Quarterly Report (10-q)

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 SEPTEMBER 30, 2019

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

Commission file number: 000-54617

(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)

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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 ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered

The number of shares of the Registrant’s common stock outstanding as of November 18, 2019 was 19,843,503.

TABLE OF CONTENTS

PART I
Item 1.	Financial Statements (Unaudited)	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
PART II
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Mine Safety Disclosures	22
Item 5.	Other Information	22
Item 6.	Exhibits	23
	Signatures	24

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

US NUCLEAR CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2019			2018
	(unaudited)			(audited)
ASSETS

CURRENT ASSETS
Cash	$	1,051,531		$	969,118
Accounts receivable, net		618,344			730,773
Inventories		1,039,613			1,047,612
Prepaid expenses and other current assets		4,500			2,500
TOTAL CURRENT ASSETS		2,713,988			2,750,003

Property and equipment, net		4,727			5,752
Right-of-use assets		249,065
Investment		10,000			10,000
Acquisition deposit		300,000			-
Goodwill		570,176			570,176
TOTAL ASSETS	$	3,847,956		$	3,335,931

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	110,958		$	93,263
Accrued liabilities		37,491			54,511
Accrued compensation - officer		425,000			350,000
Customer deposit		4,928			96,571
Acquisition contingency		35,989			57,142
Note payable		16,875			16,262
Operating lease liability		153,627
Line of credit		215,197			222,490
TOTAL CURRENT LIABILITIES		1,000,065			890,239

Note payable, net of current portion		13,633			26,543
Note payable to shareholder		398,551			413,555
Operating lease liabillity, net of current portion		95,438			-
TOTAL LIABILITIES		1,507,687			1,330,337

COMMITMENTS & CONTINGENCIES		-			-

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, 19,781,371 and 16,959,784 shares issued and outstanding		1,978			1,696
Additional paid in capital		8,843,362			6,445,625
Accumulated deficit		(6,505,071	)		(4,441,727	)
TOTAL SHAREHOLDERS’ EQUITY		2,340,269			2,005,594
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,847,956		$	3,335,931

The accompanying notes are an integral part of these unaudited consolidated financial statements.

US NUCLEAR CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018

Sales	$	659,325		$	1,145,480		$	2,818,901		$	2,706,785
Cost of sales		336,882			633,384			1,392,608			1,429,606
Gross profit		322,443			512,096			1,426,293			1,277,179

Operating expenses
Selling, general and administrative expenses		1,729,246			834,685			3,474,788			2,545,379
Acquisition of manufacturing and supply rights		-			1,084,000			-			1,084,000
Total operating expenses		1,729,246			1,918,685			3,474,788			3,629,379

Loss from operations		(1,406,803	)		(1,406,589	)		(2,048,495	)		(2,352,200	)

Other income (expense)
Interest expense		(3,103	)		(8,126	)		(14,849	)		(21,910	)
Total other expense		(3,103	)		(8,126	)		(14,849	)		(21,910	)

Loss before provision for income taxes		(1,409,906	)		(1,414,715	)		(2,063,344	)		(2,374,110	)

Provision for income taxes		-			-			-			-

Net loss	$	(1,409,906	)	$	(1,414,715	)	$	(2,063,344	)	$	(2,374,110	)

Weighted average shares outstanding - basic and diluted		18,654,300			16,584,617			17,748,583			15,643,639

Loss per shares - basic and diluted	$	(0.08	)	$	(0.09	)	$	(0.12	)	$	(0.15	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

US NUCLEAR CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(unaudited)

	Common Stock				Additional Paid-in		Accumulated			Total Shareholders’
	Shares		Amount		Capital		Deficit			Equity
Balance, December 31, 2018		16,959,784	$	1,696	$	6,445,625	$	(4,441,727	)	$	2,005,594

Issuance of common stock for services		257,050		26		118,541		-			118,567
Net loss		-		-		-		(187,419	)		(187,419	)

Balance, March 31, 2019		17,216,834		1,722		6,564,166		(4,629,146	)		1,936,742

Issuance of common stock for services		615,287		61		804,070		-			804,131
Issuance of common stock for cash		583,333		58		249,942		-			250,000
Net loss		-		-		-		(466,019	)		(466,019	)

Balance, June 30, 2019		18,415,454		1,841		7,618,178		(5,095,165	)		2,524,854

Issuance of common stock for services		1,218,857		122		1,150,199		-			1,150,321
Issuance of common stock for cash		147,060		15		74,985		-			75,000
Net loss		-		-		-		(1,409,906	)		(1,409,906	)

Balance, September 30, 2019		19,781,371	$	1,978	$	8,843,362	$	(6,505,071	)	$	2,340,269

Balance, December 31, 2017		14,047,403	$	1,405	$	3,342,953	$	(2,034,657	)	$	1,309,701

Issuance of common stock for services		386,410		38		632,918					632,956
Issuance of common stock for cash		1,270,000		127		781,123					781,250
Net loss								(542,141	)		(542,141	)

Balance, March 31, 2018		15,703,813		1,570		4,756,994		(2,576,798	)		2,181,766

Issuance of common stock for services		126,000		13		328,307					328,320
Issuance of common stock for cash		460,000		46		287,454					287,500
Net loss								(417,254	)		(417,254	)

Balance, June 30, 2018		16,289,813		1,629		5,372,755		(2,994,052	)		2,380,332

Issuance of common stock for services		326,000		33		448,707					448,740
Issuance of common stock for acquisition		300,000		30		593,970					594,000
Net loss								(1,414,715	)		(1,414,715	)

Balance, September 30, 2018		16,915,813	$	1,692	$	6,415,432	$	(4,408,767	)	$	2,008,357

The accompanying notes are an integral part of these unaudited consolidated financial statements.

US NUCLEAR CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months Ended
	September 30,
	2019			2018

OPERATING ACTIVITIES
Net loss	$	(2,063,344	)	$	(2,374,110	)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		1,025			59,117
Adjustment to acquisition contingency		(7,719	)		6,631
Issuance of common stock for services		2,073,019			1,410,016
Issuance of common stock for manufacturing and supply rights					594,000
Expenses paid directly by majority shareholder		-			41,900
Operating lease expense		107,443			-
Changes in operating assets and liabilities:
Accounts receivable		112,429			(334,640	)
Other receivables		-			-
Inventories		7,999			89,671
Prepaid expenses and other current assets		(2,000	)
Accounts payable		4,261			(38,534	)
Accrued liabilities		(17,020	)		(17,507	)
Accrued compensation - officer		75,000			75,000
Customer deposits		(91,643	)		(36,855	)
Operating lease liability		(107,443	)		-
Net cash provided by (used in) operating activities		92,007			(525,311	)

INVESTING ACTIVITIES
Purchase of property and equipment		-			(5,777	)
Cash paid for investment		-			(10,000	)
Cash paid for acquisition deposit		(300,000	)		-
Net cash used in investing activities		(300,000	)		(15,777	)

FINANCING ACTIVITIES
Net borrowings (repayments) under lines of credit		(7,293	)		(27,178	)
Proceeds from sale of common stock		325,000			1,068,750
Repayments for note payable		(12,297	)		(11,280	)
Proceeds from note payable to shareholder		15,155			-
Repayments for note payable to shareholder		(30,159	)		(40,174	)
Net cash provided by (used in) financing activities		290,406			990,118

NET INCREASE (DECREASE) IN CASH		82,413			449,030

CASH
Beginning of period		969,118			442,341
End of period	$	1,051,531		$	891,371

Supplemental disclosures of cash flow information
Taxes paid	$	-		$	-
Interest paid	$	14,849		$	21,910

Reclassification of acquisition contingency to accounts payable	$	13,434		$	15,796
Right of use asset and operating lease liability recognized	$	356,508		$	-
Payment by stockholder for intangible asset and investment	$	-		$	26,000

The accompanying notes are an integral part of these unaudited consolidated financial statements.

US NUCLEAR CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

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, 2018 and notes thereto included in the Company’s annual report on Form 10-K filed on April 17, 2019. 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.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Optron and its wholly-owned subsidiary, Overhoff Technology Corporation (“Overhoff”), and have been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. There were no cash equivalents as of September 30, 2019 and December 31, 2018.

US NUCLEAR CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

Accounts Receivable

The Company maintains reserves for potential credit losses for accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded based on the Company’s historical collection history. Allowance for doubtful accounts as of September 30, 2019 and December 31, 2018 were $5,000 and $5,000, respectively.

Inventories

Inventories are valued at the lower of cost (determined primarily by the average cost method) or net realizable value. Management compares the cost of inventories with the net realizable value and allowance is made for writing down their inventories to net realizable value, if lower. As of September 30, 2019 and December 31, 2018, there was no allowance for slow moving or obsolete inventory. The Company periodically assessed its inventory for slow moving and/or obsolete items. If any are identified an appropriate allowance for those items is made and/or the items are deemed to be impaired.

Property and Equipment

Property and Equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

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

Long-Lived Assets

The Company applies the provisions of Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at September 30, 2019 and December 31, 2018, the Company believes there was no impairment of its long-lived assets.

Intangible Assets

The Company’s intangible assets at September 30, 2019 and December 31, 2018 were all acquired with the purchase of ECC and are being amortized over 24 months. The Company performs a test for impairment at least annually. No impairment test was performed as of the intangible assets were fully amortized.

Goodwill

Goodwill represents the excess of purchase price over the underlying net assets of businesses acquired. The entire goodwill balance in the accompanying financial statements resulted from the Company’s acquisition of Overhoff Technology Corporation in 2006. The Company complies with ASC 350, Goodwill and Other Indefinite Lived Intangible Assets , requiring that a test for impairment be performed at least annually. As of September 30, 2019 and December 31, 2018 the Company performed the required impairment analysis which resulted in no impairment adjustments.

US NUCLEAR CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash, accounts receivable, accounts payable, accrued liabilities, customer deposits, and line of credit, the carrying amounts approximate their fair values due to their short maturities. In addition, the Company has a note payable to shareholder that the carrying amount also approximates fair value.

Revenue Recognition

Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. As sales are and have been primarily from the sale of products to customers, and the Company has no significant post-delivery obligations, this new standard did not result in a material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.

Revenue from the product sales are recognized under Topic 606 in a manner that reasonably reflects the delivery of its products to customers in return for expected consideration and includes the following elements:

●

executed contracts with the Company’s customers that it believes are legally enforceable;

●

identification of performance obligations in the respective contract;

●

determination of the transaction price for each performance obligation in the respective contract;

●

allocation the transaction price to each performance obligation; and

●

recognition of revenue only when the Company satisfies each performance obligation.

These five elements, as applied to each of the Company’s revenue category, is summarized below:

●

Product sales - revenue is recognized when the Company performs its obligations under the contracts it has with its customers to deliver products at an agreed upon price and it is generally when the control of the product has been transferred to the customer.

Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as customer deposits.

Sales returns and allowances was $0 for the nine months ended September 30, 2019 and 2018. The Company provides a one-year warranty on all sales. Warranty expense for the nine months ended September 30, 2019 and 2018 was insignificant. The Company does not provide unconditional right of return, price protection or any other concessions to its customers.

See Notes 12 and 13 for disclosures of revenue disaggregated by geographical area and product line.

Customer Deposits

Customer deposits represent cash paid to the Company by customers before the product has been completed and shipped.

Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes . ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all 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.

US NUCLEAR CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

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.

Stock-Based Compensation

The Company records stock-based compensation in accordance with FASB ASC Topic 718, ” Compensation – Stock Compensation.” FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.

Basic and Diluted Earnings Per Share

Earnings per share is calculated in accordance with ASC Topic 260, Earnings Per Share . Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive convertible shares and stock warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. There were no potentially dilutive securities outstanding during the nine months ended September 30, 2019 and 2018.

Segment Reporting

FASB ASC Topic 280, Segment Reporting , requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company determined it has two reportable segments. See Note 12.

Related Parties

The Company accounts for related party transactions in accordance with ASC 850, Related Party Disclosures . A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Reclassifications

Certain prior period amounts were reclassified to conform to the manner of presentation in the current period. These reclassifications had no effect on the net loss or stockholders’ equity.

Recent Accounting Pronouncements

In May 2014, the FASB issued 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 retrospective method of adoption. The adoption of this ASC did not have a material impact on the Company’s financial statements and disclosures.

US NUCLEAR CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

In June 2018, the FASB issued Accounting Standards Update (“ASU”) ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting , which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption is permitted. The Company adopted this ASU on January 1, 2019 with no material impact on the Company’s 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. ASU 2016-02 and additional ASUs are now codified as Accounting Standards Codification Standard (“ASC”) 842 - Leases (“ASC 842”). ASC 842 supersedes the lease accounting guidance in ASC 840 Leases, and requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The Company adopted ASC 842 on January 1, 2019 and used the modified retrospective transition approach and did not restate its comparative periods. As of the date of implementation on January 1, 2019, the impact of the adoption of ASC 842 resulted in the recognition of a right of use asset and lease payable obligation on the Company’s consolidated balance sheets of $356,508. As the right of use asset and the lease payable obligation were the same upon adoption of ASC 842, there was no cumulative effect impact on the Company’s accumulated deficit.

Note 3 – Inventories

Inventories at September 30, 2019 and December 31, 2018 consisted of the following:

	September 30,		December 31,
	2019		2018
Raw materials	$	705,662	$	591,970
Work in Progress		100,186		25,353
Finished goods		233,765		430,289
Total inventories	$	1,039,613	$	1,047,612

At September 30, 2019 and December 31, 2018 the inventory reserve was $0.

Note 4 – Property and Equipment

The following are the details of the property and equipment at September 30, 2019 and December 31, 2018:

	September 30,			December 31,
	2019			2018
Furniture and fixtures	$	148,033		$	148,033
Leasehold Improvements		50,091			50,091
Equipment		233,826			233,826
Computers and software		33,036			33,036
		464,986			464,986
Less accumulated depreciation		(460,259	)		(459,234	)
Property and equipment, net	$	4,727		$	5,752

Depreciation expense for the nine months ended September 30, 2019 and 2018 was $1,025 and $5,276, respectively. At September 30, 2019, the Company has $437,044 of fully depreciated property and equipment that is still in use.

US NUCLEAR CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

Note 5 – Investment

On August 3, 2018, the Company closed an agreement by and among, MIFTEC Laboratories, Inc. (“MIFTEC”), a licensee of Magneto-Inertial Fusion Technologies, Inc., (“MIFTI”), and the Company. MIFTEC is a licensee of MIFTI radionuclide technology. MIFTEC will engage the Company to manufacture equipment pursuant to MIFTEC’s specifications and designs and have the Company as a sales representative for the manufactured equipment. The Company will be the exclusive manufacturer and supplier to MIFTEC of equipment in North America and Asia. In addition, the Company received a 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 the Company’s common stock valued at $594,000. The fair value was determined based on the Company’s stock price on August 3, 2018. The Company recorded the value of the 10% interest in MIFTEC at $10,000 and recorded $1,084,000 as the acquisition of manufacturing and supply rights in the accompanying consolidated statement of operations during the year ended December 31, 2018. The Company evaluated this investment for impairment and determined that no impairment was necessary during the nine months ended September 30, 2019. The carrying value of this investment at September 30, 2019 and December 31, 2018 was $10,000 and $10,000, respectively.

Note 6 – Acquisition Deposit

In April 2019, the Company also entered into a Cooperative Agreement with Magneto-Inertial Fusion Technologies, Inc (“MIFTI”) whereby the Company acquired certain exclusive manufacturing and supply rights, including thermonuclear fusion-powered reactor for production of electricity per MIFTI designs 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 $500,000 is an option to buy a 10% interest in MIFTI for $2,700,000, if completed with 24 months of the agreement date. If the options expires, MIFTI shall issue the Company 500,000 shares of common stock and rescind all other exclusive rights contained in the agreement. As of September 30, 2019, the Company has paid $300,000 which is presented as an acquisition deposit in the accompanying consolidated balance sheet.

Note 7 – 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 September 30, 2019 and December 31, 2018, the amount outstanding under this note payable was $30,508 and $42,805, respectively. The Company repaid $12,297 during the nine months ended September 30, 2019.

Future maturities of notes payable as of September 30, 2019 are as follows:

Twelve months ending September 30,
2020	$	16,875
2021		13,633
	$	30,508

Note 8 – 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, 2020. During the nine months ended September 30, 2019, the Company’s majority shareholder loaned an additional $15,155 to the Company and was repaid $30,159. During the nine months ended September 30, 2018, the Company’s majority shareholder was repaid $40,174. The amounts due to Mr. Goldstein are $398,551 and $413,555 as of September 30, 2019 and December 31, 2018, respectively.

US NUCLEAR CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

Note 9 – Line of Credit

As of September 30, 2019, the Company had four lines of credit with a maximum borrowing amount of $400,000 with interest ranging from 5.5% to 11.5%. As of September 30, 2019, and December 31, 2018, the amounts outstanding under these lines of credit were $215,197 and $222,490, respectively.

Note 10 – Leases

The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an estimate of its incremental borrowing rate which is based on the interest rate of similar debt outstanding.

The Company leases its current facilities from Gold Team Inc., a company owned by the Company’s CEO, which owns both the Canoga Park, CA and Milford, Ohio locations. The leases expire on April 30, 2020 and the Company expects to exercise a renewal option for an additional 12 months. Effective January 1, 2019, the Company adopted the provision of ASC 842 Leases.

The table below presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheets as of September 30, 2019:

	Classification on Balance Sheet	September 30, 2019
Assets
Operating lease assets	Operating lease right of use assets	$	249,065
Total lease assets		$	249,065

Liabilities
Current liabilities
Operating lease liability	Current operating lease liability	$	153,627
Noncurrent liabilities
Operating lease liability	Long-term operating lease liability		95,438
Total lease liability		$	249,065

Lease obligations at September 30, 2019 consisted of the following:

Twelve months ending September 30,
2020	$	168,000
2021		98,000
Total payments		266,000
Amount representing interest		(16,935	)
Lease obligation, net		249,065
Less lease obligation, current portion		(153,627	)
Lease obligation, long-term portion	$	95,438

The lease expense for the nine months ended September 30, 2019 was $126,000 which consisted of amortization expense of $107,443 and interest expense of $18,557. The cash paid under operating leases during the nine months ended September 30, 2019 was $126,000. At September 30, 2019, the weighted average remaining lease terms were 1.6 years and the weighted average discount rate was 8%

US NUCLEAR CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

Note 11 – Shareholders’ Equity

During the nine months ended September 30, 2019, the Company issued:

●

2,086,144 shares of common stock to consultants and board members for services rendered valued at $2,070,494. The fair value was determined based on the Company’s stock price on the grant date

●

5,050 shares of common stock to employees for compensation valued at $2,525. The fair value was determined based on the Company’s stock price on the grant date; and

●

730,393 shares of common stock for cash of $325,000.

Note 12 – Segment Reporting

ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company has 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 nine months ended September 30, 2019 and 2018:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018

Sales
Optron	$	72,619		$	377,775		$	1,132,364		$	850,360
Overhoff		586,706			767,705			1,686,537			1,856,425
Corporate		-			-			-			-
	$	659,325		$	1,145,480		$	2,818,901		$	2,706,785

Gross profit
Optron	$	33,102		$	171,694		$	619,597		$	394,668
Overhoff		289,341			340,402			806,696			882,511
Corporate		-			-			-			-
	$	322,443		$	512,096		$	1,426,293		$	1,277,179

Income (loss) from operations
Optron	$	(160,601	)	$	38,444		$	81,650		$	17,118
Overhoff		112,012			161,032			246,747			346,128
Corporate		(1,358,214	)		(1,606,065	)		(2,376,892	)		(2,715,446	)
	$	(1,406,803	)	$	(1,406,589	)	$	(2,048,495	)	$	(2,352,200	)

Interest Expenses
Optron	$	2,724		$	5,285		$	13,460		$	17,605
Overhoff		-			485			49			1,949
Corporate		379			2,356			1,340			2,356
	$	3,103		$	8,126		$	14,849		$	21,910

Net income (loss)
Optron	$	(157,325	)	$	33,159		$	86,190		$	(487	)
Overhoff		103,012			160,547			219,698			344,179
Corporate		(1,355,593	)		(1,608,421	)		(2,369,232	)		(2,717,802	)
	$	(1,409,906	)	$	(1,414,715	)	$	(2,063,344	)	$	(2,374,110	)

US NUCLEAR CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

	As of		As of
	September 30,		December 31,
	2019		2018
Total Assets
Optron	$	1,454,897	$	1,324,707
Overhoff		1,940,046		1,811,483
Corporate		453,013		199,741
	$	3,847,956	$	3,335,931

Goodwill
Optron	$	-	$	-
Overhoff		570,176		570,176
Corporate		-		-
	$	570,176	$	570,176

Note 13 – Geographical Sales

The geographical distribution of the Company’s sales for the three and nine months ended September 30, 2019 and 2018 is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Geographical sales
North America	$	187,819	$	463,678	$	995,861	$	1,431,443
Middle East		-		-		751,100		-
Asia		429,536		607,408		972,154		1,055,726
South America		-		59,929		11,576		139,237
Other		41,970		14,465		88,210		80,379
	$	659,325	$	1,145,480	$	2,818,901	$	2,706,785

Note 14 – Related Party Transactions

The Company leases its current facilities from Gold Team Inc., a company owned by the Company’s CEO, which owns both the Canoga Park, CA and Milford, Ohio locations. Rent expense for the nine months ended September 30, 2019 and 2018 were $126,000 and $126,000, respectively. As of September 30, 2019 and December 31, 2018, payable to Gold Team Inc. in connection with the above leases amount to $28,000 and $0, respectively. (See Note 10)

US NUCLEAR CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

In addition, as of September 30, 2019 and December 31, 2018, the Company had accrued compensation payable to its majority shareholder of $425,000 and $350,000, respectively.

Also see Note 7.

Note 15 – Concentrations

One customer accounted for 26.8% of the Company’s sales for the nine months ended September 30, 2019 and two customers accounted for 30% and 20% of the Company’s sales for the nine months ended September 30, 2018.

No vendors accounted for more than 10% of the Company’s purchases for the nine months ended September 30, 2019 and 2018.

Note 16 – 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 September 30, 2019 and December 31, 2018. The contingent liability is for the earn-out related to the purchase of Electronic Control Concepts.

	September 30, 2019
	Level 1		Level 2		Level 3		TOTAL
LIABILITES
Contingent Liability		-		-	$	35,989	$	35,989

	December 31, 2018
	Level 1		Level 2		Level 3		TOTAL
LIABILITES
Contingent Liability		-		-	$	57,142	$	57,142

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

Contingent liability at December 31, 2018	$	57,142
Change in fair value		(7,719	)
Reclassification to accounts payable		(13,434	)
Contingent liability at September 30, 2019	$	35,989

US NUCLEAR CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

Note 17 – Commitments

Future payment under all of the Company obligations as of September 30, 2019:

	Twelve Months Ended September 30,
	2020		2021		2022		2023		Total
Note payable	$	16,875	$	13,633	$	-	$	-	$	30,508
Note payable - shareholder		-		398,551		-		-		398,551
Operating lease obligations		168,000		98,000		-		-		266,000
Line of credit		218,197		-		-		-		218,197
	$	403,072	$	510,184	$	-	$	-	$	913,256

Note 18 – Subsequent Events

Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statements were available to be issued and has determined that no material subsequent events exist other than the following.

Subsequent to September 30, 2019, the Company issued a total of 62,132 shares for professional services rendered.

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, 2018 filed with the Securities Exchange Commission on Form 10-K on April 17, 2019 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.

Generally, our product concentration places a heavy reliance on our Overhoff Technology division; however, during the nine months ended September 30, 2019 we derived 26.7% of our total revenues from sales made by Optron to 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 65% of our total revenue in 2019. 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.

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.

Results of Operations

For the three months ended September 30, 2019 compared to the three months ended September 30, 2018

	Three Months Ended September 30,						Change
	2019			2018			$			%

Sales	$	659,325		$	1,145,480		$	(486,155	)		-42.4	%
Cost of goods sold		336,882			633,384			(296,502	)		-46.8	%
Gross profit		322,443			512,096			(189,653	)		-37.0	%
Selling, general and administrative expenses		1,729,246			1,918,685			(189,439	)		-9.9	%
Loss from operations		(1,406,803	)		(1,406,589	)		(214	)		0.0	%
Other expense		(3,103	)		(8,126	)		5,023			-61.8	%
Loss before provision for income taxes		(1,409,906	)		(1,414,715	)		4,809			-0.3	%
Provision for income taxes		-			-			-
Net loss	$	(1,409,906	)	$	(1,414,715	)	$	4,809			-0.3	%

Sales for the three months ended September 30, 2019 were $659,325 compared to $1,145,480 for the same period in 2018. The decrease of $486,155 or 42.4% is a result of a decrease in sales from both our Overhoff and Optron subsidiaries of $180,999 and $305,156, respectively. The decrease in sales from our Overhoff subsidiary was due to several large orders not shipping within the quarter. The decrease in sales from our Optron subsidiary was due to a decrease in large purchase orders. 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 September 30, 2019 is as follows:

North America 29%

Middle East 0%

Asia (Including Japan) 65%

South America 0%

Other 6%

Our gross margins for the three months ended September 30, 2019 were 48.9% as compared to 44.7% for the same period in 2018. The increase in gross margin is due to lower overhead costs.

Selling, general and administrative expense for the three months ended September 30, 2019 were $1,729,246 compared to $1,918,685 for the same period in 2018. The decrease of $189,439 or 9.9% was due to the acquisition of manufacturing and supply rights in 2018 of $1,084,000 offset by higher stock-based compensation in 2019. During the three months ended September 30, 2019, stock-based compensation was $1,150,321 compared to $448,740 during the same period in 2018.

Other expense for the three months ended September 30, 2019 was $3,103, a decrease of $5,023 from $8,126 for the same period in 2018. The decrease was due to lower interest expense due to less debt outstanding.

Net loss for the three months ended September 30, 2019 was $1,409,906 compared to $1,414,715 for the same period in 2018. The change was principally attributed to the factors described above.

For the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018

	Nine Months Ended September 30,						Change
	2019			2018			$			%

Sales	$	2,818,901		$	2,706,785		$	112,116			4.1	%
Cost of goods sold		1,392,608			1,429,606			(36,998	)		-2.6	%
Gross profit		1,426,293			1,277,179			149,114			11.7	%
Selling, general and administrative expenses		3,474,788			3,629,379			(154,591	)		-4.3	%
Loss from operations		(2,048,495	)		(2,352,200	)		303,705			-12.9	%
Other expense		(14,849	)		(21,910	)		7,061			-32.2	%
Loss before provision for income taxes		(2,063,344	)		(2,374,110	)		310,766			-13.1	%
Provision for income taxes		0			0			0
Net loss	$	(2,063,344	)	$	(2,374,110	)	$	310,766			-13.1	%

Sales for the nine months ended September 30, 2019 were $2,818,901 compared to $2,706,785 for the same period in 2018. The increase of $112,116 or 4.1% is a result of an increase in sales from our Optron subsidiary of $282,004; offset by a decrease in sales from our Overhoff subsidiary of $169,888. The increase in sales from our Optron subsidiary was due to the fulfillment of a large order of drone detector instruments shipped in May 2019. The decrease in sales from our Overhoff subsidiary was due to several large orders not shipping during the third quarter. 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 nine months ended September 30, 2019 is as follows:

North America 35%

Middle East 27%

Asia (Including Japan) 35%

South America 0%

Other 3%

Our gross margins for the nine months ended September 30, 2019 were 50.6% as compared to 47.2% for the same period in 2018. The increase in gross margin is due to lower overhead costs.

Selling, general and administrative expense for the nine months ended September 30, 2019 were $3,474,788 compared to $3,629,379 for the same period in 2018. The decrease of $154,591 or 4.3% was due to the acquisition of manufacturing and supply rights in 2018 of $1,084,000 offset by higher stock-based compensation in 2019. During the nine months ended September 30, 2019, stock-based compensation was $2,073,019 compared to $1,410,016 during the same period in 2018.

Other expense for the nine months ended September 30, 2019 was $14,849, a decrease of $7,061 from $21,910 for the same period in 2018. The decrease was due to lower interest expense due to less debt outstanding.

Net loss for the nine months ended September 30, 2019 was $2,063,344 compared to $2,374,110 for the same period in 2018. The change was principally attributed to the factors described above.

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 nine months ended September 30, 2019, our majority shareholder loaned the Company an additional $15,155 and was repaid $30,159. 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 September 30, 2019, total assets increased by 15.3% to $3,847,956 from $3,335,931 at December 31, 2018 principally related to an increase in cash, acquisition deposit and right-of use assets offset by a decrease in inventory.

At September 30, 2019, total liabilities increased by 13.3% to $1,507,687 from $1,330,337 at December 31, 2018. The increase is principally related to the lease obligation associated with the right-of-use assets.

Net cash provided by operating activities for the nine months ended September 30, 2019 was $92,007 compared to cash used in operating activities of $525,311 for the same period in 2018. The change in cash from operations was principally due to a decrease in the net loss and the changes in working capital accounts, principally inventory and accounts receivable.

Net cash used in investing activities for the nine months ended September 30, 2019 was $300,000 compared to $15,777 for the same period in 2018. The increase in cash used in investing activities was principally due to an acquisition deposit paid in 2019 of $300,000.

Net cash provided by financing activities for the nine months ended September 30, 2019 was $290,406 compared to $990,118 for the same period in 2018. The change in cash from financing activities was principally due to the sale of 1,730,000 shares of our common stock for proceeds of $1,068,750 during the nine months ended September 30, 2018 compared to the sale of 730,393 shares of our common stock for proceeds of $325,000 during the same period in 2019.

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.

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 September 30, 2019.

Changes in internal controls

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation to determine whether any change in our internal controls over financial reporting occurred during the three-month period ended September 30, 2019. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company’s internal controls over financial reporting during the nine months ended September 30, 2019 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, 2019 for Risk Factors.

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

During the three months ended September 30, 2019, the Company issued 1,218,857 shares of common stock to consultants for services rendered and 147,060 shares of common stock to investors for cash.

The above shares were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering.

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

3.1

02/14/2012

3.2

By-Laws

3.2

02/14/2012

3.3

Amendment to Certificate of Incorporation

8-K

3.3

05/29/2012

4.1

Specimen Stock Certificate

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

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

32.1

Certification 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

32.2

Certification 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

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Definition

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