Information included or incorporated by
reference in this Annual Report on Form 10-K contains forward-looking statements. All forward-looking statements are inherently
uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company.
Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only
as of the date hereof. Forward-looking statements may contain the words “believes,” “project,” “expects,”
“anticipates,” “estimates,” “forecasts,” “intends,” “strategy,” “plan,”
“may,” “will,” “would,” “will be,” “will continue,” “will likely
result,” and similar expressions, and are subject to numerous known and unknown risks and uncertainties. Additionally, statements
relating to implementation of business strategy, future financial performance, acquisition strategies, capital raising transactions,
performance of contractual obligations, and similar statements may contain forward-looking statements. In evaluating such
statements, prospective investors and shareholders should carefully review various risks and uncertainties identified in this Report,
including the matters set forth under the captions “Risk Factors” and in the Company’s other SEC filings. These
risks and uncertainties could cause the Company’s actual results to differ materially from those indicated in the forward-looking
statements. The Company disclaims any obligation to update or publicly announce revisions to any forward-looking statements to
reflect future events or developments.
Although forward-looking statements in
this Annual Report on Form 10-K reflect the good faith judgment of our management, such statements can only be based on facts and
factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and
actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking
statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those
specifically addressed under the heading “Risk Factors Related to Our Business” below, as well as those discussed elsewhere
in this Annual Report on Form 10-K. Readers are urged not to place undue reliance on these forward-looking statements, which speak
only as of the date of this Annual Report on Form 10-K. We file reports with the Securities and Exchange Commission (“SEC”).
You can read and copy any materials we file with the SEC at the SEC’s Public Reference Room, 100 F. Street, NE, Washington,
D.C. 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC, including us.
ITEM 1. BUSINESS
Corporate History
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.
US Nuclear Corp is
a smaller reporting company under SEC Rule 405 because it has annual revenues of less than $50 million during the most recently
completed fiscal year for which audited financial statements are available. As a smaller reporting company, pursuant to Rule
8-01 of Regulation S-X, the Company is only required to produce financial statements as follows: (a) audited balance sheet as of
the end of each of the most recent two fiscal years, or as of a date within 135 days if the issuer has existed for a period of
less than one fiscal year, (b) audited statements of income, cash flows and changes in stockholders’ equity for each of the
two fiscal years preceding the date of the most recent audited balance sheet (or such shorter period as the registrant has been
in business), and (c) interim reviewed financial statements for the current period if the filing is more than 135 days after the
end of your fiscal year. Any and all amendments shall include updated interim or audited financial statements if the financial
statements in the prior filing are more than 135 days old.
On October 15, 2013, US Nuclear Corp f/k/a
APEX 3 Inc., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger between the Company,
Robert I. Goldstein, US Nuclear Acquisition Corp (“Merger Sub”), a California corporation and Optron Scientific Company,
Inc. dba Technical Associates, (“Optron Scientific”) a California corporation and the parent company of Overhoff Technology
Corp. The Agreement and Plan of Merger provided for the acquisition by the Company of all of the outstanding shares of Optron Scientific
through a reverse merger of Merger Sub into Optron Scientific, the surviving corporation. We have filed the Agreement and Plan
of Merger as Exhibits 3.4 and 2.1 with this statement and with the State of California.
As part of the Agreement and Plan of Merger
with Optron Scientific the parties agreed to an exchange of shares, in which all of the 98,372 issued and outstanding shares of
Optron Scientific were exchanged for 9,150,000 shares of the Company.
Prior to the share exchange, Mr. Goldstein
was the sole owner of 98,372 shares of Optron Scientific Company, Inc., which represented all of the outstanding shares of Optron
Scientific Company, Inc. Mr. Goldstein was the owner of 9,150,000 shares of US Nuclear Corp prior to the merger, and 9,150,000
shares of US Nuclear Corp were issued to him as a result of the merger in exchange for 98,372 shares of Optron Scientific Company,
Inc.
In conjunction with the Agreement and Plan
of Merger, US Nuclear Corp, Optron Scientific and Robert I. Goldstein entered into a Cancellation Agreement which provided for
the cancellation of 9,150,000 shares of US Nuclear Corp held by Robert I. Goldstein, in consideration of his entering into the
Agreement and Plan of Merger, which provided for his right to acquire 9,150,000 shares of US Nuclear Corp after it had the value
of the ownership of Optron Scientific. As part of the consideration for the merger transaction, the share value of Mr. Goldstein’s
shares of the Company prior to the merger was estimated at the par value of the shares, or 9,150,000 times the par value of .0001
per share. After the merger, the newly issued 9,150,000 shares of the Company held by Mr. Goldstein had a value of 85.51 percent
of the total value of the outstanding stock of the Company after its acquisition of all of the stock of Optron Scientific. The
Agreement and Plan of Merger was signed by Mr. Goldstein in his individual capacity and as President and Chief Executive Officer
of the Company and as President and Chief Executive Officer of Optron Scientific, and of Merger Sub. The Cancellation Agreement
was signed by Mr. Goldstein in his individual capacity and as President, and Chief Executive Officer of the Company and of Optron
Scientific. The Corporate Secretary of each of the companies, Darian B. Andersen, also signed on behalf of each of the companies.
The remaining 1,550,000 outstanding shares of US Nuclear Corp, which are held by Richard Chiang, were unaffected by the Cancellation
Agreement.
Following the merger, we began to provide
a full line of radiation detection equipment and services to clients’ industries that range from nuclear reactor plants,
universities, local and state hospitals, government agencies, and emergency medical technicians or EMT/first responders. The Company’s
nuclear radiation safety detection equipment company has its roots from the famous Manhattan Project of the 1940s. In 1971, Allen
Goldstein, the father to our current President and CEO, Robert Goldstein, acquired the assets of Technical Associates and incorporated
the company. The Company designed and built the first industrial grade radiation monitors and continues to innovate its legacy
with new product engineering for radiation measurement and safety instruments. The Company designs and manufactures nuclear radiation
detection and safety equipment, survey meters, air and water monitors, port security equipment and tritium air monitors. The Company’s
customers are diverse groups such as Homeland Security, Lawrence Livermore Labs, Los Alamos National Labs, Department of Defense,
FBI, CIA, US Navy, Chevron Corporation, Bechtel Corporation, Biotechnology Laboratories, Hospitals, Universities, and Civil Emergency
Management departments such as Fire, Paramedics and Law Enforcement. The Company is headquartered in Canoga Park, California and
the Company can be accessed through its websites on the Internet at usnuclearcorp.com, tech-associates.com and overhoff.com.
The Company’s two main divisions
consisting of Optron Scientific Company Inc., DBA Technical Associates and Overhoff Technology Corporation offer over 200 products
that service and address the nuclear power industry, domestically and internationally. Technical Associates specializes in the
design and manufacture of radiation detection equipment monitors and hand held devices, while Overhoff Technology Corporation specializes
in the design and manufacture of tritium air monitors and water monitors.
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.
On August 3, 2018, we closed an agreement
by and among, MIFTEC Laboratories, Inc. (“MIFTEC”), a licensee of Magneto-Inertial Fusion Technologies, Inc., (“MIFTI”),
and us. MIFTEC is a licensee of MIFTI radionuclide technology. MIFTEC will engage us to manufacture equipment pursuant to MIFTEC’s
specifications and designs and have us as a sales representative for the manufactured equipment. We will be the exclusive manufacturer
and supplier to MIFTEC of equipment in North America and Asia. In addition, we received a 10% ownership interest in MIFTEC. The
consideration for the exclusive manufacturing rights and a 10% ownership interest in MIFTEC was $500,000 and 300,000 shares of
our common stock.
On April 22, 2019 the Company entered into
a Cooperative Agreement with MIFTI whereby the Company acquired certain exclusive manufacturing and supply rights in return for
$500,000, of which $100,000 is payable upon signing, $200,000 within four months of the agreement and $200,000 within nine months
of the agreement. The Company also has the option to purchase 10% of MIFTI for $2,700,000.
On February 5, 2020, the Company entered
into a Stock Purchase Agreement (“SPA”) with Grapheton, Inc., a California corporation (“Grapheton”). Grapheton
is a start-up company that focuses on building energy storage devises, known as supercapacitors, from a new material system. The
technology utilized by Grapheton has been proven to provide a compelling advantage in microelectrode arrays with superior electrical
and electrochemical properties. Grapheton was founded by Sam Kassegne, PgD, PE (“Kassegne”), who serves as Grapheton’s
President and Chief Technical Officer, and Bao Nguyen (“Nguyen”), Grapheton’s Chief Operations Officer.
Technology and Products
The Company designs and develops both technologies
in-house by its CEO, Robert I. Goldstein as well as offers products from other manufacturers. Mr. Goldstein’s extensive experience
of over forty years in the field of nuclear radiation detection has allowed the Company to achieve significant recognition that
has been approved by US Federal standards set by the Environmental Protection Agency (EPA), Food and Drug Administration (FDA)
and the Nuclear Regulatory Commission (NRC). The Company has complete ownership of all of its technology and there are no licenses
held by any outside party. No persons, company, vendor, distributor or contractor holds any title or claim to any of the Company’s
work or technology. The Company believes that its technology and business is defensible due to the fact that the barriers of entry
are high and technically complex. The Company has sought out niche markets in its business by becoming a leading category player
in devices such as Tritium equipment. The Company’s products consist of radiation water monitors, tritium monitors, air and
water monitors, nano-second x-ray monitors, and vehicle, personnel, exit and room monitors. The Company also offers handheld survey
meters/dosimeters, and port security equipment, along with supporting software and services.
Radiation Water Monitors
US Nuclear Corp’s radiation water
monitors allow detection of radioactive materials in drinking water, ground water, rainfall, rivers, and lakes. In order to detect
radioactive materials, the emitted radiation must travel from the radiation emitter to the detector. Alpha, Beta, Gamma, and Neutron
radiation moves well through air, but poorly through water. The complexity of detecting radiation in water and developing an efficient
monitor has given the Company’s monitors a reasonable edge against competitors, and for this reason, has limited competition
in the water monitor business. The Company has invested more than ten years developing highly sensitive detectors for this market,
giving it a clear advantage over competitors. The Company’s radiation water monitors are used to check for radioactive materials
being released as liquid effluent in drain pipes by universities, hospitals, pharmaceutical companies, oil and gas extraction facilities,
industrial chemical plants, and nuclear reactor plants.
Tritium Monitors
US Nuclear Corp
is one of very few companies that currently operate within the tritium space. The Company’s Overhoff Technology Corp unit
is a leading manufacturer of tritium detection and monitors. The demand for tritium detection and monitors are steadily increasing
as countries develop solutions to their energy needs. In addition to CANDU reactors (Canada Deuterium Uranium), the
next generation of nuclear reactors called Molten Salt Reactors, (MSR) and Liquid-Fluoride Thorium Reactors (LFTR) utilize fuels
other than traditional uranium and plutonium sources. Thorium, which is more significantly abundant than uranium, is very difficult
to use to create nuclear weapons, is favored by many governments, and as a source of conventional energy it has been proven to
be highly effective. By way of energy production, MSR and LFTRs produce high amounts of tritium which need to be constantly monitored
for detection. Additionally, the waste products of LFTR reactors are less hazardous than the current light-water uranium-plutonium
reactors, and thus, LFTR reactors provide higher level of safety and security against terrorist threats. The Company expects that
a significant portion of its future sales and business strategy is tied to the growth of MSR and LFTRs, as well as from CANDU reactors.
Tritium is produced
naturally in the upper atmosphere when cosmic rays strike nitrogen molecules in the air. More commonly, tritium is produced during
nuclear weapons explosions, and as a byproduct in reactors producing electricity. Generally, tritium has several important
uses; its most significant contribution is its use as a component in the triggering mechanism in thermonuclear weapons. Very large
quantities of required for the maintenance of nuclear weapons capabilities. Tritium is also produced commercially in nuclear reactors,
as well as used in various self-luminescent devices, such as exit signs in buildings, aircraft dials, gauges, luminous paints,
and wristwatches. In the mid-1950s and early 1960s, tritium was widely dispersed during above-ground testing of nuclear weapons.
Today, sources of tritium come from commercial nuclear reactors, research reactors, and government weapons production plants. Tritium
may also be released as steam from these facilities or may leak into the underlying soil and ground water. Additionally, self-luminescent
devices illegally disposed in municipal landfills come into contact with water which pass through water ways, carrying dangerous
levels of tritium. Tritium holds a very dangerous health risk and high levels of exposure to tritium increases risk of developing
cancer. To combat tritium leaks and to maintain acceptable levels, the Company has developed several tritium monitors to gauge
tritium in water and in the air.
Alpha, Beta, Gamma and Tritium Monitors
For
the past 20 years, Overhoff Technology has been devoted exclusively to the design, manufacturing and servicing of Tritium monitors.
Overhoff Technology has leading control over market share in the Tritium monitor space as the top maker of Tritium monitors. Tritium
monitors are a highly delicate process and are particularly dependent on the selection of the finest materials such as Teflon for
low leakage insulators and nafion membranes for separation of noble gas from Tritium. The Company’s Overhoff DC amplifiers
called “electrometers” are stable with the ability to register small currents down to the femto-ampere level, 10-13 to
10-15ampre range. The Overhoff electrometer also has the unique ability to reject false counts from Radon gas. Because
Tritium is a radioactive material, the Nuclear Regulatory Commission (“NRC”) regulations and state health agencies
require Tritium to be measured at every nuclear power plant, all national laboratories, in the nuclear-powered Navies of the United
States, France and the United Kingdom, at weapons facilities, at pharmaceutical and pesticide research facilities, and at Fusion
Power research sites.
DroneRAD Aerial Radiation Detection
US Nuclear Corp has partnered with FlyCam
UAV (a drone manufacturer). The two companies have married their two technologies with the NEO, an all-weather UAV octocopter
capable of carrying a number of radiation and chemical detection sensors. With the advent of merging FlyCam UAV’s NEO and
US Nuclear Corp sensor technology aerial radiation and chemical detection is now a reality. The
DroneSensor system (the first of its kind) uses state-of-the-art industrial grade drones carrying radiation & chemical sensors.
Wireless transmission to ground station provides real-time data. Having these UAV mounted sensors quickly and efficiently
surveying large areas for contamination eliminates risk to human life.
Air and Water Monitors
The Company’s Overhoff Air Monitors
come in both hand-held portables and mid-to large-sized air and stack monitors. These are classified as Dual Ion Chamber style
detectors or Dual Proportional Detectors. The sample flows into one chamber where ionization current is measured, and at the same
time a sealed background detector of the same volume measures the ionization current due to any external gamma emitters plus the
addition of background from radioactive minerals in the soil with cosmic rays. The current from the background chamber is subtracted
from the current in the main sample chamber to give the net tritium level without distortion from radon or gamma in the background.
In nuclear power plants, radioactive noble gases are also in the air stream in small or large quantities. Overhoff combats this
problem using Dow Chemical Nafion® tubing which physically separates the
noble gases from the tritium oxide prior to measurement. The Company is currently expecting a large number of its users and larger
numbers of its competitor’s customers will need to replace or supplement their current air and stack monitors to combat the
two biggest pollution nuclides now coming out of nuclear power plants, tritium and C-14. As of today, only US Nuclear Corp offers
these full-service monitors.
Vehicle Monitors, Personnel Monitors,
Exit Monitors and Room Monitors
The Company’s suite of radiation
monitors can be used in various scenarios where humans may come into contact with radiation contamination. The Company’s
Vehicle Monitors, Personnel Monitors, Exit Monitors and Room Monitors are effective tools in detection of radiation in hospitals
where radioactivity is used in many departments such as nuclear medicine, oncology, blood labs, and imaging. Since radiation is
also used in diagnosing and treating cancer, and since some cancers can develop in any organ, each department in a hospital becomes
involved, from ophthalmology to thoracic medicine. Additionally, the Company’s monitors are used to check hospital laundry
to detect any radiation on clothes as well as in trash bins before they are picked up by the applicable waste management team.
Lastly, the Company’s monitors can be placed in the entrance of hospitals in case there is an incident at a nearby nuclear
power plant. These monitors are the first line of defense against further contamination, by providing early warning detection;
doctors can provide treatment without placing other patients and staff in direct contact with patients who are contaminated with
radiation.
Radon Air Monitors and Radon Switch
Products
The Company produces a full line of radon
air monitors and switches that are used to determine the radon content in the air in basements, mills, mines, buildings, or anywhere
that radon concentration is a concern. The radon switch products activate and controls radon mitigation fans. These switches have
a built-in computer storage with data storage. The Company also makes a radon tritium monitor that is a portable instrument used
for detection and measurement of airborne Vadose zone, between the top of the ground surface to the water table.
Handheld Survey Meters and Personal
Dosimeters, Pocket Micro-R Meters
The Company’s survey meters are light-weight,
hand-held radiation detectors. They function as general purpose radiation survey meters, but also serve as special purpose survey
meters. For example, the Company’s radon monitors are used in mines where workers are at risk for breathing radon gas along
with air. The Company’s surface monitors are used in hospitals, research labs, even in high school chemistry and physics
labs to check for radioactive contamination on lab benches. Friskers are used to check if worker’s hands or shoe bottoms
have picked up any radiation contamination and the Company’s Gamma survey meter check packages at post offices or airports
for radiation, along with scrap metals at collection points and again before it is accepted for processing.
Port Security Equipment
Due to increased terror threats from IED
(Improvised Explosive Devices), dirty bombs and potential radioactive materials following 9/11 at shipping ports, we began utilizing
passive detectors to review radiation emanating from inside containers. While other port security scanners generally use radioactive
materials or x-ray generating machines to check everything from shipping containers, Federal Express, USPS (United States Postal
Service) packages, and luggage for contraband, our scanner solutions do not use radiation, allowing for safe usage by investigators.
We were approached by the FDA after the events of 9/11, and we designed our P-8Neon Quick-Scan X-ray detector to provide complete
scanning without releasing any harmful radiation in the process. Our RAD-CANSCAN machines can measure which shipping containers
hold radioactive materials by mapping inside the container so that TSA personnel will know the results without having to open each
container. Additionally, our TBM-6SPE is a multi-detector system that lets an investigator check specifically for each of the four
main emissions of radiation, Alpha, Beta, Gamma and Neutrons.
Software
The Company’s Overhoff Overview software
program provides centralized radiation and environmental monitoring for entire facilities within one building or several square
miles allowing monitoring of a nuclear power plant or subway station. Overview accepts data from networked radiation detectors,
environmental monitors and webcams, and allows the user to view and generate reports on the data, as well as track maintenance
due on instruments. Additionally, Overview lets the user see real-time monitoring for differential pressure on containment boxes
or rooms. Our software measures gamma and neutron radiation levels, airborne radioactivity levels, temperature and humidity in
the facility, status of security doors, wind speed and direction, and barometric pressure.
(b) Item 1A
Risk Factors
Risks Related to Our
Business and Industry
Our business is intensely
competitive, and our revenues are unpredictable as a small company.
We
compete with a formidable group of competitors in our business, many of which have greater resources and capabilities than our
company. There are numerous companies that have established businesses and command larger market share such as Thermo Fisher Scientific,
Canberra Industries, and Mirion Technologies, Ludlum Measurements, Smiths Detection and Lab Impex Systems Ltd. Many of these companies
have products and services that compete directly with ours and many of them are supported with larger marketing budgets and sales
staff that can provide stronger sales coverage and support to customers than our capabilities. Furthermore, competitors may have
technological advantages and may be able to implement new technologies more rapidly than our Company. Additionally, to the extent
of our bookings, we cannot accurately predict to a large degree of certainty what annual revenues and income outlook may be. Due
to our relatively small size, many factors may contribute to differences in the future and therefore cannot be assured in any manner.
The market for nuclear radiation safety equipment is dependent upon a number of factors beyond the Company’s control, which
cannot be accurately predicted. Some of these factors include pricing, competition from new entrants, newer technologies, market
regulation and government policy, as well as overall market demand. Other factors include fossil fuel energy prices that may have
an effect upon nuclear energy demand. Lower oil, natural gas, and coal prices may result in less favorable decisions to pursue
nuclear energy as a source of energy.
We
rely heavily on our international customers for business and expect to continue to rely on international customers in the future.
Our
international revenues were 54% of our total revenue in 2019. This was a 20% increase from 2018 and we expect this trend to continue
in 2020 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.
Government Regulation
Although
the sales of our equipment are not generally regulated by any local or federal government agency, the nuclear power industry itself
is highly regulated by the Nuclear Regulatory Commission. As an independent agency of the United States government, the NRC is
responsible for overseeing reactor safety, security, reactor licensing, renewal, radioactive material safety, and spent fuel disposal.
The effects of the NRC’s policies therefore have an effect on our business. The impact of any negative decision in the nuclear
power industry will ultimately affect us. We may also be affected by foreign government policy and regulation not covered by the
NRC.
Nuclear
Power, Fossil Fuel and Renewal Energy
While the nuclear
power industry is a key component in the context of energy supply in the world today there are other competing energy sources that
carry less potential risk hazards. Competing energy sources such as fossil fuels, solar, wind and water are strong threats to nuclear
power. Each one has its benefits and conversely a negative side. The current landscape of nuclear power according to the Nuclear
Regulatory Commission, or NRC, states that as of May 2014, there were 30 countries worldwide operating 435 nuclear reactors in
operation in the world, with 72 new reactors under construction in 15 countries. Within the United States, there are 100 nuclear
power plants providing 20% of the country’s total electric energy generation. Additionally, 31 of the 50 US states generate
electricity from nuclear power plants, and four states, New Jersey, South Carolina, Connecticut, and Vermont rely on nuclear power
for more than 50 percent of their electricity. The United States produced approximately 27% of the world’s gross nuclear-generated
electricity in 2010 with France at 17%, Japan 12%, Russia 6%, Germany 5%, South Korea 5%, Ukraine 3%, Canada 3%, Sweden 2%, Spain
2%, the United Kingdom 3% and the rest of the world at 15%. The growth in new nuclear power plant construction in the United States
has been slower due to issues related to domestic policy and the effects of the Fukushima Dai-ichi nuclear plant accident, foreign
countries such as Russia have plans to build 26 new plants by 2020. It is difficult to predict if these plans domestically and
internationally will materialize or be postponed indefinitely if negative market forces develop.
Opponents
to Nuclear Energy are formidable due to concerns over safety.
Maintaining the demand for our products
and future growth in demand will depend in part upon continued acceptance of nuclear technology as a means of generating electricity.
In many cases, countries have embraced nuclear technology because alternate means of energy have either been at a high cost with
heavy pollution, or other means have not been practical. However, incidents involving nuclear energy production, such as overheating
reactors, radiation leaks and reactor melt-downs, can cause a significant decrease in public acceptance of nuclear technology.
Events at the Fukushima Daiichi nuclear complex in Japan on March 11, 2011 may have adverse long term effects in some countries
decision to either continue using nuclear power or suspend its nuclear power program. While the long-term impact is unclear, several
countries have suspended operations at existing nuclear power plants. Specifically, on May 30, 2011, Germany announced that
in addition to the permanent closure of eight reactors, an additional six reactors will be taken off-line by 2021 and that all
remaining reactors to be shut-down by 2022. Switzerland has made a policy decision to phase out of their 5 reactors by 2034. Italy,
while not having any operating reactors, has implemented a moratorium on nuclear power. The ultimate results of these safety reviews
and/or public resistance to nuclear technology may lead to suspension or cancellation of permitting and development activities,
license extensions of existing nuclear facilities, and possibly even the closure of operating nuclear facilities by one or more
countries. Lack of public acceptance of nuclear technology would adversely affect the demand for nuclear power and therefore demand
for radiation detection equipment.
Continued growth of CANDU reactors and rapid development
of next generation Molten Salt (MSR) and Liquid-Fluoride Thorium Reactors (LFTR).
The Company relies on continued growth
and orders from CANDU reactors (Canada Deuterium Uranium), and rapid development of the next generation of nuclear reactors called
Molten Salt Reactors, (MSR) and Liquid-Fluoride Thorium Reactors (LFTR), for its tritium-based equipment. MSR and LFTR are new
types of reactors that utilize thorium as a fuel rather than traditional uranium or plutonium. Thorium is a more abundant element
than uranium. Many countries with heavy energy needs such as China have begun to adopt MSR and LFTR programs. However, the numbers
of these types of reactors are still small in numbers and there can be no assurances that they will ever reach large numbers capable
of sustaining rapid growth and development for nuclear-radiation safety products such as our tritium equipment. If CANDU reactors
experience adverse events such as long term inactivity due to political or environmental concerns, or economic issues, and if MSR
and LFTR reactors fail to develop beyond its current growth forecasts worldwide, the Company will experience lower demand for its
products which would have an adverse effect on the Company’s sales and profitability.
Failure to make accretive
acquisitions and successfully integrate them could adversely affect our future financial results.
As
part of our growth strategy, we plan to seek, when management deems advantageous to the Company, to acquire complementary (including
competitive) businesses, facilities or technologies and enter into joint ventures. Our goal is to make such acquisitions,
integrate these acquired assets into our operations and reduce operating expenses. The process of integrating these acquired
assets into our operations may result in unforeseen operating difficulties and expenditures and may absorb significant management
attention that would otherwise be available for the ongoing development of our business. We cannot assure you that the anticipated
benefits of any acquisitions will be realized. In addition, future acquisitions by us could result in potentially dilutive
issuances of equity securities, the incurrence of debt and contingent liabilities and amortization expenses related to goodwill
and other intangible assets, any of which can materially and adversely affect our operating results and financial position. Acquisitions
also involve other risks, including entering geographic markets in which we have no or limited prior experience and the potential
loss of key employees.
We have filed a provisional
patent for our product based on our tritium products but hold no current patents on our products, and our business employs proprietary
technology and information which may be difficult to protect and may infringe on the intellectual property rights of third parties.
In
general, we rely primarily on a combination of trade secrets, copyright and trademark laws, and confidentiality procedures to protect
our technology. Due to the technological change that characterizes our business, we believe that the improvement of existing products,
reliance upon trade secrets and unpatented proprietary know-how and the development of new products are generally as important
as patent protection in establishing and maintaining a competitive advantage.
We
have currently filed a provisional utility-type patent on our tritium products to protect our intellectual property, but currently
rely on trade secrets, proprietary know-how and technology that we seek to protect, in part, by confidentiality agreements with
prospective joint venture partners, employees and consultants. We cannot assure you that these agreements will not be breached,
that we will have adequate remedies for any breach, or that our trade secrets and proprietary know-how will not otherwise become
known or be independently discovered by others. Other than the provisional patent, we currently do not hold patents from the United
States Patent and Trademark Office on any of our products we manufacture. Our success depends, in part, on our ability to keep
competitors from reverse engineering our products, maintain trade secrecy and operate without infringing on the proprietary rights
of third parties. We cannot assure you that the patents of others will not have an adverse effect on our ability to conduct
our business, that any of our trade secrets and applications will be protected, that we will develop additional proprietary technology
that is defensible against theft or will provide us with competitive advantages or will not be challenged by third parties. Further,
we cannot assure you that others will not independently develop similar or superior technologies, duplicate elements of our technology
or design around it.
It
is possible that we may need to acquire licenses to, or to contest the validity of, issued or pending patents or claims of third
parties. We cannot assure you that any license acquired under such patents would be made available to us on acceptable terms,
if at all, or that we would prevail in any such contest. In addition, we could incur substantial costs in defending ourselves
in suits brought against us for alleged infringement of another party’s patents or in defending the validity or enforceability
of any patents we may seek in the future, or in bringing patent infringement suits against other parties.
In
December, 2013, we were granted a registered trademark of the US Nuclear Corp name and logo from the United States Patent and Trademark
Office and consider it important to the protection of our US Nuclear Corp brands. We have not been nor are we currently involved
in or aware of any litigation regarding any of our intellectual property.
Our failure to obtain
capital may significantly restrict our proposed operations.
We will need to raise more capital to expand our business. It
is anticipated that we will require an additional capital raise of $5 million dollars over the next twelve months to fund our business
plans. Future sources of capital may not be available to us when we need it or may be available only on unacceptable terms.
We
are subject to the risk that certain key personnel, including key employees named below, on whom we depend, in part, for our operations,
will cease to be involved with us. The loss of any these individuals would adversely affect our financial condition and the
results of our operations.
We are dependent on the experience, knowledge,
skill and expertise of our President and CEO Robert I. Goldstein. We are also in large part dependent on current CFO, and Secretary
Rachel Boulds. The loss of any of the key personnel listed above could materially and adversely affect our future business efforts.
Our success depends in substantial part upon the services, efforts and abilities of Robert I. Goldstein, our Chairman and Chief
Executive Officer, due to his experience, history and knowledge of the nuclear radiation industry and his overall insight into
our business direction. The loss or our failure to retain Mr. Goldstein, or to attract and retain additional qualified personnel,
could adversely affect our operations. We do not currently carry key-man life insurance on Mr. Goldstein or any of our officers
and have no present plans to obtain this insurance. See “Management.”
The loss of any of
our executive officers could adversely affect our business.
We depend to a large extent on the efforts
and continued employment of our executive officers, one of these officers, Rachel Boulds maintains employment at other companies,
and her other responsibilities could take precedence over her duties to us. The time Ms. Boulds plans to devote to our business
will primarily be based upon the financial accounting duties as CFO, and Secretary.
Competition
from other radiation detection or related companies could result in a decrease of our business and a decrease in our financial
performance.
We operate in a highly competitive industry.
Many of our current and potential competitors, including larger multinational companies, domestic manufacturing companies with
multiple product lines in radiation detection products have existed longer and have larger customer bases, greater brand recognition
and significantly greater financial, marketing, personnel, technical and other resources than US Nuclear Corp. In addition, many
of these competitors may be able to devote significantly greater resources to:
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research and development of new products
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attracting and retaining key employees;
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maintaining a large budget for marketing and promotional
expenses
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providing more favorable credit terms to suppliers
and channel distributors
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Regulations, including those contained
in and issued under the Sarbanes-Oxley Act of 2002 (“SOX”) and the Dodd–Frank Wall Street Reform and Consumer
Protection Act of 2010 (“Dodd-Frank”), increase the cost of doing business and may make it difficult for us to retain
or attract qualified officers and directors, which could adversely affect the management of our business and our ability to obtain
or retain listing of our Common Stock.
We are a public company. The current
regulatory climate for public companies, even small and emerging growth companies such as ours, may make it difficult or prohibitively
expensive to attract and retain qualified officers, directors and members of board committees required to provide for our effective
management in compliance with the rules and regulations which govern publicly-held companies, including, but not limited to, certifications
from executive officers and requirements for financial experts on boards of directors. The perceived increased personal risk associated
with these recent changes may deter qualified individuals from accepting these roles. For example, the enactment of the Sarbanes-Oxley
Act of 2002 has resulted in the issuance of a series of new rules and regulations and the strengthening of existing rules and regulations
by the SEC. Further, recent and proposed regulations under Dodd-Frank heighten the requirements for board or committee membership,
particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting
matters. We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to
attract and retain qualified officers and directors, the management of our business could be adversely affected.
Our internal controls over financial
reporting may not be effective, and our independent auditors may not be able to certify as to their effectiveness, which could
have a significant and adverse effect on our business.
We are subject to various SEC reporting
and other regulatory requirements. We have incurred and will continue to incur expenses and, to a lesser extent, diversion of our
management’s time in our efforts to comply with SOX Section 404 regarding internal controls over financial reporting. Our
management’s evaluation over our internal controls over financial reporting may determine that material weaknesses in our
internal control exist. If, in the future, management identifies material weaknesses, or our external auditors are unable
to attest that our management’s report is fairly stated or to express an opinion on the effectiveness of our internal controls,
this could result in a loss of investor confidence in our financial reports, have an adverse effect on our stock price, and subject
us to sanctions or investigation by regulatory authorities.
Limitations on director and officer
liability and our indemnification of our officers and directors may discourage stockholders from bringing suit against a director.
Our Certificate of Incorporation and By-Laws
provide, with certain exceptions as permitted by Delaware corporation law, that a director or officer shall not be personally liable
to us or our stockholders for breach of fiduciary duty as a director, except for acts or omissions which involve intentional misconduct,
fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing
suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders
on our behalf against a director. In addition, our Certificate of Incorporation and By-Laws provide for mandatory indemnification
of directors and officers to the fullest extent permitted by governing state law.
We may incur a variety of costs to engage
in future acquisitions of companies, products or technologies, to grow our business, to expand into new markets, or to provide
new services. As such, the anticipated benefits of those acquisitions may never be realized.
It is management’s intention to acquire
other businesses to grow our customer base, to expand into new markets, and to provide new product lines. We may make acquisitions
of, or significant investments in, complementary companies, products or technologies, although no additional material acquisitions
or investments are currently pending. Acquisitions may be accompanied by risks such as:
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difficulties in assimilating the operations and employees of acquired companies;
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diversion of our management’s attention from ongoing business concerns;
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our potential inability to maximize our financial and strategic position through the successful incorporation of acquired technology and rights into our products and services;
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additional expense associated with amortization of acquired assets;
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additional expense associated with understanding and development of acquired business;
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maintenance and implementation of uniform standards, controls, procedures and policies; and
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impairment of existing relationships with employees, suppliers and customers as a result of the integration of new management employees.
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We must attract and
retain skilled personnel. If we are unable to hire and retain technical, sales and marketing, and operational employees,
our business could be harmed.
Our
revenues are generated by the sales of our radiation detection products from our direct sales, sales to catalogs, distributors
and to a lesser extent, our website. Our ability to manage our growth will be particularly dependent on our ability to develop
and retain an effective sales force and qualified technical and managerial personnel. We intend to hire additional employees, including
engineers, sales and marketing employees and operational employees. The competition for engineers, qualified sales, technical,
and managerial personnel in the technology and manufacturing community, is intense, and we may not be able to hire and retain sufficient
qualified personnel. In addition, we may not be able to maintain the quality of our operations, control our costs, maintain
compliance with all applicable regulations, and expand our internal management, technical, information and accounting systems in
order to support our desired growth, which could have an adverse impact on our operations.
Our failure to manage growth effectively
could harm our ability to attract and retain key personnel and adversely impact our operating results.
There can be no assurance that we will
be able to manage our expansion through acquisitions effectively. Our current and planned personnel, systems, procedures and controls
may not be adequate to support and effectively manage our future operations, especially as we employ personnel in multiple geographic
locations. We may not be able to hire, train, retain, motivate and manage required personnel, which may limit our growth, damage
our reputation and negatively affect our financial performance and harm our business.
If we obtain financing, existing
shareholder interests may be diluted.
If we raise additional
funds by issuing equity or convertible debt securities, the percentage ownership of our shareholders will be diluted. In addition,
any new securities could have rights, preferences and privileges senior to those of our common stock. Furthermore, we cannot assure
you that additional financing will be available when and to the extent we require or that, if available, it will be on acceptable
terms.
The requirements of being a public company
may strain our resources and distract our management, which could make it difficult to manage our business, particularly after
we are no longer an “emerging growth company.”
We are required to comply with various
regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory
requirements are time-consuming and expensive and could have a negative effect on our business, results of operations and financial
condition.
As a public company, we are subject to
the reporting requirements of the Exchange Act, and requirements of SOX. The cost of complying with these requirements may place
a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect
to our business and financial condition. SOX requires that we maintain effective disclosure controls and procedures and internal
controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we must
commit significant resources, may be required to hire additional staff and need to continue to provide effective management oversight.
We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable
to public companies. Sustaining our growth also will require us to commit additional management, operational and financial resources
to identify new professionals to join the Company and to maintain appropriate operational and financial systems to adequately support
expansion. These activities may divert management’s attention from other business concerns, which could have a material adverse
effect on our business, financial condition, results of operations and cash flows.
As an “emerging growth company”
as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) enacted on April 5, 2012, we may take advantage
of certain temporary exemptions from various reporting requirements including, but not limited to, not being required to comply
with the auditor attestation requirements of Section 404 of SOX (and rules and regulations of the SEC thereunder, which we refer
to as Section 404) and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
When these exemptions cease to apply, we
expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We will remain
an “emerging growth company” for up to five years, although we may cease to be an emerging growth company earlier under
certain circumstances. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations —
JOBS Act” for additional information on when we may cease to be deemed to be an emerging growth company. We cannot predict
or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.
We face
risks related to Novel Coronavirus (COVID-19) which have
disrupted our manufacturing, research and development, operations, sales and financial results, and could continue to do so for
the foreseeable future.
While we are still
operating, our business has been and will continue to be adversely impacted by the effects of the Novel Coronavirus (COVID-19).
In addition to global macroeconomic effects, the Novel Coronavirus (COVID-19)
outbreak and any other related adverse public health developments will cause disruption to our operations and sales activities.
Our third-party manufacturers, suppliers, third-party distributors, sub-contractors and customers have been and will be disrupted
by worker absenteeism, quarantines and restrictions on our employees’ ability to work, office and factory closures, disruptions
to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions. Depending on the magnitude
of such effects on our manufacturing, assembling, and testing activities or the operations of our suppliers, third-party distributors,
or sub-contractors, our supply chain, manufacturing and product shipments will be delayed, which could adversely affect our business,
operations and customer relationships. In addition, the Novel Coronavirus (COVID-19)
or other disease outbreak will in the short-run and may over the longer term adversely affect the economies and financial markets
of many countries, resulting in an economic downturn that will affect demand for our products and impact our operating results.
There can be no assurance that any decrease in sales resulting from the Novel Coronavirus (COVID-19)
will be offset by increased sales in subsequent periods. Although the magnitude of the impact of the Novel Coronavirus (COVID-19)
outbreak on our business and operations remains uncertain, the continued spread of the Novel Coronavirus (COVID-19)
or the occurrence of other epidemics and the imposition of related public health measures and travel and business restrictions
will adversely impact our business, financial condition, operating results and cash flows. In addition, we
have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations, or other
movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design
our products in a timely manner or meet required milestones or customer commitments.
Risks
Related to Our Common Stock
Our stock price may
be volatile or may decline regardless of our operating performance, and the price of our common stock may fluctuate significantly.
Once
our shares begin trading, the market price for our common stock is likely to be volatile, in part because our shares have not been
traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors,
most of which we cannot control, including:
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competition from other radiation detection companies or related businesses;
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changes in government regulations, general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the nuclear power industry;
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changes in key personnel;
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entry into new geographic markets;
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actions and announcements by us or our competitors or significant acquisitions, divestitures, strategic partnerships, joint ventures or capital commitments;
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changes in operating performance and stock market valuations of other radiation detection and related companies;
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investors’ perceptions of our prospects and the prospects of the nuclear power industry;
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fluctuations in quarterly operating results, as well as differences between our actual financial and operating results and those expected by investors;
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the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;
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announcements relating to litigation;
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financial guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;
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changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;
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the development and sustainability of an active trading market for our common stock;
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future sales of our common stock by our officers, directors and significant stockholders; and
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changes in accounting principles affecting our financial reporting.
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These
and other factors may lower the market price of our common stock, regardless of our actual operating performance.
The
stock markets and trading facilities, including the OTC Bulletin Board, have experienced extreme price and volume fluctuations
that have affected and continue to affect the market prices of equity securities in many companies. In the past, stockholders of
some companies have instituted securities class action litigation following periods of market volatility. If we were involved in
securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from
our business.
Our Common Stock is
subject to risks arising from restrictions on reliance on Rule 144 by shell companies or former shell companies.
Under
a regulation of the SEC known as “Rule 144,” a person who has beneficially owned restricted securities of an issuer
and who is not an affiliate of that issuer may sell them without registration under the Securities Act provided that certain conditions
have been met. One of these conditions is that such person has held the restricted securities for a prescribed period, which will
be 6 months or 1 year, depending on various factors. The holding period for our common stock would be 1 year if our common stock
could be sold under Rule 144. However, Rule 144 is unavailable for the resale of securities issued by an issuer that is a shell
company (other than a business combination related shell company) or that has been at any time previously a shell company. The
SEC defines a shell company as a company that has (a) no or nominal operations and (b) either (i) no or nominal assets, (ii) assets
consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal
other assets. Until the merger, we were a shell company.
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The SEC has provided an exception to this unavailability if and for as long as the following conditions are met:
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The issuer of the securities that was formerly a shell company has ceased to be a shell company,
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The issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act,
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The issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and
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At least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company known as “Form 10 Information.”
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If
securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our
stock price and trading volume could decline.
The
trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish
about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts.
If no securities or industry analysts commence coverage of our company, the trading price for our common stock would be negatively
impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who cover us downgrades our common
stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more
of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease,
which could cause our stock price and trading volume to decline.
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Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
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As
a public company, we are required to evaluate our internal controls over financial reporting. Furthermore, at such time as we cease
to be an “emerging growth company,” as more fully described in these Risk Factors, we shall also be required to comply
with Section 404. At such time, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable
deadline imposed upon us for compliance with the requirements of Section 404. In addition, if we fail to achieve and maintain the
adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able
to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance
with Section 404. We cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or
the impact of the same on our operations. If we are not able to implement the requirements of Section 404 in a timely manner or
with adequate compliance, our independent registered public accounting firm may issue an adverse opinion due to ineffective internal
controls over financial reporting and we may be subject to sanctions or investigation by regulatory authorities, such as the SEC.
As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our
financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of
additional personnel. Any such action could negatively affect our results of operations and cash flows.
We
are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging
growth companies will make our Common Stock less attractive to investors, potentially decreasing our stock price.
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:
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have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
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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);
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submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
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disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive’s compensation to median employee compensation.
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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. However, we may choose “opt out” of such extended transition period, and
as a result, we would then comply with new or revised accounting standards on the relevant dates on which adoption of such standards
is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended
transition period for complying with new or revised accounting standards would be irrevocable
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.
Until
such time, however, we cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock
and our stock price may be more volatile.
When
these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring
compliance with them. We may remain an “emerging growth company” for up to five years, although we may cease to be
an emerging growth company earlier under certain circumstances. We cannot predict or estimate the amount of additional costs
we may incur as a result of the change in our status under the JOBS Act or the timing of such costs.
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.
Our management and other affiliates
have significant control of our Common Stock and could control our actions in a manner that conflicts with the interests of other
stockholders.
Our executive officers, directors and their
affiliated entities together will beneficially own approximately 55.7% of our Common Stock, representing approximately 77% of the
voting power of our outstanding capital stock. As a result, these stockholders, acting together, will be able to exercise considerable
influence over matters requiring approval by our stockholders, including the election of directors, and may not always act in the
best interests of other stockholders. Such a concentration of ownership may have the effect of delaying or preventing a change
in our control, including transactions in which our stockholders might otherwise receive a premium for their shares over then current
market prices.
Penny Stock Considerations
Our
shares likely will be “penny stocks” as that term is generally defined in the Securities Exchange Act of 1934 to mean
equity securities with a price of less than $5.00. Our shares thus will be subject to rules that impose sales practice and disclosure
requirements on broker-dealers who engage in certain transactions involving a penny stock.
Under
the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor
must make a special suitability determination regarding the purchaser and must receive the purchaser’s written consent to the transaction
prior to the sale. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually
or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations
the broker-dealer is required to:
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Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;
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Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;
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Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks; and
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Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account.
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Failure
to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have
a material adverse effect on our business and operating results. In addition, current and potential stockholders could lose confidence
in our financial reporting, which could have an adverse effect on our stock price.
Effective
internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot
provide reliable financial reports or prevent fraud, our operating results could be harmed.
Upon
the effectiveness of the Company’s contemplated current report under the Securities Exchange Act of 1934, we will be required
to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley
Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting
and a report by our independent registered public accounting firm addressing these assessments.
During
the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet the deadline imposed
by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if we fail to maintain the adequacy
of our internal accounting controls, as such standards are modified, supplemented or amended from time to time, we may not be able
to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance
with Section 404. Failure to achieve and maintain an effective internal control environment could cause us to face regulatory
action and also cause investors to lose confidence in our reported financial information, either of which could have an adverse
effect on our stock price.
We do not expect to pay any cash dividends
for the foreseeable future.
The continued operation and growth of our
business will require substantial cash. Accordingly, we do not anticipate that we will pay any cash dividends on shares of our
Common Stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our Board
of Directors and will depend upon our results of operations, financial condition, contractual restrictions relating to indebtedness
we may incur, restrictions imposed by applicable law and other factors our Board of Directors deems relevant. Accordingly, if you
purchase shares in this offering, realization of a gain on your investment will depend on the appreciation of the price of our
Common Stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our Common
Stock.
OTC Bulletin Board Qualification for
Quotation
On February 6, 2015, we were issued our ticker symbol, UCLE
on the OTC Bulletin Board from FINRA. On March 20, 2015, we were approved for DTC eligibility by the Depository Trust and Clearing
Corporation,) (“DTCC”).
Holders
As of June 26, 2020, we had 54 holders of record of our Common
Stock.