US NUCLEAR CORP. - Quarter Report: 2014 September (Form 10-Q)

Note 4 – Equipment

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

Note 5 – Note Payable to Shareholder

Robert Goldstein, the owner of the Company, has loaned funds to the Company from time to time. These loans are evidenced by unsecured, non-interest bearing notes due on December 31, 2015. The amounts due to Mr. Goldstein are $0 and $660,429 as of September 30, 2014 and December 31, 2013, respectively. On September 30, 2014, Mr. Goldstein converted $200,000 of a note payable into 1,000,000 shares of the Company’s common stock. In addition, Mr. Goldstein also forgave the remaining balance of the note payable of $668,828. This forgiveness of debt is being treated as a capital contribution from the Company’s majority shareholder.

Note 6– Line of Credit

As of September 30, 2014 the Company had three lines of credit with a maximum borrowing amount of $400,000 and interest from 3.25% to 9.25%.As of September 30, 2014 and December 31, 2013, the amounts outstanding under these three lines of credit were $250,612 and $355,255, respectively.

Note 7 – Shareholders’ Equity

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

During the quarter ended September 30, 2014, the Company sold 1,090,000 shares of its common stock for proceeds of $108,500, net of $500 in offering costs.

On September 30, 2014, the Company’s CEO and majority shareholder converted $200,000 of a note payable into 1,000,000 shares of the Company’s common stock. In addition, the Company’s CEO also forgave the remaining balance of the note payable of $668,828. This forgiveness of debt is being treated as a capital contribution from the Company’s majority shareholder.

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

US NUCLEAR CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(Unaudited)

Note 8 – Segment Reporting

ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company has two reportable segments:Optron and Overhoff. Optron is located in Canoga Park, California and Overhoff is located in Milford, Ohio.

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

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

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

Revenue for the quarter ended September 30, 2014 decreased to $474,651 down by 3% compared to $490,725 for the same period for the prior year, the revenue breakdown is as follows:

General and administrative expense decreased for the 3rd quarter of 2014 compared to the prior year 3rd quarter to $329,971 down from $457,682 a decrease of 27.9%. The decrease was mainly attributed to payroll expense decrease.

Professional fees increased from $0 in the 3rd quarter of 2013 to $24,060 for the 3rd quarter of 2014, due to increased expenses for accounting, auditing and the professional services required for the Company’s reporting as required by the Securities and Exchange Commission.

Payroll expense decreased from $318,992 in the 3rd quarter of 2013 to $129,691 for the 3rd quarter of 2014, a decrease of 59.3%.

At September 30, 2014, total assets decreased by 1%, to $2,843,422 from $2,867,847 for the 3rd quarter of 2013 principally related to an increase in cash and cash equivalents, a decreased in accounts receivable and an increase in inventory.

At September 30, 2014, total liabilities increased by 17% to $1,439,119 from $1,226,241 for the 3rd quarter of 2013 principally related to a decrease in sales and related operating costs with an increase in indebtedness to the Company’s principal stockholder.

Net income was $13,487, or breakeven for the quarter ended September 30, 2014 from a negative $172,489 for the 3rd quarter of 2013.

You should read the following discussion of our financial condition and results of operations together with the audited financial statements and the notes to the audited financial statements included in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.

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

Since our acquisition of Overhoff Technology in 2006, we have had discussions with other companies in our industry for an acquisition. While we targeted Overhoff due to its unique position in the tritium market, we have not commenced an acquisition since our Overhoff Technology acquisition; we believe in part the reason was due to lack of additional capital, our status as a privately-held entity at the time, and focus on developing our own products. We will seek out companies that our management believes will provide value to our customers and will complement our business. We will focus on diversifying our product line into a larger range so that our customers and vendors may have a more expansive experience in type, choice, options, price and selection. We also believe that with a more diverse product line we will become more competitive as our industry is intensely competitive.

Our current product concentration places a heavy reliance on our Overhoff Technology division; where we derived 59% of our total revenues in the 3rd quarter of 2014 from one customer. We expect to encounter a continuation of this trend unless we are successful in diversifying our client base, executing our acquisition strategy and experience increases in business from our Technical Associates division.

Our international revenues were 24% of our total revenue in the 3rd quarter of 2014. We expect this percentage to continue to increase over time as we continue to field new orders inquires and engage new customers overseas. We believe that South Korea and China will likely be larger contributors to revenue within the next few years. While we maintain steady growth domestically, the international side of our business may be a larger component as nuclear technology and rapid development for clean energy grows abroad. There can be no assurances as to our growth projections and our risk profile as we depend upon increased foreign customers for business.

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

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

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

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

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

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

Contractual obligations

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

Off-balance sheet arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

None

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

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

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

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

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

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

Changes in Internal Control over Financial Reporting

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

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There are not presently any material pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

Item 1A. Risk Factors

There is currently no trading market for our common stock.

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

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

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

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

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

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

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

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

Management currently owns 77% of all the issued and outstanding capital stock of the Company. Consequently, management has the ability to control the operations of the Company and will have the ability to control substantially all matters submitted to stockholders for approval, including:

Robert I. Goldstein, our Chief Executive Officer and Director, is the beneficial owner of 10,150,000 shares of our common stock. Accordingly, this concentration of ownership by itself may have the effect of impeding a merger, consolidation, takeover or other business consolidation, or discouraging a potential acquirer from making a tender offer for the common stock.

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

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

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

The Registrant is has concluded a private offering of its shares on September 29, 2014. We are relying upon Section 4(2) of the Securities Act of 1933, as amended for the above issuances. We believed that Section 4(2) was available because the Registrant believes that the foregoing transactions were exempt from the registration requirements under the Act, based on the following facts: there was no general solicitation, there was a limited number of purchasers, each of whom the Registrant believes was  an “accredited investor” (within the meaning of Regulation D under the Securities Act of 1933, as amended) and was sophisticated about business and financial matters, and all shares issued were subject to restriction on transfer, so as to take reasonable steps to assure that the purchaser was not an underwriter within the meaning of Section 2(11) under the Act.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

As previously disclosed on Form 8-K, on October 16, 2014, Darian B. Andersen, resigned as Chief Financial Officer, effective October 31, 2014. On that same day, the Company entered into an employment agreement with Rachel Boulds as Chief Financial Officer, to be effective as of October 31, 2014.

On September 30, 2014, the Company entered into a Forgiveness of Debt and Conversion Agreement whereby the Majority Shareholders and Board of Directors voted to accept the agreement which effectively removes $868,828 of outstanding related party debt from Robert I. Goldstein, its President, CEO & Chairman of the Board of Directors. Pursuant to the agreement, Mr. Goldstein agreed to forgive $668,828 and convert the balance of $200,000 into 1,000,000 shares of restricted common stock at $0.20 cents per share.

On November 4, 2014, the Company entered into a 5 year Employment Agreement with Robert I. Goldstein, its President, Chief Executive Officer and Chairman of the Board to serve as such for a 5 year term with an extension, for $100,000 in annual compensation per year. The Employment Agreement has been filed with this Form 10-Q disclosure.

Item 6. Exhibits.

SIGNATURES

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

US Nuclear Corp.

Dated: November 10, 2014

By /s/ Robert I. Goldstein

Robert I. Goldstein

President and Chief Executive Officer

By /s/ Rachel Boulds

Rachel Boulds

Chief Financial Officer