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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

  [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

          For the quarterly period ended June 30, 2014

[ ]                   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-54617 

   

US NUCLEAR CORP.

(Exact name of registrant as specified in its charter)

 

Delaware 45-4535739
State or other jurisdiction of (I.R.S. Employer
Incorporation or organization Identification No.)

 

Robert I. Goldstein

7051 Eton Avenue

Canoga Park, CA 91303

(Address of principal executive offices)

 

(818) 883-7043

(Registrant’s telephone number, including area code)

 

 

Securities registered under Section 12(b) of the Exchange Act:

None.

 

Securities registered under Section 12(g) of the Exchange Act:

 

Common Stock, $0.0001 par value per share

(Title of Class)

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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. Yes [x] No [_]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, at www.usnuclearcorp.com, 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). Yes [x] No [_]

 

1
 

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer               ¨ Accelerated filer                          ¨
Non-accelerated filer            ¨ Smaller reporting company     x

(Do not check if a smaller reporting company.)

 

Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [x]

 

The number of shares of the Registrant’s common stock outstanding as of August 12, 2014 was 11,150,000

 

 

 

 

 

 

 

 

2
 

 

TABLE OF CONTENTS

PART I    
Item 1. Financial Statements   4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Item 4. Controls and Procedures 16
PART II    
Item 1. Legal Proceedings 17
Item 1A. Risk Factors 17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 19
Item 4. Mine Safety Disclosures 19
Item 5. Other Information 19
Item 6. Exhibits 19
  Signatures 20

 

 

 

 

 

 

3
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

US Nuclear Corp.
Financial Statements

Contents

 

Financial Statements PAGE
   
   
Condensed Consolidated Balance Sheets as of June 30, 2014 (Unaudited) and December 31, 2013 5
   
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2014 (Unaudited) and 2013 (Unaudited) 6
   
Condensed Consolidated Statements of Cash for the Three and Six Months Ended June 30, 2014 (Unaudited) and 2013 (Unaudited) 7
   
Notes to Unaudited Condensed Consolidated Financial Statements 8
   

 

 

4
 

 

US NUCLEAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
               
ASSETS
               
          June 30,   December 31,
  2014   2013
          (unaudited)    
CURRENT ASSETS        
  Cash and cash equivalents  $            172,021  $              265,873
  Accounts receivable             121,026               584,813
  Inventory             1,656,968            1,421,642
  Other current assets                 2,200                  4,800
TOTAL CURRENT ASSETS           1,952,215            2,277,128
               
EQUIPMENT, net               16,162                 20,543
GOODWILL               570,176               570,176
TOTAL ASSETS $         2,538,553 $          2,867,847
               
LIABILITIES AND SHAREHOLDERS' EQUITY
               
CURRENT LIABILITIES        
Accounts payable $             99,779 $             140,250
Accrued liabilities               67,048                 61,072
Customer Deposit               17,650                  9,235
Line of credit               252,764               355,255
TOTAL CURRENT LIABILITIES             437,241               565,812
               
Note payable to shareholder             818,996               660,429
TOTAL LIABILITIES           1,256,237            1,226,241
               
COMMITMENTS AND CONTINGENCIES                      -                          -   
               
SHAREHOLDERS' EQUITY:        
Preferred stock, $0.0001 pare value, 5,000,000 shares        
  authorized; none issued and outstanding        
Common stock, $0.0001 par value; 100,000,000 shares authorized,        
  11,150,000 and 10,700,000 shares issued and outstanding                 1,115                  1,070
Additional paid in capital           2,157,064            2,157,064
Accumulated deficit            (875,863)             (516,528)
TOTAL SHAREHOLDERS' EQUITY           1,282,316            1,641,606
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $         2,538,553 $          2,867,847
               
               
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

 

5
 

US NUCLEAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
          For the Three Months Ended   For the Six Months Ended
          June 30,   June 30,
          2014   2013   2014   2013
          (unaudited)   (unaudited)   (unaudited)   (unaudited)
                       
Sales       $               375,859 $               515,792 $               639,505 $             987,614
Cost of goods sold                   177,669                 239,866                 343,513               478,831
Gross profit                     198,190                 275,926                 295,992               508,783
Selling, general and administrative expenses                 348,187                 370,748                 653,471               574,004
                       
Loss from operations                (149,997)                 (94,822)                (357,479)               (65,221)
                       
Other expense                  
  Interest expense                       (938)                      (892)                   (1,856)                 (1,664)
    Total non-operating expense                      (938)                      (892)                   (1,856)                 (1,664)
                       
Income before provision for income taxes                (150,935)                 (95,714)                (359,335)               (66,885)
                       
Provision for income taxes                          -                             -                             -                          -   
                       
Net loss     $              (150,935) $               (95,714) $              (359,335) $             (66,885)
                       
                       
Weighted average shares outstanding - basic and diluted            11,150,000              9,150,000            11,115,193            9,150,000
                       
Earnings per shares - basic and diluted $                   (0.01) $                   (0.01) $                   (0.03) $                 (0.01)
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

6
 

 

US NUCLEAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013
                       
                  2014   2013
                  (unaudited)   (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES        
  Net loss        $       (359,335)  $             (66,885)
  Adjustment to reconcile net loss to net          
    cash used in operating activities:          
      Depreciation and amortization               4,581                 2,563
      Changes in:              
        Accounts receivable              463,787             232,571
        Inventory              (235,326)            (357,858)
        Other current assets                 2,600                  (128)
        Accounts payable              (40,471)               76,080
        Accrued liabilities                 5,976               30,070
        Income taxes payable                      -                 (24,653)
        Customer deposits                 8,415                 5,336
                       
        Net cash used in operating activities        (149,773)            (102,904)
                       
CASH FLOWS FROM INVESTING ACTIVITIES        
  Purchases of equipment                    (200)                      -   
                       
        Net cash used in investing activities               (200)                      -   
                       
CASH FLOWS FROM FINANCING ACTIVITIES        
  Net borrowings under lines of credit          (102,491)               35,662
  Proceeds from sale of common stock                    45                      -   
  Proceeds from note payable to shareholder          158,567             159,814
                       
        Net cash provided by financing activities            56,121             195,476
                       
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS          (93,852)               92,572
                       
CASH AND CASH EQUIVALENTS          
  Beginning of the period              265,873             348,439
  End of the period      $         172,021  $            441,011
                       
Supplemental disclosures of cash flow information        
  Taxes paid        $                 -     $                     -   
  Interest paid        $            1,856  $                1,664
                       
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

 

 

7
 

 

US Nuclear Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2014

 

Note 1 - Organization and Basis of Presentation

The unaudited condensed consolidated financial statements were prepared by US Nuclear Corp. (the “Company”), pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) were omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K. The results for the six months ended June 30, 2014, are not necessarily indicative of the results to be expected for the year ending December 31, 2014.

 

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. Optron Scientific Company, Inc. (“Optron”) was incorporated in the State of California on December 24, 1971.

 

On October 15, 2013, the Company entered into a share exchange agreement and plan of merger with Optron. Pursuant to the agreement, the Company acquired from Optron all of the issued and outstanding capital stock consisting of 98,372 shares of common stock in exchange for 9,150,000 shares of the Company’s common stock.

 

Concurrently with the closing of the transactions, the Company entered into an agreement with Richard Chiang, the Company’s sole director and chief executive officer, pursuant to which he returned 9,150,000 shares of the Company’s common stock for cancellation. Mr. Chiang was not compensated for the cancellation of his shares of the Company’s common stock. Upon completion of the foregoing transactions, the Company had an aggregate of 10,700,000 shares of common stock issued and outstanding.

 

The exchange of shares with Optronwas accounted for as a reverse acquisition under the purchase method of accounting since Optronobtained control of the Company. Accordingly, the merger of Optron into the Company was recorded as a recapitalization of Optron, Optron being treated as the continuing entities. The historical financial statements presented are the financial statements of Optron. The share exchange agreement has been treated as a recapitalization and not as a business combination; therefore, no pro forma information is disclosed. At the date of this transaction, the net liabilities of the legal acquirer, US Nuclear, were $12,901.

 

As a result of the reverse merger transactions described above the historical financial statements presented are those of Optron, the operating entity.

 

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.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Optron and its wholly-owned subsidiary, Overhoff Technology Corporation (“Overhoff”), and 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.

 

 

8
 

 

US Nuclear Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2014

Note 2 – Summary of Significant Accounting Policies

 

Accounting Method

 

The Company’s unaudited condensed consolidated financial statements are prepared using the accrual method of accounting. The Company has elected a fiscal year ending on December 31.

 

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.

 

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.

 

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 December 31, 2013 and 2012 were $0 and $0, respectively.

 

Inventories

 

Inventories are valued at the lower of cost (determined primarily by the average cost method) or market. Management compares the cost of inventories with the market value and allowance is made for writing down their inventories to market value, if lower.

 

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 property and equipment are 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. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

 

Furniture and fixtures 5 years
Leasehold improvement Lesser of lease life or economic life
Equipment 5 years
Computers and software 5 years

 

 

Long-Lived Assets

 

The Company applies the provisions of 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 June 30, 2014, the Company believes there was no impairment of its long-lived assets.

9
 

 

US Nuclear Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2014

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. Under accounting requirements, goodwill is not amortized but is subject to annual impairment tests.

 

Revenue Recognition

 

The Company’s revenue recognition policies comply with FASB ASC Topic 605. Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as customer deposits.

 

Sales returns and allowances was $0 for the six months ended June 30, 2014 and 2013. The Company does not provide unconditional right of return, price protection or any other concessions to its customers.

 

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 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 condensed consolidated financial statements.

 

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 is based on the assumption 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. There were no potentially dilutive securities outstanding during the six months ended June 30, 2014 and 2013.

10
 

 

 

US Nuclear Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2014

 

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 two reportable segments. See Note 8.

 

 

Recent Accounting Pronouncements

In April 2014, the FASB issued ASU 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360)."  ASU 2014-08 amends the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations.  Under the new guidance, only disposals representing a strategic shift in operations or that have a major effect on the Company's operations and financial results should be presented as discontinued operations.  This new accounting guidance is effective for annual periods beginning after December 15, 2014.  The Company is currently evaluating the impact of adopting ASU 2014-08 on the Company's results of operations or financial condition.

 

In June 2014, the FASB issued ASU No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”which removes the definition of a development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of operations, cash flows, and stockholders’ equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendment is effective for annual reporting periods beginning after December 15, 2014. Early application is permitted. This ASU is not applicable to the Company.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the “SEC”) did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

 

Note 3 – Inventory

 

Inventory at June 30, 2014 and December 31, 2013 consisted of the following:

 

   June 30,  December 31,
   2014  2013
Raw materials  $882,740   $870,758 
Work in Progress   193,557    137,721 
Finished goods   580,671    413,163 
   $1,656,968   $1,421,642 

 

11
 

 

US Nuclear Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2014

Note 4 – Equipment

 

 

The following are the details of equipment at June 30, 2014 and December 31, 2013:

 

 

   June 30,  December 31,
   2014  2013
Furniture and fixtures  $146,273   $146,073 
Leasehold improvements   50,091    50,091 
Equipment   212,076    212,076 
Computers and software   26,628    26,628 
Less accumulated depreciation   (418,906)   (414,325)
Property and equipment, net  $16,162   $20,543 

 

Note 5 – Note Payable to Shareholder

 

Robert Goldstein, the owner of the Company, has loaned funds to the Company from time to time. These loans are evidenced by unsecured, non-interest bearing notes due on December 31, 2015. The amounts due to Mr. Goldstein are $818,996 and $660,429 as of June 30, 2014 and December 31, 2013, respectively.

  

Note 6– Line of Credit

 

As of June 30, 2014 the Company had three lines of credit with a maximum borrowing amount of $400,000 and interest from 3.25% to 9.25%. As of June 30, 2014 and December 31, 2013, the amounts outstanding under these three lines of credit were $252,764 and $355,255, respectively.

 

Note 7 – Shareholders’ Equity

 

There was no stock based compensation incurred during the six months ended June 30, 2014 and 2013.

 

See Note 1 for discussion of shares issued and canceled in connection with the share exchange agreement and plan of merger agreement.

 

Note 8 – 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 two reportable segments: Optron and Overhoff. Optron is located in Canoga Park, California and Overhoff is located in Milford, Ohio.

 

12
 

 

US Nuclear Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2014

 

The following tables summarize the Company’s segment information for the three and six months ended June 30, 2014 and 2013:

 

      Three months ended June 30,   Six months ended June 30,
      2014   2013   2014   2013
                   
 Sales                
  Optron $ 87,766 $ 168,617 $ 184,964 $ 583,328
  Overhoff   288,093   347,175   454,541   404,286
    $ 375,859 $ 515,792 $ 639,505 $ 987,614
                   
 Gross profit                
  Optron $ 67,330 $ 63,332 $ 79,561 $ 271,124
  Overhoff   130,860   212,594   216,431   237,659
    $ 198,190 $ 275,926 $ 295,992 $ 508,783
                   
 Loss from operations                
  Optron $ (125,212) $ (159,713) $ (290,590) $ (25,059)
  Overhoff   (24,785)   64,891   (66,889)   (40,162)
    $ (149,997) $ (94,822) $ (357,479) $ (65,221)
                   
 Provision for income taxes                
  Optron $ - $ - $ - $ -
  Overhoff   -   -   -   -
    $ - $ - $ - $ -
                   
 Net income (loss)                
  Optron $ (135,150) $ (160,605) $ (292,446) $ (26,723)
  Overhoff   (15,785)   64,891   (66,889)   (40,162)
    $ (150,935) $ (95,714) $ (359,335) $ (66,885)
                   
                   
               June 30,    December 31,
              2014   2013
 Total Assets                
  Optron         $ 956,742 $ 952,092
  Overhoff           1,581,811   1,915,755
            $ 2,538,553 $ 2,867,847
                   
 Goodwill                
  Optron         $ - $ -
  Overhoff           570,176   570,176
            $ 570,176 $ 570,176

 

 

 

13
 

  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Results of Operations June 30, 2014

For the quarter ended June 30, 2014 compared to the quarter ended June 30, 2013

 

Revenue for the quarter ended June 30, 2014 decreased to $375,859, down by 27.1% compared to $515,792for the same period for the prior year, the revenue breakdown is as follows:

North America     61 %
Asia (Including Japan)     16 %
Other     23 %

 

General and administrative expense decreased for the 2nd quarter of 2014 compared to the prior year 2nd quarter to $348,187, down from $370,748, a decrease of 6%. The decrease is mainly attributed to lower sales.

 

Professional fees increased from $63,683 in the 2nd quarter of 2013 to $161,601 for the 2nd quarter of 2014, an increase of 156.9%due to increased expenses for accounting, auditing and the professional services required for the Company’s reporting as required by the Securities and Exchange Commission.

 

Payroll expense decreased from $137,187 in the 2nd quarter of 2013 to $115,022 for the 2nd quarter of 2014, a decrease of 19.3%.

 

At June 30, 2014, total assets increased by 11%, to $2,538,553 from $2,867,847 for the 2nd quarter of,2013 principally related to a decrease in cash and cash equivalents and accounts receivable and an increase in inventory.

 

At June 30, 2014, total liabilities increased by 2% to $1,256,237 from $1,226,241 for the 2nd quarter of2013 principally related to a decrease in sales and related operating costs with an increase in indebtedness to the Company’s principal stockholder.

 

Net loss increased to a negative $150,935 for the quarter ended June 30, 2014 from a negative $95,714 for the 2nd quarter of 2013.

 

You should read the following discussion of our financial condition and results of operations together with the audited financial statements and the notes to the audited financial statements included in this Quarterly Report on Form 10-Q. 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.

 

US Nuclear Corp f/k/a APEX 3 Inc., was incorporated in the State of Delaware on February 14, 2012, and has since amended its name to US Nuclear Corp., (“US Nuclear”) on May 4, 2012 with the State of Delaware. US Nuclear Corp was formed as a vehicle to pursue a business combination with an operating company that would have perceived benefits of becoming a publicly traded corporation.  Optron Scientific was incorporated in the State of California in 1971 and is the operating company of US Nuclear Corp with two divisions, Optron Scientific Company, Inc., doing business as (“DBA”) Technical Associates and Overhoff Technology Corporation, both of which design, manufacture and market detection and monitor systems that are used to detect and identify radioactive material, leaks, waste, contamination, biohazards, nuclear material, as well as products used in airports, cargo, screening as ports and borders, government buildings, hospitals, and other critical infrastructure, as well as by the military and emergency responder services The company uses a wide range of technologies including x-ray, trace detection, millimeter-wave, infra-red, tritium detection, and diagnostics in its product applications. 

 

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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 have 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 that 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.

 

Our current product concentration places a heavy reliance on our Overhoff Technology division; where we derived 44% of our total revenues in the 2nd quarter of2014 from one customer. 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 39% of our total revenue in the 2nd quarter of2014. We expect this percentage to continue to increase over time as we continue to field new orders inquires and engage new customers overseas. We believe that South Korea and China will likely be larger contributors 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. There can be no assurances as to our growth projections and our risk profile as we depend upon increased foreign customers for business.

 

Additionally, we are inexperienced as a public company and may find it difficult to meet all of the challenges and expenses of being a public company. As we commencing as a public company, we plan to raise capital by offering shares of our common stock or convertible debt to investors.  For the next twelve months, we anticipate we will need approximately $1,500,000 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 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 $6,000 for each facility per month. 

 

We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

 

  •    have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

 

   •    comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

 

  •    submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and

 

  •     disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

 

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In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

 

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

 

As an emerging growth company, the company is exempt from Section 14A and B of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes.

 

The Company is an Emerging Growth Company under the JOBS Act of 2012, but the Company has irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(B) of the JOBS Act. 

 

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. 

 

Off-balance sheet arrangements

 

We do not have any off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

None

 

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 ("Exchange Act"), the Company's management, under the supervision and with the participation of the Chief Operating Officer, who is also the executive principal officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2014 , the end of the period covered by this Quarterly Report on Form 10-Q.

 

Based upon that evaluation, the Chief Operating Officer and Chief Financial Officer concluded that, as of June 30, 2014, the disclosure controls and procedures were effective. Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

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The Company's management has identified material weaknesses in its internal control over financial reporting related to the following matters:

 

Certain areas of recordkeeping need to be strengthened, particularly in the inventory management.

 

Certain documentation and accounting policies and procedures need improvement, particularly in line of credit documentation.

 

Changes in Internal Control over Financial Reporting

 

There was no change in the Company's internal control over financial reporting that was identified in connection with such evaluation that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting

 

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There are not presently any 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

There is currently no trading market for our common stock.

 

We cannot assure you that our common stock will be listed on NASDAQ or any other securities exchange. 

 

We may seek the listing of our common stock on NASDAQ or the American Stock Exchange. However, we cannot assure you that following such a transaction, we will be able to meet the initial listing standards of either of those or any other stock exchange, or that we will be able to maintain a listing of our common stock on either of those or any other stock exchange. After completing a business combination, until our common stock is listed on the NASDAQ or another stock exchange, we expect that our common stock would be eligible to trade on the OTC Bulletin Board, another over-the-counter quotation system, or on the “pink sheets,” where our stockholders may find it more difficult to dispose of shares or obtain accurate quotations as to the market value of our common stock.  In addition, we would be subject to and SEC rule that, if it failed to meet the criteria set forth in such rule, imposes various practice requirements on broker-dealers who sell securities governed by the rule to persons other than established customers and accredited investors. Consequently, such rule may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity. This would also make it more difficult for us to raise additional capital following a business combination.

 

There is no public market for our common stock, nor have we ever paid dividends on our common stock.

 

There is no public trading market for our common stock and none is expected to develop in the foreseeable future unless and until we complete a business combination with an operating business and such business files a registration statement under the Securities Act of 1933, as amended.

 

Additionally, we have never paid dividends on our Common Stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment of dividends will be re-invested into the Company to further its business strategy.

 

Issuance of Preferred Stock could result in dilution to existing shareholders.

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Our Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock with designations, rights and preferences determined from time to time by its Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. Although we have no present intention to issue any shares of its authorized preferred stock, there can be no assurance that we will not do so in the future.

 

Control by management reduces the ability of minority shareholders to affect changes in management, corporate structure, or business strategy. 

 

Management currently owns 82% of all the issued and outstanding capital stock of the Company. Consequently, management has the 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.

 

Robert I. Goldstein, our Chief Executive Officer and Director, is the beneficial owner of 9,150,000 shares of our common stock. Accordingly, this concentration of ownership by itself may have the effect of impeding a merger, consolidation, takeover or other business consolidation, or discouraging a potential acquirer from making a tender offer for the common stock.

 
This report contains forward-looking statements and information relating to us, our industry and to other businesses.


These forward-looking statements are based on the beliefs of our management, as well as assumptions made by and information currently available to our management. When used in this prospectus, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to risks and uncertainties that may cause our actual results to differ materially from those contemplated in our forward-looking statements. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The Registrant is currently conducting a private offering of its shares and has received purchase requests, however, such purchases are subject to the Registrant completing its sale of $100,000 in securities to 35 or more accredited investors. We are relying upon Section 4(2) of the Securities Act of 1933, as amended for the above issuances. We believed that Section 4(2) was available because the Registrant believes that the foregoing transactions were exempt from the registration requirements under the Act, based on the following facts: there was no general solicitation, there was a limited number of purchasers, each of whom the Registrant believes was  an “accredited investor” (within the meaning of Regulation D under the Securities Act of 1933, as amended) and was sophisticated about business and financial matters, and all shares issued were subject to restriction on transfer, so as to take reasonable steps to assure that the purchaser was not an underwriter within the meaning of Section 2(11) under the Act.

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Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None. 

Item 6. Exhibits.

 

      Incorporated by reference  
Exhibit Exhibit Description Filed herewith Form Period ending Exhibit Filing date  
3.1 Certificate of Incorporation   10   3.1 02/14/2012  
3.2 By-Laws   10   3.2 02/14/2012  
3.3 Amendment to Certificate of Incorporation   8-K   3.3 05/29/2012  
4.1 Specimen Stock Certificate   10   4.1 02/14/2012  
31 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X          
32 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X          
101.INS XBRL Instance Document X          
101.SCH XBRL Taxonomy Extension Schema Document X          
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X          
101.LAB XBRL Taxonomy Extension Label Linkbase Document X          
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X          
101.DEF XBRL Taxonomy Extension Definition Linkbase Definition X          

 

 

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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.

 

Dated: August 12, 2014

 

By /s/ Robert I. Goldstein

Robert I. Goldstein

President and Chief Executive Officer

 

 

By /s/ Darian B. Andersen

Darian B. Andersen

Chief Financial Officer

 

 

 

 

 

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