UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

____________________

 

FORM 10-Q

____________________

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2024

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________________ to __________________

 

Commission File Number: 001-41555

 

ASP Isotopes Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

87-2618235

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

601 Pennsylvania Avenue NW,

South Building, Suite 900

Washington, DC

 

20004

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (202756-2245

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01per share

 

ASPI

 

Nasdaq Stock Market LLC

(Nasdaq Capital Market)

 

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 every Interactive Data File required to be submitted 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 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 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

As of August 12, 2024, the registrant had 66,686,941 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 

Table of Contents

 

 

 

 

Page

 

PART I.

FINANCIAL INFORMATION

 

5

 

Item 1.

Financial Statements (Unaudited)

 

5

 

 

Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023

 

5

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Month Periods ended June 30, 2024 and 2023

 

6

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Month Periods ended June 30, 2024 and 2023

 

7

 

 

Condensed Consolidated Statements of Cash Flows for the Six Month Periods ended June 30, 2024 and 2023

 

8

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

9

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

32

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

43

 

Item 4.

Controls and Procedures

 

43

 

 

 

 

 

 

PART II.

OTHER INFORMATION

 

44

 

Item 1.

Legal Proceedings

 

44

 

Item 1A.

Risk Factors

 

44

 

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

 

44

 

Item 3.

Defaults Upon Senior Securities

 

44

 

Item 4.

Mine Safety Disclosures

 

44

 

Item 5.

Other Information

 

44

 

Item 6.

Exhibits

 

45

 

Signatures

 

46

 

 

 
2

Table of Contents

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

 

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “would,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

 

·

our ability to achieve or sustain positive cash flows from operations or profitability;

 

 

·

our ability to complete the construction of, commission and successfully operate isotope enrichment plants in a cost-effective manner;

 

 

·

our ability to meet, and to continue to meet, applicable regulatory requirements for the use of the isotopes we may produce using the ASP technology or the Quantum Enrichment process;

 

 

·

our ability to obtain regulatory approvals for the production and distribution of isotopes;

 

 

·

our ability to comply on an ongoing basis with the numerous regulatory requirements applicable to the ASP technology, the Quantum Enrichment process and our enrichment facilities in South Africa;

 

 

·

the introduction, market acceptance and success of Mo-100 that we may produce using ASP technology as an alternative and potentially more convenient production route for Tc-99m;

 

 

·

the success or profitability of our future offtake arrangements with respect to various isotopes that we may produce using ASP technology or the Quantum Enrichment process;

 

 

·

a failure of demand for various isotopes that we may produce using ASP technology or the Quantum Enrichment process;

 

 

·

our future capital requirements and sources and uses of cash;

 

 

·

our ability to obtain funding for our operations and future growth;

 

 

·

the extensive costs, time and uncertainty associated with new technology development;

 

 

·

our ability to implement and maintain effective internal controls;

 

 

·

developments and projections relating to our competitors and industry;

 

 

·

the ability to recognize the anticipated benefits of acquisitions, including our acquisition of assets of Molybdos (Pty) Limited in the “business rescue” auction, the assets and intellectual property we acquired from Klydon Proprietary Ltd, and our investment in PET Labs Pharmaceuticals;

 

 

·

problems with the performance of the ASP technology or the Quantum Enrichment process in the enrichment of isotopes;

 

 

·

our dependence on a limited number of third-party suppliers for certain components;

 

 

·

our inability to adapt to changing technology and diagnostic landscape, such as the emergence of new diagnostic scanners or tracers;

 

 

·

our expected dependence on a limited number of key customers for isotopes that we may produce using ASP technology or the Quantum Enrichment process;

 

 
3

Table of Contents

 

·

our inability to protect our intellectual property and the risk of claims that we have infringed on the intellectual property of others;

 

 

·

our inability to compete effectively;

 

 

·

risks associated with the current economic environment;

 

 

·

risks associated with our international operations;

 

 

·

our credit counterparty risks;

 

 

·

geopolitical risk and changes in applicable laws or regulations;

 

 

·

our inability to adequately protect our technology infrastructure;

 

 

·

our inability to hire or retain skilled employees and the loss of any of our key personnel;

 

 

·

operational risk;

 

 

·

costs and other risks associated with becoming a reporting company and becoming subject to the Sarbanes-Oxley Act; and

 

 

·

other factors that are described in “Risk Factors,” on page 44.

 

These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those set forth in Part I, Item 1A - “Risk Factors” below and for the reasons described elsewhere in this Quarterly Report on Form 10-Q. Any forward-looking statement in this Quarterly Report on Form 10-Q reflects our current view with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, industry, and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

 

This Quarterly Report on Form 10-Q also contains estimates, projections, and other information concerning our industry, our business, and the potential markets for certain isotopes, including data regarding the estimated size of those markets, their projected growth rates, and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by third parties, industry, medical and general publications, government data, and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

 

Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, “we,” “us,” “our,” “ASP Isotopes,” and the “Company” refer to ASP Isotopes Inc. and, where appropriate, its consolidated subsidiaries.

 

Trademarks

 

All trademarks, service marks, and trade names included in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

 

 
4

Table of Contents

 

PART I-FINANCIAL INFORMATION

 

Item 1. Financial Statements.

ASP Isotopes Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$28,262,332

 

 

$7,908,181

 

Accounts receivable

 

 

515,450

 

 

 

216,504

 

Receivable from noncontrolling interests

 

 

 

 

 

721,548

 

Prepaid expenses and other current assets

 

 

3,248,432

 

 

 

1,664,023

 

Deferred offering costs

 

 

45,000

 

 

 

 

Total current assets

 

 

32,071,214

 

 

 

10,510,256

 

Property and equipment, net

 

 

17,774,788

 

 

 

10,712,839

 

Operating lease right-of-use assets, net

 

 

1,417,402

 

 

 

1,258,701

 

Goodwill

 

 

3,289,163

 

 

 

3,267,103

 

Other noncurrent assets

 

 

208,367

 

 

 

1,793,014

 

Total assets

 

$54,760,934

 

 

$27,541,913

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$2,432,857

 

 

$1,111,819

 

Accrued expenses

 

 

2,455,510

 

 

 

1,311,245

 

Notes payable

 

 

31,610

 

 

 

470,396

 

Finance lease liabilities – current

 

 

120,595

 

 

 

61,941

 

Operating lease liabilities – current

 

 

541,796

 

 

 

336,564

 

Deferred revenue

 

 

882,000

 

 

 

882,000

 

Other current liabilities

 

 

1,240,724

 

 

 

1,500,000

 

Share liability

 

 

306,000

 

 

 

 

Total current liabilities

 

 

8,011,092

 

 

 

5,673,965

 

Deferred tax liabilities

 

 

71,093

 

 

 

110,578

 

Convertible notes payable, at fair value

 

 

29,086,669

 

 

 

 

Finance lease liabilities – noncurrent

 

 

562,566

 

 

 

207,092

 

Operating lease liabilities – noncurrent

 

 

1,014,774

 

 

 

1,066,647

 

Other liabilities

 

 

1,653,000

 

 

 

1,653,000

 

Total liabilities

 

 

40,399,194

 

 

 

8,711,282

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.01 par value; 500,000,000 shares authorized, 52,132,833 and 48,923,276 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

 

 

521,329

 

 

 

489,233

 

Additional paid-in capital

 

 

50,911,752

 

 

 

40,567,003

 

Accumulated deficit

 

 

(39,720,310 )

 

 

(23,839,300 )

Accumulated other comprehensive loss

 

 

(701,291 )

 

 

(920,982 )

Total ASP Isotopes stockholders’ equity

 

 

11,011,480

 

 

 

16,295,954

 

Noncontrolling interests

 

 

3,350,260

 

 

 

2,534,677

 

Total stockholders’ equity

 

 

14,361,740

 

 

 

18,830,631

 

Total liabilities and stockholders’ equity

 

$54,760,934

 

 

$27,541,913

 

 

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

 

 
5

Table of Contents

 

ASP Isotopes Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended  

    June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$1,022,299

 

 

$-

 

 

$1,862,653

 

 

$-

 

Cost of goods sold

 

 

601,275

 

 

 

-

 

 

 

1,162,759

 

 

 

-

 

Gross profit

 

 

421,024

 

 

 

-

 

 

 

699,894

 

 

 

-

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

473,302

 

 

 

252,880

 

 

 

688,436

 

 

 

460,214

 

Selling, general and administrative

 

 

7,405,178

 

 

 

4,094,664

 

 

 

13,283,724

 

 

 

7,612,154

 

Total operating expenses

 

 

7,878,480

 

 

 

4,347,544

 

 

 

13,972,160

 

 

 

8,072,368

 

Loss from operations

 

 

(7,457,456 )

 

 

(4,347,544 )

 

 

(13,272,266 )

 

 

(8,072,368 )

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange transaction gain (loss)

 

 

26,147

 

 

 

-

 

 

 

1,804

 

 

 

(935 )

Change in fair value of share liability

 

 

164,000

 

 

 

60,100

 

 

 

(54,000 )

 

 

170,385

 

Change in fair value of convertible notes payable

 

 

(1,574,816 )

 

 

-

 

 

 

(2,528,526 )

 

 

-

 

Interest income

 

 

43,530

 

 

 

1,098

 

 

 

55,718

 

 

 

1,494

 

Interest expense

 

 

(69,078 )

 

 

-

 

 

 

(82,866 )

 

 

-

 

Total other (expense) income

 

 

(1,410,217 )

 

 

61,198

 

 

 

(2,607,870 )

 

 

170,944

 

Loss before income tax (expense) benefit

 

 

(8,867,673 )

 

 

(4,286,346 )

 

 

(15,880,136 )

 

 

(7,901,424 )

Income tax provision

 

 

(13,769 )

 

 

-

 

 

 

33,850

 

 

 

-

 

Net loss before allocation to noncontrolling interests

 

 

(8,881,442 )

 

 

(4,286,346 )

 

 

(15,846,286 )

 

 

(7,901,424 )

Less: Net income attributable to noncontrolling interests

 

 

51,483

 

 

 

-

 

 

 

34,724

 

 

 

-

 

Net loss attributable to ASP Isotopes Inc. shareholders before deemed dividend on inducement warrant for common stock

 

$(8,932,925 )

 

$(4,286,346 )

 

$(15,881,010 )

 

$(7,901,424 )

Deemed dividend on inducement warrant for common stock

 

 

(2,779,659 )

 

 

-

 

 

 

(2,779,659 )

 

 

-

 

Net loss attributable to ASP Isotopes Inc. shareholders

 

$(11,712,584 )

 

$(4,286,346 )

 

$(18,660,669 )

 

$(7,901,424 )

Net loss per share, attributable to ASP Isotopes Inc. shareholders, basic and diluted

 

$(0.24 )

 

$(0.14 )

 

$(0.40 )

 

$(0.27 )

Weighted average shares of common stock outstanding, basic and diluted

 

 

49,136,009

 

 

 

29,796,065

 

 

 

46,848,926

 

 

 

29,535,060

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss before allocation to noncontrolling interests

 

$(8,881,442 )

 

$(4,286,346 )

 

$(15,846,286 )

 

$(7,901,424 )

Foreign currency translation

 

 

763,420

 

 

 

(472,673 )

 

 

219,691

 

 

 

(1,476,526 )

Total comprehensive loss before allocation to noncontrolling interests

 

 

(8,118,022 )

 

 

(4,759,019 )

 

 

(15,626,595 )

 

 

(9,377,950 )

Less: Comprehensive income attributable to noncontrolling interests

 

 

52,303

 

 

 

-

 

 

 

44,773

 

 

 

-

 

Total comprehensive loss

 

$(8,170,325 )

 

$(4,759,019 )

 

$(15,671,368 )

 

$(9,377,950 )

 

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

 

 
6

Table of Contents

 

ASP Isotopes Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated Other Comprehensive (Loss)

 

 

Accumulated

 

 

Noncontrolling

 

 

Total Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

 Income

 

 

 Deficit

 

 

 Interests

 

 

Equity

 

Balance as of December 31, 2023

 

 

48,923,276

 

 

$489,233

 

 

$40,567,003

 

 

$(920,982 )

 

$(23,839,300 )

 

$2,534,677

 

 

$18,830,631

 

Retired unvested restricted shares

 

 

(325,000 )

 

 

(3,250 )

 

 

3,250

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

1,713,654

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,713,654

 

Distribution to noncontrolling interest of VIE

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,694 )

 

 

(8,694 )

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(543,729 )

 

 

-

 

 

 

-

 

 

 

(543,729 )

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,948,085 )

 

 

(16,759 )

 

 

(6,964,844 )

Balance as of March 31, 2024

 

 

48,598,276

 

 

 

485,983

 

 

 

42,283,907

 

 

 

(1,464,711 )

 

 

(30,787,385 )

 

 

2,509,224

 

 

 

13,027,018

 

Issuance of common stock from warrant exercise

 

 

3,164,557

 

 

 

31,646

 

 

 

5,506,329

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,537,975

 

Issuance of restricted common stock

 

 

250,000

 

 

 

2,500

 

 

 

(2,500 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of common stock to consultant

 

 

60,000

 

 

 

600

 

 

 

183,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

183,600

 

Settlement of liabilities with consultants

 

 

60,000

 

 

 

600

 

 

 

183,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

183,600

 

Board fee liabilities to be settled with shares

 

 

-

 

 

 

-

 

 

 

240,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

240,000

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

2,518,016

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,518,016

 

Contribution from noncontrolling interest in VIE

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

807,975

 

 

 

807,975

 

Distribution to noncontrolling interest of VIE

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(18,422 )

 

 

(18,422 )

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

763,420

 

 

 

-

 

 

 

-

 

 

 

763,420

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,932,925 )

 

 

51,483

 

 

 

(8,881,442 )

Balance as of June 30, 2024

 

 

52,132,833

 

 

$521,329

 

 

$50,911,752

 

 

$(701,291 )

 

$(39,720,310 )

 

$3,350,260

 

 

$14,361,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2022

 

 

35,907,127

 

 

$359,071

 

 

$16,756,426

 

 

$255,030

 

 

$(7,553,066 )

 

$-

 

 

$9,817,461

 

Issuance of common stock and warrants, net of issuance costs of $506,390

 

 

3,164,557

 

 

 

31,646

 

 

 

4,461,964

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,493,610

 

Cancellation of common stock received in exchange for issuance of preferred stock in subsidiary

 

 

(3,000,000 )

 

 

(30,000 )

 

 

30,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of common stock in lieu of commissions

 

 

57,250

 

 

 

573

 

 

 

74,997

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

75,570

 

Issuance of restricted common stock

 

 

1,256,750

 

 

 

12,567

 

 

 

(12,567 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

2,144,099

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,144,099

 

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,003,853 )

 

 

-

 

 

 

-

 

 

 

(1,003,853 )

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,615,078 )

 

 

-

 

 

 

(3,615,078 )

Balance as of March 31, 2023

 

 

37,385,684

 

 

 

373,857

 

 

 

23,454,919

 

 

 

(748,823 )

 

 

(11,168,144 )

 

 

-

 

 

 

11,911,809

 

Settlement of liabilities with related party

 

 

-

 

 

 

-

 

 

 

626,223

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

626,223

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

2,374,686

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,374,686

 

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(472,673 )

 

 

-

 

 

 

-

 

 

 

(472,673 )

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,286,346 )

 

 

-

 

 

 

(4,286,346 )

Balance as of June 30, 2023

 

 

37,385,684

 

 

$373,857

 

 

$26,455,828

 

 

$(1,221,496 )

 

$(15,454,490 )

 

$-

 

 

$10,153,699

 

 

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

 

 
7

Table of Contents

 

ASP Isotopes Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Six Months Ended

June 30,

 

 

 

2024

 

 

2023

 

Cash flows from Operating activities

 

 

 

 

 

 

Net loss

 

$(15,846,286 )

 

$(7,901,424 )

Adjustments to reconcile net loss to cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

249,714

 

 

 

167

 

Loss on disposal of property and equipment

 

 

1,666

 

 

 

-

 

Stock-based compensation

 

 

4,231,670

 

 

 

4,518,785

 

Convertible note payable for non-cash issuance costs

 

 

621,915

 

 

 

-

 

Share liability for non-cash consultant expense

 

 

619,200

 

 

 

496,300

 

Change in fair value of share liability

 

 

54,000

 

 

 

(170,385 )

Change in fair value of convertible notes payable

 

 

2,528,526

 

 

 

-

 

Change in right-of-use lease asset

 

 

217,997

 

 

 

32,553

 

Change in deferred tax liabilities

 

 

(39,068 )

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(288,878 )

 

 

-

 

Prepaid expenses and other current assets

 

 

(1,566,707 )

 

 

294,971

 

Other noncurrent assets

 

 

-

 

 

 

(48,747 )

Accounts payable

 

 

223,828

 

 

 

(351,830 )

Accrued expenses

 

 

1,425,242

 

 

 

446,564

 

Operating lease liability

 

 

(224,134 )

 

 

(18,844 )

Other current liabilities

 

 

(303,941 )

 

 

-

 

Net cash used in operating activities

 

 

(8,095,256 )

 

 

(2,701,890 )

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(3,867,903 )

 

 

(508,607 )

Net cash used in investing activities

 

 

(3,867,903 )

 

 

(508,607 )

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

5,537,975

 

 

 

5,000,000

 

Proceeds from noncontrolling interest in VIE

 

 

807,975

 

 

 

-

 

     Proceeds from collection of receivable from noncontrolling interest in VIE

 

 

 705,403

 

 

 

 -

 

Common stock issuance costs

 

 

-

 

 

 

(506,390 )

     Payment of deferred issuance costs

 

 

 (45,000

 

 

 -

 

Distribution to noncontrolling interest in VIE

 

 

(27,116 )

 

 

-

 

Proceeds from issuance of convertible notes payable

 

 

25,936,228

 

 

 

-

 

Payment of notes payable

 

 

(438,569 )

 

 

-

 

Payment of principal portion of finance leases

 

 

(61,929 )

 

 

-

 

Net cash provided by financing activities

 

 

32,414,967

 

 

 

4,493,610

 

Net change in cash and cash equivalents

 

 

20,451,808

 

 

 

1,283,113

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(97,657 )

 

 

(46,088 )

Cash and cash equivalents - beginning of period

 

 

7,908,181

 

 

 

2,389,140

 

Cash and cash equivalents - end of period

 

$28,262,332

 

 

$3,626,165

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Settlement of liabilities with related party

 

$-

 

 

$626,223

 

Right-of-use asset obtained in exchange for operating lease liability

 

$364,458

 

 

$-

 

Right-of-use asset obtained in exchange for finance lease liability

 

 501,389

 

 

 -

 

Purchase of property and equipment included in accounts payable

 

$1,100,179

 

 

$318,900

 

Purchase of property and equipment included in other noncurrent liabilities

 

$1,653,000

 

 

$-

 

Deemed dividend on inducement warrant

 

2,779,659

 

 

 -

 

Board fees to be settled with common stock

 

 240,000

 

 

 -

 

Issuance of common stock in lieu of commissions

 

$-

 

 

$75,750

 

 

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

 

 
8

Table of Contents

 

ASP Isotopes Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

1. Organization

 

Description of Business

 

ASP Isotopes Inc. was incorporated in the state of Delaware on September 13, 2021, and has its principal operations in Washington, DC. ASP Isotopes Inc.’s subsidiary ASP Isotopes Guernsey Limited (“ASP Guernsey”), has its principal operations in Guernsey. ASP Guernsey’s subsidiary, ASP Isotopes South Africa Proprietary Limited (“ASP South Africa”), has its principal operations in South Africa. ASP Rentals Proprietary Limited (“ASP Rentals”), a variable interest entity (“VIE”) of ASP South Africa, has its principal operations in South Africa. Enlightened Isotopes (Pty) Ltd (“Enlightened Isotopes”), an 80% owned subsidiary of ASP South Africa, was formed in March 2023 and began operations in January 2024. ASP Isotopes UK Ltd, a subsidiary of ASP Guernsey, was incorporated in July 2022. PET Labs Pharmaceuticals Proprietary Limited (“PET Labs”), a 51% owned subsidiary of ASP Isotopes Inc. operates in South Africa. ASP Isotopes Inc.’s subsidiary, Quantum Leap Energy LLC, was formed in the state of Delaware in September 2023 and began operations in February 2024. Quantum Leap Energy LLC’s subsidiary Quantum Leap Energy Proprietary Limited (“Quantum Leap Energy South Africa”), has its operations in South Africa. ASP Isotopes Inc., its subsidiaries and ASP Rentals are collectively referred to as “the Company” throughout these consolidated statements.

 

The Company is a development stage advanced materials company dedicated to the development of technology and processes that, if successful, will allow for the enrichment of natural isotopes into higher concentration products, which could be used in several industries. The Company’s proprietary technology, the Aerodynamic Separation Process (“ASP technology”), originally developed by Klydon Proprietary Ltd (“Klydon”), is designed to enable the production of isotopes used in several industries. The Company’s initial focus is on the production and commercialization of enriched Carbon-14 (“C-14”), Molybdenum-100 (“Mo-100”) and Silicon-28 (“Si-28”). The Company has commissioned an isotope enrichment plant for the enrichment of C-14 located in Pretoria, South Africa, which will be ready for production upon the final installation of essential components, and we expect to start commercial supply of C-14 during second half of 2024. The Company anticipates completion and commissioning of a multi-isotope enrichment plant in Pretoria, South Africa during second half 2024, and the Company expects to start initial commercial supply of Si-28 during second half 2024. In addition, the Company has started planning additional isotope enrichment plants. The Company believes the C-14 it may develop using the ASP technology may be used in the development of new pharmaceuticals and agrochemicals.  The Company believes that the Mo-100 it may develop using the ASP technology has significant potential advantages for use in the preparation of nuclear imaging agents by radiopharmacies and others in the medical industry. The Company believes the Si-28 it may develop using the ASP technology may be used to develop advanced semiconductors and in quantum computing. In addition, the Company is considering the future development of the ASP technology for the separation of Zinc-68, Xenon-129/136 for potential use in the healthcare end market, Germanium 70/72/74 for possible use in the semiconductor end market, and Chlorine-37 for potential use in the nuclear energy end market.

 

The Company is also developing quantum enrichment technology to produce enriched Ytterbium-176 (“Yb-176”), Nickel-64, Lithium6, Lithium-7 and Uranium-235 (“U-235”). Quantum enrichment is an advanced isotope enrichment technique that is currently in development that uses lasers. The Company believes that the U-235 it may develop using quantum enrichment technology may be commercialized as a nuclear fuel component for use in the new generation of high-assay low-enriched uranium (HALEU)-fueled small modular reactors that are now under development for commercial and government uses. The Company’s first quantum enrichment facility is expected to complete construction and commissioning during fourth quarter 2024 with first commercial production of Yb-176 also expected during fourth quarter 2024.

 

Liquidity

 

The Company has experienced net losses and negative cash flows from operating activities since its inception. The Company incurred net losses of $15,846,286 and $7,901,424 for the six months ended June 30, 2024 and 2023, respectively.

 

The Company currently expects that its cash and cash equivalents of $28,262,332 as of June 30, 2024, along with gross proceeds of $34,500,000 received in July 2024 through the issuance of common stock (see Note 12), will be sufficient to fund its operating expenses and capital requirements for more than 12 months from the date the financial statements are issued. The Company anticipates it will need to continue to raise capital through additional equity and/or debt financings and/or collaborative development agreements to fund its operations.

 

There can be no assurance that the Company will achieve or sustain positive cash flows from operations or profitability. The Company is in the process of seeking additional debt and equity financing. However, such funding may not be available on a timely basis on terms acceptable to the Company, or at all. If the Company is unable to raise additional capital when required or on acceptable terms, the Company may be required to scale back or discontinue the advancement of product candidates, reduce headcount, reorganize, merge with another entity, or cease operations.

 

 
9

Table of Contents

 

2. Basis of Presentation and Summary of Significant Accounting Policies

 

Unaudited Financial Information

 

The Company’s unaudited condensed consolidated financial statements included herein have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, and pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC. In the Company’s opinion, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the financial position and results of operations for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes for the year ended December 31, 2023.

 

Basis of Presentation and Use of Estimates

 

The Company’s condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of the Company’s condensed consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and disclosure in the Company’s condensed consolidated financial statements and accompanying notes. The most significant estimates in the Company’s consolidated financial statements relate to stock based compensation, the accounting for the acquisition of PET Labs Pharmaceuticals and fair value measurement of the convertible notes payable and warrants. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may materially differ from these estimates and assumptions.

 

Principles of consolidation

 

The Company’s condensed consolidated financial statements include the accounts of ASP Isotopes Inc., its wholly-owned subsidiaries, the 80% owned Enlightened Isotopes, the 51% owned PET Labs Pharmaceuticals and the 24% owned VIE ASP Rentals. All intercompany balances and transactions have been eliminated in consolidation. 

 

Currency and currency translation

 

The condensed consolidated financial statements are presented in U.S. dollars, the Company’s reporting currency. The functional currency of ASP Isotopes Inc. and ASP Guernsey is the U.S. dollar. The functional currency of the Company’s subsidiaries ASP South Africa and Quantum Leap Energy South Africa is the South African Rand. The functional currency of the 80% owned Enlighted Isotopes, the 51% owned PET Labs Pharmaceuticals and the 24% owned VIE ASP Rentals is the South African Rand. Adjustments that arise from exchange rate changes on transactions of each group entity denominated in a currency other than the functional currency are included in other income and expense in the consolidated statements of operations. Assets and liabilities of the entities with functional currency of South African Rand are recorded in South African Rand and translated into the U.S. dollar reporting currency of the Company at the exchange rate on the balance sheet date. Revenue and expenses of the entities with functional currency of South African Rand are recorded in South African Rand and translated into the U.S. dollar reporting currency of the Company at the average exchange rate prevailing during the reporting period. Resulting translation adjustments are recorded separately in stockholders’ equity as a component of accumulated other comprehensive (loss) income.

 

Concentration of Credit Risk and other Risks

 

Cash balances maintained at U.S. financial institutions may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $250,000 per depositor, per insured bank for each account ownership category. Although the Company currently believes that the financial institutions with whom it does business, will be able to fulfill their commitments to the Company, there is no assurance that those institutions will be able to continue to do so. The Company has not experienced any credit losses associated with its balances in such accounts for the six months ended June 30, 2024 and 2023.

 

Our foreign subsidiaries held cash of approximately $1,885,000 and $1,963,000 as of June 30, 2024 and December 31, 2023, respectively, which is included in cash on the consolidated balance sheets. Our strategic plan does not require the repatriation of foreign cash in order to fund our operations in the U.S., and it is our current intention to indefinitely reinvest our foreign cash outside of the U.S. If we were to repatriate foreign cash to the U.S., we would be required to accrue and pay U.S. taxes in accordance with applicable U.S. tax rules and regulations as a result of the repatriation.

 

 
10

Table of Contents

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents are stated at fair value and may include money market funds, U.S. Treasury and U.S. government-sponsored agency securities, corporate debt, commercial paper and certificates of deposit. The Company had cash equivalents of $146,500 in the form of money market funds as of June 30, 2024. The Company had no cash equivalents as of December 31, 2023.

 

Segment Information

 

As of December 31, 2023, we managed our operations as a single segment, specialist isotopes and related services.  Beginning in 2024, primarily as a result of increased business activities of our subsidiary, Quantum Leap Energy LLC, we have two operating segments: (i) nuclear fuels, and (ii) specialist isotopes and related services.

 

The nuclear fuels segment is focused on research and development of technologies and methods used to produce high-assay low-enriched uranium (HALEU) and Lithium-6 for the advanced nuclear fuels target end market.

 

The specialist isotopes and related services segment is focused on research and development of technologies and methods used to separate high-value, low-volume isotopes (such as C-14, Mo-100 and Si-28) for highly specialized target end markets other than advanced nuclear fuels, including pharmaceuticals and agrochemicals, nuclear medical imaging and semiconductors, as well as services related to these isotopes, and this segment includes PET Labs Pharmaceuticals.

 

The financial information is regularly reviewed by the chief operating decision maker (“CODM”) in deciding how to allocate resources. The Company’s CODM is its chief executive officer.

 

The Company manages assets on a total company basis, not by operating segment, as the assets are shared or commingled.  Therefore, the chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, asset information is not reported on a segment basis.

 

Select income statement information as of the three months ended June 30, 2024 and 2023 is as follows:

 

 

 

Revenues

 

 

Net Loss Before 

Allocation to Noncontrolling Interest

 

Segment

 

Three

Months Ended

June 30,

2024

 

 

Three

Months Ended

June 30,

2023

 

 

Three

Months Ended

June 30,

2024

 

 

Three

Months Ended

June 30,

2023

 

Specialist isotopes and related services

 

$1,022,299

 

 

$-

 

 

$(6,029,170 )

 

$(4,286,346 )

Nuclear fuels

 

 

-

 

 

 

-

 

 

 

(2,852,272 )

 

 

-

 

 

 

$1,022,299

 

 

$-

 

 

$(8,881,442 )

 

$4,286,346 )

 

Select income statement information as of the six months ended June 30, 2024 and 2023 is as follows:

 

 

 

Revenues

 

 

Net Loss Before

Allocation to Noncontrolling Interest

 

Segment

 

Six

Months Ended

June 30,

2024

 

 

Six

Months Ended

June 30,

2023

 

 

Six

Months Ended

June 30,

2024

 

 

Six

Months Ended

June 30,

2023

 

Specialist isotopes and related services

 

$1,862,653

 

 

$-

 

 

$(10,915,007 )

 

$(7,901,424 )

Nuclear fuels

 

 

-

 

 

 

-

 

 

 

(4,931,279 )

 

 

-

 

 

 

$1,862,653

 

 

$-

 

 

$(15,846,286 )

 

$(7,901,424 )

 

 
11

Table of Contents

 

Fair Value of Financial Instruments

 

Accounting guidance defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

 

Level 1:

Observable inputs such as quoted prices in active markets;

 

 

 

 

Level 2:

Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

 

 

 

 

Level 3:

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

The Company’s share liability (Note 12) is measured as a Level 1 fair value on a recurring basis and was $306,000 as of June 30, 2024. There was no share liability as of December 31, 2023. The Company’s convertible notes payable (Note 6) is measured as a Level 3 fair value on a recurring basis and was $29,086,669 as of June 30, 2024. There were no transfers among Level 1, Level 2 or Level 3 categories in the six months ended June 30, 2024. The following table provides a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs:

 

 

 

Convertible

Notes Payable

 

 

Share

Liability

 

Balance as of December 31, 2022

 

$-

 

 

$140,455

 

Fair value at issuance

 

 

-

 

 

 

669,700

 

Fair value adjustment

 

 

-

 

 

 

194,540

 

Settlement of liability

 

 

-

 

 

 

(1,004,695 )

Balance as of December 31, 2023

 

 

-

 

 

 

-

 

Fair value at issuance

 

 

26,558,143

 

 

 

435,600

 

Fair value adjustment

 

 

2,528,526

 

 

 

54,000

 

Settlement of liability

 

 

-

 

 

 

(183,600 )

Balance as of June 30, 2024

 

$29,086,669

 

 

$306,000

 

 

The carrying amounts of accounts payable, accrued expenses and notes payable are considered to be representative of their respective fair values because of the short-term nature of those instruments.

 

Revenue Recognition

 

The Company’s revenue relates to PET Labs Pharmaceuticals, in which the Company acquired 51% ownership on October 31, 2023 (Note 11). The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The Company enters into transactions with radiopharmacy companies that are within the scope of ASC 606. The terms of these transactions include payment for delivery of nuclear medical doses for PET scanning in South Africa.

 

 Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.

 

 
12

Table of Contents

 

The Company evaluates a transaction’s performance obligations to determine if promised goods or services in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, the Company considers whether the goods or services are integral or dependent to other goods or services in the contract.

 

The Company determines the transaction price based on the agreed government rates for the promised goods in the contract. 

 

The consideration is recognized as revenue when control is transferred for the related goods.

 

The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. The Company receives payments from its customers based on billing schedules established in each contract. Upfront payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

 

Accounts Receivable

 

Accounts receivable are stated at the amount management expects to collect from outstanding balances. An allowance for expected credit losses is estimated for those accounts receivable considered to be uncollectible based upon historical experience and management's evaluation of outstanding accounts receivable. We maintain an allowance for expected credit losses for accounts receivable, which is recorded as an offset to accounts receivable, and changes in such are classified as selling, general and administrative expense in the Consolidated Statements of Operations and Comprehensive Loss. We assess collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, we consider historical collectability based on past due status and make judgments about the creditworthiness of customers based on ongoing credit evaluations. We also consider customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions. Bad debts are written off against the allowance when identified. As of June 30, 2024, December 31, 2023 and January 1, 2023 there was no allowance for expected credit losses.

 

Property and Equipment

 

Property and equipment include costs of assets constructed, purchased or leased under a finance lease, related delivery and installation costs and interest incurred on significant capital projects during their construction periods. Expenditures for renewals and betterments also are capitalized, but expenditures for normal repairs and maintenance are expensed as incurred. Costs associated with yearly planned major maintenance are generally deferred and amortized over 12 months or until the same major maintenance activities must be repeated, whichever is shorter. The cost and accumulated depreciation applicable to assets retired or sold are removed from the respective accounts, and gains or losses thereon are included in the statement of operations and comprehensive loss.

 

We assign the useful lives of our property and equipment based upon our internal engineering estimates, which are reviewed periodically. The estimated useful lives of our property and equipment range from 3 to 10 years, or the shorter of the useful life or remaining life of the lease for leasehold improvements. Depreciation is recorded using the straight-line method.

 

Construction in progress (Note 4) is carried at cost and consists of specifically identifiable direct and indirect development and construction costs. While under construction, costs of the property are included in construction in progress until the property is placed in service, at which time costs are transferred to the appropriate property and equipment account, including, but not limited to, leasehold improvements or other such accounts.

 

Property and equipment acquired from the PET Labs Pharmaceutical Acquisition was measured at fair value on October 31, 2023.  The fair value forms the new basis of these assets and is depreciated over the remaining estimated useful lives of the related assets.

 

 Business Combination and Asset Acquisitions

 

The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs, which would meet the requirements of a business. If determined to be a business combination, the Company accounts for the transaction under the acquisition method of accounting in accordance with ASC 805 Business Combinations, which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling interest in the acquiree and establishes the acquisition date as the fair value measurement point. Accordingly, the Company recognizes assets acquired and liabilities assumed in business combinations, including contingent assets and liabilities, and non-controlling interest in the acquiree based on the fair value estimates as of the date of acquisition. In accordance with ASC 805, the Company recognizes and measures goodwill as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired.

 

 
13

Table of Contents

 

The consideration for the Company’s business acquisitions may include future payments that are contingent upon the occurrence of a particular event or events. The obligations for such contingent consideration payments are recorded at fair value on the acquisition date. The contingent consideration obligations are then evaluated each reporting period. Changes in the fair value of contingent consideration, other than changes due to payments, are recognized as a gain or loss and recorded within change in the fair value of deferred and contingent consideration liabilities in the consolidated statements of comprehensive loss.

 

If determined to be an asset acquisition, the Company accounts for the transaction under ASC 805-50, which requires the acquiring entity in an asset acquisition to recognize assets acquired and liabilities assumed based on the cost to the acquiring entity on a relative fair value basis, which includes transaction costs in addition to consideration given. No gain or loss is recognized as of the date of acquisition unless the fair value of non-cash assets given as consideration differs from the assets’ carrying amounts on the acquiring entity’s books. Consideration transferred that is non-cash will be measured based on either the cost (which shall be measured based on the fair value of the consideration given) or the fair value of the assets acquired and liabilities assumed, whichever is more reliably measurable. Goodwill is not recognized in an asset acquisition and any excess consideration transferred over the fair value of the net assets acquired is allocated to the identifiable assets based on relative fair values.

 

Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the consideration is paid or becomes payable (unless the contingent consideration meets the definition of a derivative, in which case the amount becomes part of the basis in the asset acquired). Upon recognition of the contingent consideration payment, the amount is included in the cost of the acquired asset or group of assets.

 

Goodwill

 

Goodwill represents the amount of consideration paid in excess of the fair value of net assets acquired as a result of the Company’s business acquisitions accounted for using the acquisition method of accounting. Goodwill is not amortized and is subject to impairment testing at a reporting unit level on an annual basis or when a triggering event occurs that may indicate the carrying value of the goodwill is impaired. An entity is permitted to first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. The Company will perform its annual test for goodwill as of October 31.

 

Variable Interest Entities

 

The Company accounts for the investments it makes in certain legal entities in which equity investors do not have (1) sufficient equity at risk for the legal entity to finance its activities without additional subordinated financial support, or (2) as a group, the holders of the equity investment at risk do not have either the power, through voting or similar rights, to direct the activities of the legal entity that most significantly impact the entity’s economic performance, or (3) the obligation to absorb the expected losses of the legal entity or the right to receive expected residual returns of the legal entity. These certain legal entities are referred to as “variable interest entities” or “VIEs.”

 

The Company would consolidate the results of any such entity in which it determined that it had a controlling financial interest. The Company would have a “controlling financial interest” in such an entity if the Company had both the power to direct the activities that most significantly affect the VIE’s economic performance and the obligation to absorb the losses of, or right to receive benefits from, the VIE that could be potentially significant to the VIE. On a quarterly basis, the Company will reassess whether it has a controlling financial interest in any investments it has in these certain legal entities.

 

Convertible Notes Payable

 

Convertible notes payable are accounted for in accordance with ASC 825, Financial Instruments.

 

Upon issuance the Company has elected the fair value option to account for the convertible notes payable.  Changes in fair value during the reporting period are recognized in other income (expense) in the consolidated statement of operations and comprehensive loss.

 

Leases

 

Leases are accounted for in accordance with ASC 842, Leases.

 

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on specific facts and circumstances, the existence of an identified asset(s), if any, and the Company’s control over the use of the identified asset(s), if applicable. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of future lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company will utilize the incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment, and considering the region in which the ROU asset and liabilities are located.

 

The Company has elected to combine lease and non-lease components as a single component. Operating leases are recognized on the balance sheet as ROU lease assets, lease liabilities current and lease liabilities non-current. Fixed rents are included in the calculation of the lease balances, while variable costs paid for certain operating and pass-through costs are excluded. Lease expense is recognized over the expected term on a straight-line basis.

 

 
14

Table of Contents

 

Finance leases are recognized on the balance sheet as property and equipment, finance lease liabilities current and finance lease liabilities non-current. Finance lease ROU assets and the related lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The finance lease ROU assets are amortized on a straight-line basis over the lease term with the related interest expense of the lease liability payment recognized over the lease term using the effective interest method.

 

Impairment of Long-lived Assets

 

Long-lived assets consist primarily of property and equipment. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset is not recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds the fair value of the assets. The Company did not recognize any impairment losses for the three and six months ended June 30, 2024 or 2023.

 

Research and Development Costs

 

Research and development costs consist primarily of fees paid to consultants, license fees and facilities costs. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. All research and development costs are expensed as incurred.

 

Selling, General and Administrative Costs

 

Selling, general and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, business development, legal, human resources and support functions. Other general and administrative expenses include professional fees for auditing, tax, consulting and patent-related services, rent and utilities and insurance.

 

Stock-based Compensation

 

Stock-based compensation expense represents the cost of the grant date fair value of employee stock awards recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis. The Company estimates the fair value of each stock-based award on the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates various assumptions, such as the value of the underlying common stock, the risk-free interest rate, expected volatility, expected dividend yield, and expected life of the options. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.

 

The Company also awards restricted stock to employees and directors. Restricted stock is generally subject to forfeiture if employment terminates prior to the completion of the vesting restrictions. The Company expenses the cost of the restricted stock, which is determined to be the fair market value of the shares of common stock underlying the restricted stock at the date of grant, ratably over the period during which the vesting restrictions lapse.

 

Equity-based compensation expense is classified in the statement of operations and comprehensive loss in the same manner in which the award recipients’ payroll costs are classified or in which the award recipients’ service payments are classified.

 

Income Taxes

 

Deferred income tax assets and liabilities arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

 

Prior to the acquisition of 51% of PET Labs Pharmaceuticals in October 2023, the Company had generated net losses since inception and accordingly had not recorded a provision for income taxes. Subsequent to the acquisition of 51% of PET Labs Pharmaceuticals, the Company records the provision for income taxes for the activity from PET Labs Pharmaceuticals operations.

 

 
15

Table of Contents

 

The Company follows the provisions of ASC 740-10, Uncertainty in Income Taxes, or ASC 740-10. The Company has not recognized a liability for any uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there is no unrecognized benefit since the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits and penalties in income tax expense.

 

The Company has identified the United States, South Africa and Guernsey as its major tax jurisdictions. Refer to Note 15 for further details.

 

Comprehensive Loss

 

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s comprehensive loss is comprised of net loss and the effect of currency translation adjustments.

 

Recently Issued Accounting Pronouncements

 

The Company has reviewed recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any recently issued pronouncements to have a material impact on its results of operations or financial position.

 

3.  Revenue

 

In connection with our acquisition of 51% ownership of PET Labs Pharmaceuticals in October 2023, we manufacture and sell nuclear medical doses for PET scanning in South Africa. For the three and six months ended June 30, 2024, the Company recognized revenue of $1,022,299 and $1,862,653, respectively. Since the acquisition did not occur until October 2023, there is no accounts receivable as of January 1, 2023 and no revenue was recognized for the three or six months ended June 30, 2023.

 

The following table presents changes in the Company’s accounts receivable for the six months ended June 30, 2024:

 

 

 

Balance as of

December 31,

2023

 

 

Additions

 

 

Deductions

 

 

Balance as of

June 30,

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$216,504

 

 

$1,862,653

 

 

$(1,563,707 )

 

$515,450

 

 

4. Property and Equipment

 

Property and equipment as of June 30, 2024 and December 31, 2023 consisted of the following:

 

 

 

Useful Lives

(Years)

 

 

June 30,

2024

 

 

December 31,

2023

 

Construction in progress

 

 

-

 

 

$11,081,094

 

 

$9,108,923

 

Tools, machinery and equipment

 

3 - 8

 

 

 

6,465,952

 

 

 

1,458,654

 

Computer equipment

 

3 - 4

 

 

 

105,085

 

 

 

60,447

 

Vehicles

 

 

5

 

 

 

191,153

 

 

 

39,849

 

Software

 

 

5

 

 

 

1,651

 

 

 

1,639

 

Office furniture

 

 

7

 

 

 

125,145

 

 

 

59,588

 

Leasehold improvements

 

 

5

 

 

 

80,836

 

 

 

21,446

 

Property and equipment, at cost

 

 

 

 

 

 

18,050,916

 

 

 

10,750,546

 

Less accumulated depreciation

 

 

 

 

 

 

(276,128 )

 

 

(37,707 )

Property and equipment, net

 

 

 

 

 

$17,774,788

 

 

$10,712,839

 

 

The Company is currently building three plants in Pretoria, South Africa: a Carbon-14 plant, a multi-isotope plant and a laser isotope separation plan using quantum enrichment technology. The Carbon-14 plant was completed in June 2024 and depreciation will begin in July 2024.  Costs incurred for the other two plants are considered construction in progress because the work is not complete as of June 30, 2024.  Costs incurred for the plants as of December 31, 2023 are considered construction in progress. There was no depreciation expense as it relates to the construction in progress for the three and six months ended June 30, 2024 and 2023.  Depreciation expense for all other asset categories was $146,504 and $167 for the three months ended June 30, 2024 and 2023, respectively.  Depreciation expense for all other categories was 249,714 and $167 for the six months ended June 30, 2024 and 2023, respectively.

 

 
16

Table of Contents

 

5. Accrued Expenses

 

Accrued expenses as of June 30, 2024 and December 31, 2023 consisted of the following:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Accrued professional

 

$948,470

 

 

$447,295

 

Accrued salaries and other employee costs

 

 

1,375,950

 

 

 

845,344

 

Accrued other

 

 

131,090

 

 

 

18,606

 

Total accrued expenses

 

$2,455,510

 

 

$1,311,245

 

 

6. Notes Payable

 

Convertible Notes Payable

 

In March 2024, the Company issued convertible notes payable (“March 2024 Convertible Notes”) totaling $21,063,748 and received aggregate cash of $20,550,000.  One of the notes totaling $513,748 was issued to the placement agent in lieu of cash issuance costs.  Issuance costs paid in cash totaling $521,423 and the value of the note issued upon issuance to the placement agent were expensed in selling, general and administrative costs in the condensed consolidated statement of operations and comprehensive loss for the six months ended June 30, 2024.

 

In June 2024, the Company issued additional convertible notes payable (“June 2024 Convertible Notes”) totaling $5,494,395 and received aggregate cash of $5,386,228. One of the notes totaling $108,167 was issued to the placement agent in lieu of cash issuance costs and was expensed in selling, general and administrative costs in the condensed consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2024.  Issuance costs paid in cash were negligible.  The March 2024 Convertible Notes and the June 2024 Convertible Notes are collectively the “Convertible Notes”.

 

The Convertible Notes are payable on demand in March 2029 and bear an annual interest rate of 6% through March 7, 2025 and 8% thereafter. Upon a qualified financing event the Convertible Notes convert into the shares issued in that qualified financing event at a price per share equal to 80% of the share price issued subject to a valuation cap. Upon a qualified transaction, the noteholders may elect to receive either 1.5x the principal and accrued interest balance in cash or convert into common shares.

 

The Convertible Notes are recorded on the condensed consolidated balance sheet at their fair values. The fair value of the March Convertible Notes upon the date of issuance was $21,063,748.  The fair value of the June Convertible Notes upon the date of issuance was $5,494,395.  The fair value of the Convertible Notes as of June 30, 2024 has been determined to be $29,086,669 and the resultant change in fair value of $2,528,526 has been recorded in other income and expense in the condensed consolidated statement of operations comprehensive loss for the six months ended June 30, 2024.  The resultant change in fair value for the three months ended June 30, 2024 of $1,574,816 has been recorded in other income and expense in the consolidated statement of operations and comprehensive loss. As of June 30, 2024, the total principal and accrued interest of the Convertible Notes is $26,978,913 of which $420,770 is from the interest.

 

Promissory Note Payable

 

During 2021, the Company executed a promissory note payable with an aggregate principal balance of $33,500 (25,000 GBP). The note was due after a period of two months, followed by mutually agreed upon monthly extensions, and does not bear interest.

 

As of June 30, 2024 and December 31, 2023, the promissory note payable balance was $31,610 and $31,827, respectively, and continues to be automatically extended on a monthly basis.

 

In November 2023, the Company executed a promissory note payable with a finance company to fund its D&O insurance policy for $526,282.  This note bears interest at an annual rate of 8.74% and six monthly payments beginning in December 2023.  For the three and six months ended June 30, 2024, the Company recorded interest expense of $4,499 and $11,247, respectively.  As of June 30, 2024 there was no balance remaining to be paid on the promissory note payable.  As of December 31, 2023, the promissory note payable balance was $438,569.

 

 
17

Table of Contents

 

7. Deferred Revenues

 

In June 2023, the Company entered into a Supply Agreement with a customer for the delivery of Molybdenum-100 and molybdenum-98 beginning in 2024. In conjunction with the Supply Agreement, the Company received $882,000 in September 2023, as an advance towards future revenue. The Company has recorded $882,000 as deferred revenue on the balance sheet as of June 30, 2024 and December 31, 2023. There was no deferred revenue recorded as of January 1, 2023 and June 30, 2023.

 

8. Commitments and Contingencies

 

Purchase of Cyclotron

 

In November 2023, the cyclotron that the Company ordered was shipped. As of December 31, 2023, the equipment had not been delivered. As of December 31, 2023 the Company was obligated to purchase this equipment and recorded the other asset and other liability for the full cost of $1,653,000 on the consolidated balance sheet as of December 31, 2023.

 

In March 2024, the cyclotron was received by the Company and is recorded as property and equipment.  The financing company has paid the vendor, however, it is still working on finalizing the note payable with the Company as of June 30, 2024 and therefore the liability of $1,653,000 continues to be recorded as an other liability as of June 30, 2024.

 

Klydon Proprietary Limited

 

In November 2021, the Company entered into an agreement with Klydon Proprietary Limited (“Klydon”) to design and build a plant to enrich Molybdenum in South Africa. The initial phase of the project included the building of a plant that can support the production of at least 5kgs of Mo-100. The contracted cost for this phase was $6,800,000. The second phase of the project included the production to be increased to 20kgs of Mo-100 with an additional cost of $6,000,000.

 

Klydon performed a portion of the services required under the Turnkey Contract; however, services were incomplete and many of the services were not completed within the time frame required. As a result, Klydon and ASP South Africa entered into an Acknowledgement of Debt Agreement dated November 30, 2022, whereby Klydon (i) agreed to pledge its assets (the “Pledged Assets”) to ASP South Africa to secure its performance of the Turnkey Contract by December 31, 2022, and (ii) acknowledged that ASP South Africa would suffer damages in the amount of $6,050,000 (“Damage Amount”) should it fail to perform. Under the Acknowledgement of Debt Agreement, the Pledged Assets would serve as collateral for Klydon’s obligation to pay the Damage Amount should Klydon fail to perform. In connection therewith, also on November 30, 2022, ASP South Africa and Klydon entered into a Deed of Security Agreement whereby, if Klydon failed to complete its obligations under the Turnkey Contract by December 31, 2022, all of Klydon’s rights of any nature to and interests of any nature in the Pledged Assets would be transferred to ASP South Africa. Klydon failed to complete its obligations under the Turnkey Contract by December 31, 2022, however, the Company did not perfect its interests in the assets until April 4, 2023. The Company did not believe that the amounts owed by Klydon were realizable, nor did the Company know the timing of any recovery payments. Therefore, a loss recovery receivable was not recorded at any time prior to April 4, 2023.

 

On April 4, 2023, the Company perfected its interest under the Acknowledgement of Debt Agreement, pursuant to which the Company acquired certain intellectual property from Klydon (“Klydon Settlement”). In addition, the Company acquired Klydon's interest in four entities which are inactive and in the process of being dissolved. The Company has concluded that the Klydon Settlement is accounted for under ASC 805, Business Combinations as an asset acquisition since the assets acquired were concentrated in a single identifiable asset from a related party. In conjunction with the Klydon Settlement, the Company recorded an increase to additional paid-in capital for the settlement of all liabilities owed to Klydon at the time of settlement totaling $626,223.

 

Two individuals who are officers and board members of Klydon, one who is now an officer of ASP Isotopes Inc. and the other who is now a scientific advisor of ASP Isotopes Inc., received warrants to purchase common stock of the Company and therefore are considered related parties. See Notes 10 and 12.

 

Share Purchase Agreement relating to PET Labs

 

On October 31, 2023, the Company entered into a Share Purchase Agreement with Nucleonics Imaging Proprietary Limited, a company incorporated in the Republic of South Africa (the “Seller”), relating to the purchase and sale of ordinary shares in the issued share capital of Pet Labs Pharmaceuticals Proprietary Limited, a company incorporated in the Republic of South Africa (“PET Labs”). PET Labs is a South African radiopharmaceutical operations company, dedicated to nuclear medicine and the science of radiopharmaceutical production.

 

 
18

Table of Contents

 

Under the Purchase Agreement, the Company has agreed to purchase from the Seller 51 ordinary shares in the issued share capital of PET Labs (the “Initial Sale Shares”) (representing 51% of the issued share capital of PET Labs) and has an option to purchase from the Seller the remaining 49 ordinary shares in the issued share capital of PET Labs (the “Option Shares”) (representing the remaining 49% of the issued share capital of PET Labs). The Company agreed to pay to the Seller an aggregate of $2,000,000 for the Initial Sale Shares, of which aggregate amount of $500,000 was payable on the completion of the sale of the Initial Sale Shares and $1,500,000 is payable on demand after one calendar year from the agreement date. In January 2024, the Company agreed to pay $264,750 to the Seller.  The balance due for the Initial Sale Shares as of June 30, 2024 is $1,235,250 and is recorded in other current liabilities on the condensed consolidated balance sheet. If the Company exercises its option to purchase the Option Shares (which option is exercisable from the agreement date until January 31, 2027, provided that the Initial Sale Shares have been paid for in full), the Company has agreed to pay $2,200,000 for the Option Shares.

 

Contingencies

 

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues liabilities for such matters when future expenditures are probable and such expenditures can be reasonably estimated.

 

On October 25, 2022, the Company received a letter from a law firm acting on behalf of Norsk medisinsk syklotronsenter AS (“NMS”), asserting, among other things, that the grant of a license to the ASP technology to the Company by Klydon violates a pre-existing exclusive sub-license to the ASP technology granted to Radfarma. The asserted claims, arbitration and/or litigation could include claims against the Company, the Company’s licensor (Klydon), or Klydon’s present or former sub-licensors alleging infringement of intellectual property rights with respect to the ASP technology on which our company relies. The Company recorded legal costs totaling $78,304 which was paid to Klydon’s attorneys to settle this claim.  As of December 31, 2023, Radfarma has relinquished all claims and ASP Isotopes owns the rights to the licenses originally held by Klydon and acquired by ASP Isotopes.

 

9. Leases

 

The Company accounts for facility leases in accordance with ASC 842 (Note 2). The Company is party to five facility leases in South Africa for office, manufacturing and laboratory space.

 

A lease for office and laboratory space in Pretoria, South Africa commenced in October 2021 with the initial term set to expire in December 2030. The Company has applied the guidance in ASC 842 and has determined that it should be classified as an operating lease. The Company’s incremental borrowing rate for this lease is 7.5% based on the remaining lease term of the applicable lease. Consequently, a ROU lease asset of $952,521 with a corresponding lease liability of $952,521 based on the present value of the minimum rental payments of such lease was recorded at the inception of the lease.

 

A lease for additional production space in Pretoria, South Africa commenced in April 2023 with the initial term set to expire in March 2024. Effective February 1, 2024, this lease was amended such that the new term begins on February 1, 2024 and expires in February 2026. Prior to the amendment, the Company had applied the guidance in ASC 842 and determined that this lease was a short term lease and expensed the monthly payments as incurred. The Company has applied the guidance in ASC 842 to the amended lease and has determined that it should be classified as an operating lease. The Company’s incremental borrowing rate for this lease is 10.6% based on the lease term of the applicable lease. Consequently, a ROU lease asset of $364,458 with a corresponding lease liability of $364,458 based on the present value of the minimum rental payments of such lease was recorded at the inception of the lease.

 

A lease for laboratory space in Pretoria, South Africa commenced in November 2023 with the initial term set to expire in October 2026. The Company has applied the guidance in ASC 842 and has determined that it should be classified as an operating lease. The Company’s incremental borrowing rate for this lease is 13.16% based on the remaining lease term of the applicable lease. Consequently, a ROU lease asset of $70,607 with a corresponding lease liability of $70,607 based on the present value of the minimum rental payments of such lease was recorded at the inception of the lease.

 

A lease for office and production space in Pretoria, South Africa commenced prior to October 31, 2023 with the initial term set to expire in March 2026. The Company has applied the guidance in ASC 842 and has determined that it should be classified as an operating lease effective on the date of ASP Isotopes acquisition of 51% of PET Labs Pharmaceuticals. The Company’s incremental borrowing rate is approximately 12.875% based on the expected remaining lease term of the applicable lease. Consequently, a ROU lease asset of $592,304 which reflects an $84,858 unfavorable adjustment based on the fair value of the lease terms and a corresponding lease liability of $677,163 based on the present value of the minimum rental payments of such lease was recorded at the date of ASP Isotopes acquisition of 51% of PET Labs Pharmaceuticals. Dr. Gerdus Kemp, an officer of PET Labs Pharmaceuticals and an employee of ASP Isotopes UK Ltd, is the sole owner of the facility under this lease agreement.

 

 
19

Table of Contents

 

A summary of long leases in the condensed consolidated balance sheet as of June 30, 2024 is as follows:

 

 

 

ROU Asset

 

 

Operating Lease Liability - Current

 

 

Operating Lease Liability – Non-Current 

 

 

Total Operating Lease Liability

 

Lease:

 

 

 

 

 

 

 

 

 

 

 

 

Office and laboratory, Pretoria, South Africa

 

$595,655

 

 

$59,746

 

 

$611,220

 

 

$670,966

 

Additional production, Pretoria, South Africa

 

 

306,197

 

 

 

177,221

 

 

 

128,976

 

 

 

306,197

 

Laboratory, Pretoria, South Africa

 

 

58,177

 

 

 

22,059

 

 

 

37,424

 

 

 

59,483

 

Office and production, Pretoria, South Africa

 

 

457,373

 

 

 

282,770

 

 

 

237,154

 

 

 

519,924

 

Total

 

$1,417,402

 

 

$541,796

 

 

$1,014,774

 

 

$1,556,570

 

 

A summary of long-term leases in the condensed consolidated balance sheet as of December 31, 2023 is as follows:

 

 

 

ROU Asset

 

 

Operating Lease Liability - Current

 

 

Operating Lease Liability – Non-Current 

 

 

Total Operating Lease Liability

 

Lease:

 

 

 

 

 

 

 

 

 

 

 

 

Office and laboratory, Pretoria, South Africa

 

$626,548

 

 

$53,504

 

 

$637,348

 

 

$690,852

 

Laboratory, Pretoria, South Africa

 

 

68,089

 

 

 

19,608

 

 

 

48,805

 

 

 

68,413

 

Office and production, Pretoria, South Africa

 

 

564,064

 

 

 

263,452

 

 

 

380,494

 

 

 

643,946

 

Total

 

$1,258,701

 

 

$336,564

 

 

$1,066,647

 

 

$1,403,211

 

 

A lease for additional production space in Pretoria, South Africa commenced prior to October 31, 2023 with the initial term expiring in March 2024 and the Company is maintaining the lease under the agreed upon monthly extensions.  The Company has applied the guidance in ASC 842 and has determined that this lease is a short term lease effective on the date of ASP Isotopes acquisition of 51% of PET Labs Pharmaceuticals and expensed the monthly payments for the three and six months ended June 30, 2024 and the two months ended December 31, 2023.

 

Quantitative information regarding the Company’s operating lease liabilities is as follows:

 

 

 

Three

Months Ended

June 30,

2024

 

 

Three

Months Ended

June 30,

2023

 

 

Six

Months Ended

June 30,

2024 

 

 

Six

Months Ended

June 30,

2023

 

Operating Lease Cost

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$167,692

 

 

$28,069

 

 

$316,592

 

 

$59,229

 

Other Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows paid for amounts included in the measurement of lease liabilities

 

$162,037

 

 

$21,572

 

 

$305,375

 

 

$45,520

 

Operating lease liabilities arising from obtaining right-of-use assets

 

$-

 

 

$-

 

 

$364,458

 

 

$-

 

Weighted average remaining lease term (years)

 

 

3.80

 

 

 

7.50

 

 

 

3.80

 

 

 

7.50

 

Weighted average discount rate

 

 

10.12%

 

 

7.50%

 

 

10.12%

 

 

7.50%

 

 
20

Table of Contents

 

Future lease payments under noncancelable operating lease liabilities as of June 30, 2024 are as follows:

 

 

 

Operating

Leases

 

Future Lease Payments

 

 

 

2024 (remaining six months)

 

$335,331

 

2025

 

 

676,330

 

2026

 

 

263,476

 

2027

 

 

129,538

 

2028

 

 

139,254

 

Thereafter

 

 

310,624

 

Total lease payments

 

$1,854,553

 

Less: imputed interest

 

 

(297,983 )

Total lease liabilities

 

$1,556,570

 

Less current portion

 

 

(541,796 )

Lease liability – noncurrent

 

$1,014,774

 

 

The Company records the expense from short term leases as incurred. For the three and six months ended June 30, 2024, the Company recorded $43,205 and $15,762 in rent expense from its short term leases in Pretoria, South Africa. As of June 30, 2024, there are no short term leases in effect. Lease expense from short term leases for the three and six months ended June 30, 2023 was $36,530.

 

The Company accounts for finance leases in accordance with ASC 842 (Note 2). Subsequent to the acquisition of 51% of PET Labs Pharmaceuticals on October 31, 2023, the Company is party to nine ongoing finance leases in South Africa for certain fixed assets. In addition, In June 2024, the Company entered into a new finance lease for additional equipment.

 

Quantitative information regarding the Company’s finance lease liabilities is as follows:

 

 

 

Three

Months Ended

June 30,

2024

 

 

Three

Months ended

June 30,

2023

 

 

Six

Months Ended

June 30,

2024

 

 

Six

Months Ended

June 30,

2023

 

Finance Lease Cost

 

 

 

 

 

 

 

 

 

 

 

 

Interest on lease liabilities

 

$16,893

 

 

$

 

 

$23,933

 

 

$

 

Other Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows paid for amounts included in the measurement of finance lease liabilities

 

$24,468

 

 

$

 

 

$38,846

 

 

$

 

Amortization of right-of-use assets

 

$9,871

 

 

$

 

 

$19,312

 

 

$

 

Weighted average remaining lease term (years)

 

 

4.4

 

 

 

 

 

 

4.4

 

 

 

 

Weighted average discount rate

 

 

12.9%

 

%

 

 

12.9%

 

%

 

 
21

Table of Contents

 

Future lease payments under noncancelable finance lease liabilities are as follows as of June 30, 2024:

 

 

 

Finance

Leases

 

Future Lease Payments

 

 

 

2024 (remaining six months)

 

$101,183

 

2025

 

 

203,143

 

2026

 

 

202,645

 

2027

 

 

195,913

 

2028

 

 

157,005

 

Thereafter

 

 

47,463

 

Total lease payments

 

$907,352

 

Less: imputed interest

 

 

(224,191 )

Total lease liabilities

 

$683,161

 

Less current portion

 

 

(120,595 )

Lease liability – noncurrent

 

$562,566

 

 

10. License Agreements

 

In September 2021, the Company licensed certain intellectual property from Klydon for the development, production distribution, marketing and sale of Mo-100. The license term is 999 years, unless terminated earlier by either party under certain provisions. Any development efforts improving the intellectual property performed by either Klydon or the Company will be the property of Klydon. There are no upfront, milestone payments, nor royalties on product sales over the term of the license. Two individuals who are officers and board members of Klydon received warrants to purchase common stock of the Company. (See Note 12.)

 

In January 2022, the Company licensed certain intellectual property from Klydon for the development, production distribution, marketing and sale of uranium isotope U-235 (“U-235”). The license term is 999 years, unless terminated earlier by either party under certain provisions. Any development efforts improving the intellectual property performed by either Klydon or the Company will be the property of Klydon. The Company paid an upfront fee of $100,000, which was expensed to research and development expense. The Company is required to pay a nominal royalty per Kg of product sold plus 10% royalties on product net profits over the term of the contract. One of the officers, who is also a board member of Klydon, became a board member and consultant of ASP Isotopes Inc. and an employee of ASP Guernsey in January 2022.

 

In July 2022, ASP Isotopes UK Ltd (a subsidiary of the Company) entered into a license agreement with Klydon, as licensor, pursuant to which ASP Isotopes UK Ltd acquired from Klydon an exclusive license to use, develop, modify, improve, subcontract and sublicense certain intellectual property rights relating to the ASP technology for the production, distribution, marketing and sale of all isotopes produced using the ASP technology (the “Klydon license agreement”). The Klydon license agreement superseded and replaced the Mo-100 license and U-235 license described in Note 8 above. The Klydon license agreement is royalty-free, has a term of 999 years and is worldwide for the development of the ASP technology and the distribution, marketing and sale of isotopes. Future production of isotopes is limited to member countries of the Nuclear Suppliers Group. In connection with the Klydon license agreement the Company agreed to make an upfront payment of $100,000 (to be included within the payments we make under the Turnkey Contract) and deferred payments of $300,000 over 24 months, which was expensed to research and development expense.

 

In July 2022, ASP South Africa acquired assets comprising a dormant Silicon-28 aerodynamic separation processing plant from Klydon for ZAR 6,000,000 (which at the then current exchange rate was approximately $354,000), which was recorded to property and equipment, would have been payable to Klydon on the later of 180 days of the acquisition and the date on which the assets generate any revenues of any nature.

 

On April 4, 2023, the Company perfected its interest under the Acknowledgement of Debt Agreement (see Note 8), pursuant to which the Company acquired certain intellectual property from Klydon (“Klydon Settlement”). The Company concluded that the Klydon Acquisition is accounted for under ASC 805, Business Combinations as an asset acquisition since the assets acquired were concentrated in a single identifiable asset from a related party. In conjunction with the Klydon Settlement, the Company recorded an increase to additional paid-in capital for the settlement of all liabilities owed to Klydon at the time of settlement totaling $626,223.

 

 
22

Table of Contents

 

11. Acquisitions

 

PET Labs Pharmaceuticals

 

In October 2023, the Company completed the PET Labs Pharmaceuticals Acquisition, a provider of nuclear medical doses for use in PET scans in South Africa. The acquisition of PET Labs Pharmaceuticals was intended to accelerate the distribution of the Company’s pipeline. The acquisition of PET Labs Pharmaceuticals has been accounted for as a business combination in accordance with ASC 805.

 

Pursuant to the terms of the agreement, the Company acquired 51% of the common shares issued and outstanding for total purchase consideration of $2,000,000 in cash of which $500,000 was paid up front.  In January 2024, the Company made a partial payment of $264,750 and the balance of $1,235,250 is expected to be paid in the second half of 2024 and is recorded in other current liabilities on the condensed consolidated balance sheet.

 

In addition to the purchase consideration, the Company has an option to purchase the remaining 49% of the issued and outstanding shares for an agreed consideration totaling $2,200,000. No consideration or value relating to this option was recognized as it was not considered probable at the time of acquisition and as of March 31, 2024.

 

Dr. Gerdus Kemp is an officer of PET Labs Pharmaceuticals and, effective November 1, 2023, an employee of ASP Isotopes UK Ltd.  In addition, Dr. Kemp controls the remaining 49% ownership of PET Labs Pharmaceuticals.

 

The following table summarizes the preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed:

 

Consideration

Cash

 

$500,000

 

Present value of balance due

 

 

1,395,348

 

 

 

$1,895,348

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed 

Cash and cash equivalents

 

$378,152

 

Accounts receivable

 

 

460,165

 

Other current assets

 

 

184,457

 

Property and equipment

 

 

821,926

 

Right of use assets

 

 

592,304

 

Financial liabilities

 

 

(1,248,699 )

Right of use liabilities

 

 

(677,163 )

Total identifiable net assets

 

 

511,142

 

 

Noncontrolling interest

 

 

(1,821,021 )

Goodwill

 

 

3,205,227

 

 

 

$1,895,348

 

 

Goodwill arising from the acquisition as of October 31, 2023 of $3,205,227 was attributable mainly to buyer specific synergies expected to arise from the acquisition. The Company expects that no goodwill from this acquisition will be deductible for income tax purposes.

 

The Company considered the contractual value of accounts receivable to be the same as the fair value and expects the full amount to be collected. 

 

The results of PET Labs Pharmaceuticals have been included in the consolidated financial statements from the date of the acquisition.

 

The Company accounts for business combinations in accordance with Accounting Standards Update ("ASU") No. 2015-16, Business Combinations (Topic 805), which requires an acquirer to retrospectively adjust provisional amounts recognized in a business combination during the measurement period (which represents a period not to exceed one year from the date of the acquisition), in the reporting period in which the adjustment is determined, as well as present separately on the face of the income statement or as a disclosure in the notes to the consolidated financial statements, the portion of the amount recorded in current period earnings that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date.

 

 
23

Table of Contents

 

The changes to the carrying value of goodwill is as follows:

 

Balance as of October 31, 2023 (acquisition date)

 

$3,205,227

 

Translation adjustment

 

 

61,876

 

Balance as of December 31, 2023

 

 

3,267,103

 

Translation adjustment

 

 

22,060

 

Balance as of June 30, 2024

 

$3,289,163

 

 

ASP Rentals

 

In December 2023, ASP South Africa entered into a Shareholders Agreement (“ASP Rentals Shareholders Agreement”) with ASP Rentals, a newly formed equipment financing service provider formed for the sole purpose of providing financing to ASP South Africa for its significant asset purchases in South Africa. In accordance with the terms of the ASP Rentals Shareholders Agreement, ASP Rentals issued 24% of its capital stock to ASP South Africa for total consideration of ZAR 3,300,829 (which at the exchange rate as of December 31, 2023 was $180,387) and the remaining 76% of its capital stock was issued to two third party entities for combined consideration of ZAR 13,203,317 (which at the exchange rate as of December 31, 2023 was $721,548)

 

In June 2024, ASP Rentals issued additional capital stock to support additional financing to ASP South Africa and PET Labs Pharmaceuticals.  Per the terms of the ASP Rentals Shareholder Agreement, ASP Rentals issued 20% of the new capital to ASP South Africa for total consideration of ZAR 3,671,412 (which at the exchange rate as of June 30, 2024 was $201,994) and the remaining 80% of the new capital to one of the two original third party entities for a combined consideration of ZAR 18,357,063 (which at the exchange rate as of June 30, 2024 was $1,009,969).

 

In addition to issuance of these shares, future ASP South Africa and PET Labs Pharmaceutical equipment purchases may also be financed by ASP Rentals through the issuance of additional shares.  ASP South Africa will only be entitled to dividend distributions upon the two third party entities receiving a designated return on their investment.

 

In conjunction with the ASP Rental Shareholders Agreement, ASP South Africa and PET Labs Pharmaceuticals have both entered into an Asset Sale Agreement and an Asset Rental Agreement with ASP Rentals in order to facilitate the financing of equipment recently purchased by ASP South Africa and PET Labs Pharmaceuticals. As a result of the transactions contemplated by these agreements, collectively, ASP Rentals is considered a variable interest entity. In addition, since the only function of ASP Rentals is to provide financing to ASP South Africa and PET Labs Pharmaceuticals, ASP Isotopes is considered to be the primary beneficiary of ASP Rentals. Therefore, ASP Rentals has been consolidated in accordance with ASC 810.

 

Pursuant to the terms of the ASP Rentals Shareholders Agreement, as of December 31, 2023 ASP South Africa was obligated to acquire and ASP Rentals was obligated to issue 24% of the common shares of ASP Rentals to be issued and outstanding for total purchase consideration of ZAR 3,300,829 (which at the exchange rate as of December 31, 2023 was $180,387).  As of December 31, 2023 these amounts are eliminated in consolidation.

 

As of December 31, 2023, ASP Rentals had a receivable and an obligation to issue 76% of the common shares of ASP Rentals with non-affiliates for an aggregate of ZAR 13,203,317 (which at the exchange rate as of December 31, 2023 was $721,548). As of December 31, 2023, the Company had recorded $721,548 as a receivable from noncontrolling interest in current assets and a non-controlling interest in equity. All consideration for these common shares of ASP Rentals was received in January 2024.

 

In January 2024, a total of ZAR 14,351,431 (which at the exchange rate as of December 31, 2023 was $784,291) was transferred between ASP Rentals and ASP South Africa per the terms of the ASP Sale Agreement and Asset Rental Agreement, excluding VAT. In June 2024, a total of ZAR 13,217,472 (which at the exchange rate as of June 30, 2024 was $727,199) was transferred between ASP Rentals and ASP South Africa and PET Labs Pharmaceuticals per the terms of the ASP Sale Agreement and Asset Rental Agreement, excluding VAT.

 

12. Stockholders’ Equity

 

Preferred stock

 

ASP Isotopes Inc. has 10,000,000 shares of preferred stock authorized, of which no shares were issued and outstanding as of June 30, 2024 and December 31, 2023.

 

 
24

Table of Contents

 

Common stock

 

The Company has 500,000,000 shares of common stock authorized, of which 52,132,833 and 48,923,276 shares were issued and outstanding as of June 30, 2024 and December 31, 2023, respectively. Common stockholders are entitled to one vote for each share of outstanding common stock held at all meetings of stockholders and written actions in lieu of meetings. Common stockholders are entitled to receive dividends for each share of outstanding common stock, if and when declared by the Board. No dividends have been declared or paid by the Company through June 30, 2024.

 

As of December 31, 2022, the Company owed a placement agent, as amended, 57,250 shares and the fair value was $90,455. The fair value of the 57,250 shares issuable to the placement agent just prior to settlement in March 2023 was $75,570, resulting in a change in fair value of share liability of $14,885 for the three months ended March 31, 2023. In March 2023, the Company settled this share liability by issuing the 57,250 shares of common stock.

 

In November 2022, the Company was required to issue shares of common stock with a then fair value totaling $50,000 to a consultant. The fair value of the 12,500 shares as of March 31, 2023 was $50,000.  There was no change in fair value for this award for the three and six months ended June 30, 2023. The fair value of the 12,500 shares issued in August 2023 was $18,125.

 

In February 2023, the Company was required to issue an aggregate of 100,000 shares of common stock to two consultants. The Company determined that the fair value of these two awards was $1.55 and $1.90 per share, respectively, for a total value of $172,500. The fair value of these shares as of June 30, 2023 to the two consultants was $56,800.  The resulting change in fair value loss of the share liability was $28,600 and $115,700 for the three and six months ended June 30, 2023, respectively. The fair value of these shares issued in August 2023 to the two consultants was $145,000.  

 

In March 2023, the Company was required to issue an aggregate of 100,000 shares of restricted common stock pursuant to a settlement agreement that vests immediately. The Company determined that the fair value of this award was $0.94 per share for a total value of $93,700. The fair value of these shares as of June 30, 2023 was $56,800. The resulting change in fair value loss of the share liability was $28,600 and $36,900 for the three and six months ended June 30, 2023. The fair value of these shares issued in August 2023 was $145,000.

 

In March 2023, an officer and scientific advisor of the Company exchanged an aggregate of 3,000,000 shares of ASP Isotopes Inc. common stock for 2,500 shares of Enlighted Isotopes convertible preferred stock. In conjunction with the exchange, Enlightened Isotopes transferred the common shares of ASP Isotopes Inc. to ASP Isotopes and then ASP Isotopes immediately cancelled all 3,000,000 shares. The Company will report the non-controlling interest of future net income or loss on the consolidated balance sheet and statement of operations and comprehensive loss.  As of December 31, 2023, negligible activity has been recorded for Enlightened Isotopes. Activities for Enlightened Isotopes began in 2024.

 

In May 2023, the Company was required to issue an aggregate of 100,000 shares of restricted common stock pursuant to a consulting agreement. The Company determined that the fair value of this award was $0.65 per share for a total value of $65,100. The fair value of these shares issuable to the consultant was $56,800 as of June 30, 2023 resulting in a change in fair value loss of share liability of $8,300 for the three and six months ended June 30, 2023. As of June 30, 2023, these shares had yet to be issued, however, they were settled prior to December 31, 2023.

 

In May 2023, the Company was required to issue an aggregate of 300,000 shares of restricted common stock to an employee. The Company determined that the fair value of this award was $0.55 per share for a total value of $165,000. The fair value of these shares issuable to the employee was $170,400 as of June 30, 2023 resulting in a change in fair value gain of share liability of $5,400 for the three and six months ended June 30, 2023. As of June 30, 2023, these shares had yet to be issued, however, they were settled prior to December 31, 2023. 

 

The Company’s non-employee board members agreed to receive the 2022 and 2023 cash director fees totaling $240,000 in shares of common stock. As of June 30, 2024, these shares had yet to be issued, however, the value of the fees is now recorded as additional paid-in capital on the condensed consolidated balance sheet.

 

In March 2023, the Company issued 3,164,557 shares of the Company’s common stock at a purchase price of $1.58 per share and warrants to purchase up to an aggregate of 3,164,557 shares of its common stock with an exercise price of $1.75 per share for gross proceeds of $5,000,000. The Company incurred $506,390 in cash issuance costs and issued warrants to purchase up to an aggregate of 221,519 shares of common stock with an exercise price of $1.975 per share to the placement agent with an initial fair value of $179,116.

 

In October 2023, the Company entered into Securities Purchase Agreements with certain institutional and other accredited investors and certain directors of the Company to issue and sell an aggregate of 9,952,510 shares of the Company’s common stock, for aggregate cash consideration of $9,129,495, as follows: (i) 8,459,093 shares to investors at a purchase price per share of $0.9105, (ii) 1,190,239 shares to investors at a purchase price per share of $0.9548, and (iii) 303,178 shares to directors at a purchase price per share of $0.96. The Company incurred issuance costs equivalent to 5% of the gross proceeds from new investors which was settled in stock through the issuance of 472,582 shares to the placement agent and additional cash issuance costs totaling $57,083.

 

 
25

Table of Contents

 

In January 2024, the Company was required to issue an aggregate of 100,000 shares of restricted common stock to a consultant that vests immediately. The Company determined that the fair value of this award was $1.95 per share for a total value of $195,000. The fair value of these shares as of June 30, 2024 was $306,000. The resulting change in fair value (loss) gain of the share liability was ($107,000) and $111,000 for the three and six months ended June 30, 2024.  These shares have not yet been issued as of June 30, 2024.

 

 In April 2024, the Company was required to issue an aggregate of 60,000 shares of common stock pursuant to a consulting agreement. The Company determined that the fair value of this award was $4.01 per share for a total value of $240,600 and recorded this as professional expense. The fair value of these shares issued upon settlement in June 2024 was $183,600. The resulting change in fair value loss of the share liability was $57,000 for the six months ended June 30, 2024.

 

In June 2024, the Company issued an aggregate of 60,000 shares of common stock pursuant to a consulting agreement.  The Company determined that the fair value of this award was $3.06 per share for a total value of $183,600 and recorded this amount as professional expense for the six months ended June 30, 2024.

 

Activity of the share liabilities for the six months ended June 30, 2024 is as follows:

 

 

 

Share

Liability as of

December 31,

2023

 

 

New Share

Liabilities in

2024

 

 

Mark to

Market

Adjustments

in 2024

 

 

Liabilities

Settled in

2024

 

 

Share

Liabilities as

of June 30,

2024

 

Share liabilities originated in 2024

 

$           -

 

 

$435,600

 

 

$54,000

 

 

$(183,600 )

 

$306,000

 

 

Activity of the share liabilities for the six months ended June 30, 2023 is as follows:

 

 

 

Share

Liability as of

December 31,

2022

 

 

New Share

Liabilities in

2023

 

 

Mark to

Market

Adjustments

in 2023

 

 

Liabilities

Settled in

2023

 

 

Share

Liabilities as

of June 30,

2023

 

Share liabilities originated in 2022

 

$140,455

 

 

$-

 

 

$(14,885 )

 

$(75,570 )

 

$50,000

 

Share liabilities originated in 2023

 

 

-

 

 

 

496,300

 

 

 

(155,500 )

 

 

-

 

 

 

340,800

 

 

 

$140,455

 

 

$496,300

 

 

$(170,385 )

 

$(75,570 )

 

$390,800

 

 

In July 2024, the Company issued 13,800,000 shares of common stock in a public offering at a public offering price of $2.50 per share for aggregate gross proceeds totaling $34,500,000. Issuance costs, including commissions and expenses totaled $2,247,500. Prior to June 30, 2024, the Company recorded deferred issuance costs related to this offering on the condensed consolidated balance sheet totaling $45,000.

 

Common Stock Warrants

 

The fair value of the warrants to purchase 3,386,076 shares of common stock issued in the three months ended March 31, 2023 was determined to be $2,882,621 and estimated based on the Black-Scholes model, using the following assumptions:

 

Expected volatility

 

 

60.3%

Weighted-average risk-free rate

 

 

3.44%

Expected term in years

 

 

5.5

 

Expected dividend yield

 

 

0%

 

In April 2024, a warrant to purchase 3,164,557 shares of common stock was exercised and the Company received gross proceeds of $5,537,975. As an inducement for the warrant holder to exercise in cash, a warrant to purchase 1,225,000 shares of common stock at an exercise price of $3.90 per share was issued to that same warrant holder for no consideration (“Inducement Warrant”). The Inducement Warrant vests in October 2024 and expires in October 2029. The Company evaluated the terms of the Inducement Warrant and determined that it should be accounted for as an equity based warrant. The Company also evaluated the circumstances of the award and determined that the inducement should be treated as a deemed dividend.

 

 
26

Table of Contents

 

 

The fair value of the Inducement Warrant was determined to be $2,779,659 and estimated based on the Black-Scholes model, using the following assumptions: 

 

Expected volatility

 

 

73.5%

Weighted-average risk-free rate

 

 

4.37%

Expected term in years

 

 

5.5

 

Expected dividend yield

 

 

0%

 

The fair value of the Inducement Warrant is considered the deemed dividend and is removed from net loss for the purpose of determining the earnings per share on a basic and fully diluted basis.

 

13. Stock Compensation Plan

 

Equity Incentive Plan

 

In October 2021, the Company adopted the 2021 Stock Incentive Plan (“2021 Plan”) that provided for the issuance of common stock to employees, nonemployee directors, and consultants. Recipients of incentive stock options are eligible to purchase shares of common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The 2021 Plan provided for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock awards and stock appreciation rights. The maximum contractual term of options granted under the 2021 Plan is ten years. The maximum number of shares initially available for issuance under the 2021 Plan was 6,000,000. No further options are available to be issued under the 2021 Plan.

 

In November 2022, the Company adopted the 2022 Equity Incentive Plan (“2022 Plan”) that provides for the issuance of common stock to employees, nonemployee directors, and consultants. Recipients of incentive stock options are eligible to purchase shares of common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The 2022 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock awards and stock appreciation rights. The maximum contractual term of options granted under the 2022 Plan is ten years. The number of shares of the Company’s common stock initially reserved for issuance under the 2022 Plan is equal to 5,000,000, subject to an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2023 and continuing until, and including, the fiscal year ending December 31, 2033, equal to the lesser of 5% of the number of shares of the Company’s common stock outstanding on such date or an amount determined by the Company’s board of directors. On January 1, 2024, the Company added 2,446,164 shares to the 2022 Plan. As of June 30, 2024, 2,309,770 shares remain available for future grant under the 2022 Plan.

  

In June 2024, the Company adopted the 2024 Inducement Equity Incentive Plan (“2024 Plan”).  The 2024 Plan will be used exclusively for the grant of equity awards to individuals who were not previously employees or directors of the Company, or following a bona fide period of non-employment, as an inducement material to such individuals entering into employment with the Company, pursuant to Nasdaq Listing Rule 5635(c)(4). Recipients of stock options are eligible to purchase shares of common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The 2024 Plan provides for the grant of non-statutory stock options, restricted stock, restricted stock units, stock awards and stock appreciation rights. The maximum contractual term of options granted under the 2024 Plan is ten years. The number of shares of the Company’s common stock initially reserved for issuance under the 2024 plan is equal to 2,500,000. As of June 30, 2024, 2,500,000 shares remain available for future grant under the 2024 Plan.

 

 
27

Table of Contents

 

Stock Options

 

The following table sets forth the activity for the Company’s stock options during the periods presented:

 

 

 

Number of

Options

 

 

Weighted-

Average

Exercise

Price

per Share

 

 

Weighted

Average

Remaining

Contractual

Term

(in Years)

 

 

Aggregate

Intrinsic

Value

 

Outstanding as of December 31, 2023

 

 

2,766,000

 

 

$1.91

 

 

 

8.4

 

 

$231,000

 

Granted

 

 

-

 

 

$-

 

 

 

 

 

 

 

Forfeited

 

 

(35,000 )

 

$2.00

 

 

 

 

 

 

 

 

 

Outstanding as of June 30, 2024

 

 

2,731,000

 

 

$1.90

 

 

 

7.9

 

 

$3,157,360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable as of June 30, 2024

 

 

1,996,623

 

 

$1.88

 

 

 

7.9

 

 

$2,356,120

 

Vested or expected to vest as of June 30, 2024

 

 

2,731,000

 

 

$1.90

 

 

 

7.9

 

 

$3,157,360

 

 

For the six months ended June 30, 2024, no options were granted.

 

The Company recorded stock compensation from options of $194,845 and $209,774 for the three months ended June 30, 2024 and 2023, respectively. The Company recorded stock compensation from options of $391,032 and $565,985 for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, there was $858,347 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan, which is expected to be recognized over a weighted average period of approximately 0.9 years.

 

Stock Awards

 

In October 2021, the Company issued 1,500,000 shares of restricted common stock to its Chief Executive Officer. The number of shares that vest is dependent on achieving certain performance conditions and dependent market conditions upon the third anniversary from the date of grant. The Company determined that the fair value of this award was $0.25 per share for a total value of $375,000. The Company determined the performance condition probable during the three months ended June 30, 2024 and recognized stock compensation expense of $375,000.

 

In October 2021, the Company issued 600,000 shares of restricted common stock to a consultant who is also a member the board of directors, that vest annually over three years. The Company determined that the fair value of this award was $0.25 per share for a total value of $150,000.

 

In July 2022, the Company issued 600,000 shares of restricted common stock to a consultant who is also a member the board of directors, that vest quarterly over one year. The Company determined that the fair value of this award was $2.00 per share for a total value of $1,200,000.

 

In July 2022, the Company issued 100,000 shares of restricted common stock to a consultant, that vests on the one-year anniversary of the grant. The Company determined that the fair value of this award was $2.00 per share for a total value of $200,000.

 

In November 2022, the Company issued 3,000,000 shares of restricted common stock to certain employees and directors, that vest two to four years from the date of the grant. The Company determined that the fair value of these awards was $2.63 per share for a total value of $7,890,000. In January 2024, one director that had received shares in November 2022 resigned and 100,000 unvested shares were forfeited and cancelled.

 

In December 2022, the Company issued an aggregate of 1,550,000 shares of restricted common stock to its Chief Executive Officer and Chairman, then Interim Chief Financial Officer and a director that vest quarterly over one year from the date of the grant. The Company determined that the fair value of these awards was $1.58 per share for a total value of $2,449,000.

 

In March 2023, the Company issued an aggregate of 1,256,750 shares of restricted common stock to its Chief Executive Officer and Chairman and a director that vests quarterly over one year from the date of the grant. The Company determined that the fair value of these awards was $1.80 per share for a total value of $2,262,150.

 

 
28

Table of Contents

 

In August 2023, the Company issued 300,000 and 200,000 shares of restricted common stock pursuant to one employee and one director for employment services, respectively. The Company determined that the fair value of these awards was $0.55 per share and $1.22 per share, respectively for a total combined value of $409,000. In January 2024, the employee that had received shares in August 2023 resigned and 225,000 unvested shares were forfeited and cancelled.

 

In October 2023, the Company was obligated to issue $100,000 of common stock to a board member for his services.  These shares were not awarded as of June 30, 2024, however, all related stock based compensation was recorded totaling $100,000 in October 2023.

 

In March 2024, the Company was obligated to issue 978,466 shares of restricted stock that vest over the period ending February 2025 to its Chief Executive Officer for his services during 2023. These shares were not issued as of June 30, 2024, however, stock based compensation was recorded beginning in March 2024.

 

In March 2024, the Company was obligated to issue 100,000 shares of restricted stock that vest over the period ending October 2024 to an executive of PET Labs Pharmaceuticals for his services.  These shares were issued in June 2024, however, stock based compensation was recorded beginning in March 2024.

 

In January 2024, the Company was obligated to issue $100,000 of common stock to a board member for his services.  These shares were not awarded as of June 30, 2024, however, all related stock based compensation was recorded totaling $100,000 in January 2024.

 

In June 2024, the Company awarded and issued an aggregate of 150,000 shares of restricted common stock to two employees that vests quarterly over one year from each employee’s start date. The Company determined that the fair value of these awards was $3.15 per share for a total value of $472,500.

 

The Company recorded stock compensation from stock awards totaling $2,323,171 and $2,164,912 for the three months ended June 30, 2024 and 2023, respectively. The Company recorded stock compensation from stock awards totaling $3,840,639 and $3,952,800 for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, there is $6,996,549 of unrecognized compensation cost related to the non-vested portion of restricted stock awards that is expected to be recognized over the next year.

 

The following table summarizes vesting of restricted common stock:

 

 

 

Number of

Shares

 

 

Weighted

Average Grant

Date Fair

Value

Per Share

 

Unvested as of December 31, 2023

 

 

4,489,186

 

 

$1.42

 

Granted

 

 

250,000

 

 

$3.54

 

Vested

 

 

(1,864,186 )

 

$0.54

 

Forfeited and retired

 

 

(325,000 )

 

$