U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended MARCH 31, 2018

☐ 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.)

 

 

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 Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ☐	Accelerated filer  ☐
Non-accelerated filer  ☐	Smaller reporting company  ☒
	Emerging Growth Company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐  No ☒

 

The number of shares of the Registrant’s common stock outstanding as of May 17, 2018 was 15,851, 813.

 

  

 

TABLE OF CONTENTS

PART I		Page
Item 1.	Financial Statements (Unaudited)	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	17
Item 4.	Controls and Procedures	17
PART II
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Mine Safety Disclosures
Item 5.	Other Information	18
Item 6.	Exhibits	19
	Signatures	20

 

 

 

 

   

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements. 

 

US NUCLEAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
		March 31,				December 31,
		2018				2017
ASSETS
CURRENT ASSETS
Cash		$	1,238,911			$	442,341
Accounts receivable, net			521,660				278,091
Inventories			1,154,730				1,315,498
TOTAL CURRENT ASSETS			2,915,301				2,035,930
PROPERTY AND EQUIPMENT, net			2,828				5,670
INTANGIBLE ASSET, net			21,536				53,841
ACQUISITION DEPOSIT			22,500				—
GOODWILL			570,176				570,176
TOTAL ASSETS		$	3,532,341			$	2,665,617
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable		$	99,792			$	121,499
Accrued liabilities			61,965				79,815
Accrued compensation - officer			275,000				250,000
Customer deposit			77,516				65,216
Acquisition contingency			69,232				71,103
Note payable			15,669				15,474
Line of credit			286,359				299,654
TOTAL CURRENT LIABILITIES			885,533				902,761
Note payable, net of current portion			38,563				42,576
Note payable to shareholder			426,479				410,579
TOTAL LIABILITIES			1,350,575				1,355,916
SHAREHOLDERS' EQUITY:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized; none issued and outstanding			—				—
Common stock, $0.0001 par value; 100,000,000 shares authorized, 15,703,813 and 14,047,403 shares issued and outstanding			1,570				1,405
Additional paid in capital			4,756,994				3,342,953
Accumulated deficit			(2,576,798	)			(2,034,657	)
TOTAL SHAREHOLDERS' EQUITY			2,181,766				1,309,701
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	3,532,341			$	2,665,617
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

  

US NUCLEAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
		Three Months Ended
		March 31,
		2018				2017
Sales		$	999,777			$	725,472
Cost of sales			522,493				370,400
Gross profit			477,284				355,072
Operating expenses
Selling, general and administrative expenses			1,012,546				257,741
Total operating expenses			1,012,546				257,741
Income (loss) from operations			(535,262	)			97,331
Other expense
Interest expense			(6,879	)			(6,098	)
Total other expense			(6,879	)			(6,098	)
Income (loss) before provision for income taxes			(542,141	)			91,233
Provision for income taxes			—				—
Net income (loss)		$	(542,141	)		$	91,233
Weighted average shares outstanding - basic and diluted			14,305,441				13,947,403
Earnings (loss) per shares - basic and diluted		$	(0.04	)		$	0.01
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

  

 

US NUCLEAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
		Three Months Ended
		March 31,
		2018				2017
OPERATING ACTIVITIES
Net income (loss)		$	(542,141	)		$	91,233
Adjustment to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization			35,147				35,989
Adjustment to acquisition contingency			2,300				—
Issuance of common stock for services			632,956				—
Expenses paid directly by majority shareholder			15,900				—
Changes in operating assets and liabilities:
Accounts receivable			(243,569	)			10,301
Inventories			160,768				1,277
Accounts payable			(25,878	)			73,008
Accrued liabilities			(17,850	)			(9,923	)
Accrued compensation - officer			25,000				25,000
Customer deposits			12,300				(39,919	)
Net cash provided by (used in) operating activities			54,933				186,966
INVESTING ACTIVITIES
Purchase of property and equipment			—				(1,349	)
Cash paid for acquisition deposit			(22,500	)			—
Net cash used in investing activities			(22,500	)			(1,349	)
FINANCING ACTIVITIES
Net borrowings (repayments) under lines of credit			(13,295	)			(32,368	)
Proceeds from sale of common stock			781,250				—
Repayments for note payable			(3,818	)			(3,634	)
Repayments for note payable to shareholder			—				(42,609	)
Net cash provided by (used in) financing activities			764,137				(78,611	)
NET INCREASE (DECREASE) IN CASH			796,570				107,006
CASH
Beginning of period			442,341				236,404
End of period'		$	1,238,911			$	343,410
Supplemental disclosures of cash flow information
Taxes paid		$	—			$	—
Interest paid		$	6,879			$	6,098
Non-cash investing and financing activities
Reclassification of acquisition contingency to accounts payable		$	4,171			$	6,052
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

  

US Nuclear Corp. and Subsidiaries

Notes to Consolidated Financial Statements

For the Three months Ended March 31, 2018 and 2017

(Unaudited)

 

 

 

Note 1 - Organization

 

Organization and Line of Business

 

US Nuclear Corp., formerly known as APEX 3, Inc., (the “Company” or “US Nuclear”) was incorporated under the laws of the State of Delaware on February 14, 2012.

 

On May 31, 2016, the Company entered into an Asset Purchase Agreement with Electronic Control Concepts (“ECC”) whereby the Company purchased certain tangible and intangible assets of ECC.

 

The Company is engaged in developing, manufacturing and selling radiation detection and measuring equipment. The Company markets and sells its products to consumers throughout the world.

 

 

Note 2 – Basis Presentation

 

Interim financial statements

 

The unaudited interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosure are adequate to make the information presented not misleading.

 

These statements reflect all adjustment, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2017 and notes thereto included in the Company’s annual report on Form 10-K filed on April 17, 2018. The Company follows the same accounting policies in the preparation of interim report. Results of operations for the interim period are not indicative of annual results.

 

Reclassifications

 

Certain reclassifications of prior year reported amounts have been made for comparative purposes. The Company does not consider such reclassifications to be material and they had no effect on net income (loss).

 

Recent Accounting Pronouncements

 

In January 2017, the FASB issued an Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The adoption of this ASC did not have an impact on its financial statements.

 

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASC did not have an impact on its financial statements.

 

  

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASC did not have an impact on its financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers.  ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.  ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract.  The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017.   Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein.  Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company adopted this ASU beginning on January 1, 2018 and used the modified prospective method of adoption. The adoption of this ASC did not have a material impact on the Company’s financial statements and disclosures.

 

 

Note 3 – Inventories

Inventories at March 31, 2018 and December 31, 2017 consisted of the following:

 

		March 31,				December 31,
		2018				2017
Raw materials		$	855,045			$	736,848
Work in Progress			89,906				359,717
Finished goods			209,779				218,933
Total inventories		$	1,154,730			$	1,315,498

 

  

Note 4 – Property and Equipment

 

The following are the details of the property, equipment and improvements at March 31, 2018 and December 31, 2017:

 

		March 31,				December 31,
		2018				2017
Furniture and fixtures		$	148,033			$	148,033
Leasehold Improvements			50,091				50,091
Equipment			233,826				233,826
Computers and software			27,259				27,259
			459,209				459,209
Less accumulated depreciation			(456,381	)			(453,539	)
Property and equipment, net		$	2,828			$	5,670

 

Depreciation expense for the three months ended March 31, 2018 and 2017 was $2,842 and $3,683, respectively. At March 31, 2018, the Company has $415,934 of fully depreciated property and equipment that is still in use.

 

 

Note 5 – Intangible Assets

 

The following are the details of intangible assets at March 31, 2018 and December 31, 2017:

 

		March 31,				December 31,
		2018				2017
Customer list		$	130,000			$	130,000
Technology			128,443				128,443
			258,443				258,443
Less accumulated amortization			(236,907	)			(204,602	)
Intangible assets, net		$	21,536			$	53,841

 

Amortization expense for the three months ended March 31, 2018 and 2017 was $32,305 and $32,306, respectively.

 

The estimated future amortization expense related to intangible assets for the twelve months ended March 31, 2019 is $21,536.

 

 

Note 6 – Notes Payable

 

In connection with the acquisition of assets from ECC the Company issued a note payable to the owner of ECC. The note accrued interest at 5% per annum, requires quarterly principal and interest payments of $4,518 and is due on April 15, 2021. At March 31, 2018 and December 31, 2017, the amount outstanding under this note payable was $54,232 and $58,050, respectively.

 

Future maturities of notes payable as of March 31, 2018 are as follows:

 

Twelve Months Ending March 31,
	2019			$	15,669
	2020				16,467
	2021				17,303
	2022				4,793
				$	54,232

 

 

   

Note 7 – Note Payable to Shareholder

 

Robert Goldstein, the CEO and majority shareholder, has loaned funds to the Company from time to time to cover general operating expenses. These loans are evidenced by unsecured, non-interest bearing notes due on December 31, 2019. During the three months ended March 31, 2018, the Company’s majority shareholder paid expenses on behalf of the Company of $15,900. During the three months ended March 31, 2017, the Company repaid $42,609 to its majority shareholder. The amounts due to Mr. Goldstein are $426,479 and $410,579 as of March 31, 2018 and December 31, 2017, respectively.

 

 

Note 8 – Line of Credit

 

As of March 31, 2018, the Company had four lines of credit with a maximum borrowing amount of $400,000 with interest ranging from 4.5% to 10.25%. As of March 31, 2018 and December 31, 2017, the amounts outstanding under these lines of credit were $286,359 and $299,654, respectively.

 

 

Note 9 – Shareholders’ Equity

 

During the three months ended March 31, 2018, the Company issued 371,260 and 15,150 shares of common stock to consultants and employees, respectively, for services rendered and compensation valued at $616,594 and $16,362, respectively. The fair value was determined based on the Company’s stock price on the date of issuance. In addition, during the three months ended March 31, 2018, the Company sold 1,270,000 share of its common stock to investors for cash proceeds of $781,250.

 

 

Note 10 – 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. The assets and operations of the Company’s recent acquisition of the assets of Electronic Control Concepts are included with Overhoff in the table below.

 

  

The following tables summarize the Company’s segment information for the three and three months ended March 31, 2018 and 2017:

 

		Three Months Ended March 31,
		2018				2017
Sales
Optron		$	159,061			$	79,325
Overhoff			840,716				646,147
Corporate			—				—
		$	999,777			$	725,472
Gross profit
Optron		$	71,089			$	51,521
Overhoff			406,195				303,551
Corporate			—				—
		$	477,284			$	355,072
Income (loss) from operations
Optron		$	-51,747			$	-23,620
Overhoff			205,139				153,715
Corporate			-688,654				-32,764
		$	-535,262			$	97,331
Interest Expenses
Optron		$	6,122			$	4,681
Overhoff			757				1,417
Corporate			—				—
		$	6,879			$	6,098
Net income (loss)
Optron		$	-57,869			$	-28,301
Overhoff			204,382				152,298
Corporate			-688,654				-32,764
		$	-542,141			$	91,233

 

		As of				As of
		March 31,				December 31,
		2018				2017
Total Assets
Optron		$	1,096,881			$	1,050,209
Overhoff			1,649,654				1,610,442
Corporate			785,806				4,966
		$	3,532,341			$	2,665,617
Intangible Assets
Optron		$	—			$	—
Overhoff			21,536				53,841
Corporate			—				—
		$	21,536			$	53,841
Goodwill
Optron		$	—			$	—
Overhoff			570,176				570,176
Corporate			—				—
		$	570,176			$	570,176

 

 

   

Note 11 - Geographical Sales

 

The geographical distribution of the Company’s sales for the three and three months ended March 31, 2018 and 2017 is as follows:

 

		Three Months Ended March 31,
		2018				2017
Geographical sales
North America		$	809,241			$	471,203
Asia			153,408				233,875
South America			4,115				10,815
Other			33,013				9,579
		$	999,777			$	725,472

 

 

Note 12 – Related Party Transactions

 

The Company leases its current facilities from Gold Team Inc., a company owned by the Company’s CEO, which owns both the Canoga Park, CA and Milford, Ohio locations. Rent expense for the three months ended March 31, 2018 and 2017 were $42,000 and $42,000, respectively. As of March 31, 2018 and December 31, 2017, payable to Gold Team Inc. in connection with the above leases amount to $0 and $0, respectively.

 

Future payments due under this operating lease agreement as of March 31, 2018 are as follows:

 

Twelve months ending March 31,
	2019			$	168,000
	2020				168,000
	2021				28,000
				$	364,000

 

In addition, as of March 31, 2018 and December 31, 2017, the Company had accrued compensation payable to its majority shareholder of $275,000 and $250,000, respectively.

 

Also see Note 7.

 

Note 13 – Concentrations

 

One customer accounted for 54% of the Company’s sales for the three months ended March 31, 2018 and one customers accounted for 43% of the Company’s sales for the three months ended March 31, 2017.

 

No vendors accounted for more than 10% of the Company’s purchases for the three months ended March 31, 2018 and 2017.

 

 

Note – 14 Fair Value Measurements

 

The Company follows a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to measurements involving unobservable inputs (Level 3). The three levels of the fair value hierarchy are as follows:

 

  

Level 1 inputs - observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

Level 2 inputs - other inputs that are directly or indirectly observable in the marketplace.

 

Level 3 inputs - unobservable inputs which are supported by little or no market activity.

 

The Company categorizes its fair value measurements within the hierarchy based on the lowest level input that is significant to the fair value measurement in its entirety. The following table presents the amount and level in the fair value hierarchy of each of its assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017. The contingent liability is for the earn-out related to the purchase of Electronic Control Concepts.

 

		March 31, 2018
		Level 1				Level 2				Level 3				TOTAL
LIABILITIES
Contingent Liability			—				—			$	69,232			$	69,232

 

December 31, 2017

Level 1

Level 2

Level 3

TOTAL

LIABILITIES

Contingent Liability

—

—

71,103

71,103

 

A summary of the activity of the contingent liability is as follows:

 

Contingent liability at December 31, 2017		$	71,103
Change in fair value			2,300
Reclassification to accounts payable			(4,171	)
Contingent liability at March 31, 2018		$	69,232

 

 

Note 15 – Subsequent Events

 

Subsequent to March 31, 2018, the Company sold 100,000 shares of its common stock to an investor for cash proceeds of $62,500. In addition, the Company also issued 48,000 shares of its common stock for services.

 

   

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

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand US Nuclear Corp, our operations and our present business environment. MD&A is provided as a supplement to—and should be read in conjunction with—our consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q. The audited financial statements for our fiscal year ended December 31, 2017 filed with the Securities Exchange Commission on Form 10-K on April 17, 2018 should be read in conjunction with the discussion below. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these unaudited financial statements. 

 

We were incorporated in Delaware on February 14, 2012, and on March 2, 2012, we filed a registration statement on Form 10 to register with the U.S. Securities and Exchange Commission as a public company.  We were originally organized as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation.

 

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.

 

Our current product concentration places a heavy reliance on our Overhoff Technology division; where we derived 39% of our total revenues in 2017 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 35% of our total revenue in 2017. We expect this to increase over time as we continue to field new orders inquires and engage new customers overseas. We believe that 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.

 

For the next twelve months, we anticipate we will need approximately $5,000,000 in additional capital to fund our business plans. If we do not raise the required capital we may not meet our expenses and there can be no assurance that we will be able to do so and if we do, we may find the cost of such financing to be burdensome on the Company. Additionally, we may not be able to execute on our business plans due to unforeseen market forces such as lower natural gas prices, difficulty attracting qualified executive staff, general downturn in our sector or by competition as we operate in an extremely competitive market for all of our product offerings.

 

   

Robert I. Goldstein, our President, Chief Executive Officer and Chairman of the Board of Directors also maintains a position as President of Gold Team Inc., a Delaware company that invests in industrial real estate properties for investment purposes. He holds an 8% interest in Gold Team Inc. and spends approximately 5 hours per week 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 $7,000 for each facility per month. 

 

On May 31, 2016, we entered into an Asset Purchase Agreement with Electronic Control Concepts (“ECC”) whereby the Company purchased certain tangible and intangible assets of ECC.  ECC 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.

 

Results of Operations

For the three months ended March 31, 2018 compared to the three months ended March 31, 2017

 

		Three Months Ended March 31,								Change
		2018				2017				$				%
Sales		$	999,777			$	725,472			$	274,305				37.8	%
Cost of goods sold			522,493				370,400				152,093				41.1	%
Gross profit			477,284				355,072				122,212				34.4	%
Selling, general and administrative expenses			1,012,546				257,741				754,805				292.9	%
Income (loss) from operations			(535,262	)			97,331				(632,593	)			-649.9	%
Other expense			(6,879	)			(6,098	)			(781	)			12.8	%
Income (loss) before provision for income taxes			(542,141	)			91,233				(633,374	)			-694.2	%
Provision for income taxes			—				—				—
Net income (loss)		$	(542,141	)		$	91,233			$	(633,374	)			-694.2	%

 

Sales for the three months ended March 31, 2018 were $999,777 compared to $725,472 for the same period in 2017. The increase of $274,305 or 37.8% is a result of an increase in sales from our Overhoff subsidiary of $194,569 and our Optron subsidiary of $79,736. The increase in sales from both our Overhoff and Optron subsidiaries was due to the delivery of large orders during the first quarter of 2018. We recognize revenue from the sale of our products when the orders are completed and we ship the product to our customer. The sales breakdown for the three months ended March 31, 2018 is as follows:

North America 81%

Asia (Including Japan) 15%

 

Our gross margins for the three months ended March 31, 2018 were 47.7% as compared to 48.9% for the same period in 2017. The decrease in gross margin percentage is due to slightly higher material costs.

 

Selling, general and administrative expense for the three months ended March 31, 2018 were $1,012,546 compared to $257,741 for the same period in 2017. The increase of $754,805 or 292.9% is due to shares of our common stock issued for services valued at 632,956 and higher professional and consulting fees paid for the three months ended March 31, 2018 compared to the same period in 2017.

 

Other expense for the three months ended March 31, 2018 was $6,879, an increase of $781 from $6,098 for the same period in 2017. The increase was not significant.

 

Net loss for the three months ended March 31, 2018 was $542,141 compared to net income of $91,233 for the same period in 2017. The change was principally attributed to higher selling, general and administrative expenses offset by an increase in gross profits due to higher sales.

 

  

Liquidity and Capital Resources

 

Our operations have historically been financed by our majority shareholder and more recently from proceeds from the sale of our common stock. As funds were needed for working capital purposes, our majority shareholder would loan us the needed funds. During the three months ended March 31, 2018, our majority shareholder loan us an additional $15,900. We anticipate funding the growth of our business through the sales of additional shares of our common stock and loans from our majority stockholder if necessary.

 

At March 31, 2018, total assets increased by 32.5% to $3,532,341 from $2,665,617 at December 31, 2017 principally related to an increase in cash and accounts receivable.

 

At March 31, 2018, total liabilities decreased by 0.4% to $1,350,575 from $1,355,916 at December 31, 2017. The decrease was not significant.

 

Net cash provided by operating activities for the three months ended March 31, 2018 was $54,933 compared to $186,966 for the same period in 2017. The change in cash from operations was principally due to the changes in accounts receivable, accounts payable and customer deposits.

 

Net cash used in investing activities for the three months ended March 31, 2018 was $22,500 compared to $1,349 for the same period in 2017. The increase in cash used in investing activities was principally due to a cash deposit paid for potential acquisition.

 

Net cash provided by financing activities for the three months ended March 31, 2018 was $764,137 compared to cash used in financing activities of $78,611 for the same period in 2017. The change in cash from financing activities was principally due to the sale of 1,270,000 shares of our common stock for proceeds of $781,250.

 

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.

 

We believe the following is among the most critical accounting policies that impact our consolidated financial statements. We suggest that our significant accounting policies, as described in our financial statements in the Summary of Significant Accounting Policies, be read in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

  

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.

 

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. 

 

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

  

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

None

 

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we are responsible for conducting an evaluation of the effectiveness of the design and operation of our internal controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the fiscal quarter covered by this report.  Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission (“SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared.  Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective as of March 31, 2018.

 

   

Changes in internal controls

 

Our management, with the participation our Chief Executive Officer and Chief Financial Officer, performed an evaluation to determine whether any change in our internal controls over financial reporting occurred during the three-month period ended March 31, 2018.  Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company's internal controls over financial reporting during the three months ended March 31, 2018 that has materially affected, or is reasonably likely to materially affect, the Company's internal controls 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

See our Form 10K filed on April 17, 2018 for Risk Factors.

 

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

None

 

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
10.1	Robert I. Goldstein Employment Agreement		10-Q		10.1	11/11/2014
10.2	Forgiveness of Debt and Conversion Agreement		10-Q		10.2	11/11/2014
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted 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

 

 

 

   

 

SIGNATURES

 

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

US Nuclear Corp
	By:	/s/ Robert Goldstein
		President, Chief Executive Officer, Chairman of the Board of Directors
	By:	/s/ Rachel Boulds
		Chief Financial Officer and Secretary

 

 

Date:  May 17, 2018