aspi_10q.htm

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, 2023

☐ 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.)

1101 Pennsylvania Avenue NW, Suite 300

Washington, DC

20004

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (202) 756-2245

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 $0.01 per 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 11, 2023, the registrant had 37,385,684 shares of common stock, $0.01 par value per share, outstanding.

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		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Month Periods ended June 30, 2023 and 2022	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Six Month Periods ended June 30, 2023 and 2022	7
	Condensed Consolidated Statements of Cash Flows for the Six Month Periods ended June 30, 2023 and 2022	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	58
Signatures		59

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CAUTIONARY 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 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;
	·	our ability to comply on an ongoing basis with the numerous regulatory requirements applicable to the ASP technology and our enrichment facility 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;
	·	a failure of demand for various isotopes that we may produce using ASP technology;
	·	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;
	·	developments and projections relating to our competitors and industry;
	·	the ability to recognize the anticipated benefits of the acquisition of assets of Molybdos (Pty) Limited in the “business rescue” auction and the ASP technology for the production of isotopes;
	·	problems with the performance of the ASP technology 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;
	·	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;
	·	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;
	·	we are subject to credit counterparty risks;
	·	costs and other risks associated with becoming a reporting company and becoming subject to the Sarbanes-Oxley Act;
	·	our inability to implement and maintain effective internal controls; and
	·	other factors that are described in “Risk Factors,” beginning on page 32.

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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 II, 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 markets for certain drugs, 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.

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PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

ASP Isotopes Inc.

Condensed Consolidated Balance Sheets

(unaudited)

	June 30, 2023			December 31, 2022
Assets
Current assets:
Cash	$	3,626,165		$	2,389,140
Prepaid expenses and other current assets		404,365			913,005
Total current assets		4,030,530			3,302,145
Property and equipment, net		7,735,166			8,200,595
Operating lease right-of-use asset		642,422			853,889
Other noncurrent assets		342,680			139,636
Total assets	$	12,750,798		$	12,496,265

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	670,058		$	1,354,903
Accrued expenses		807,637			361,246
Notes payable		33,854			33,854
Operating lease liability - current		46,565			45,903
Share liability		390,800			140,455
Total current liabilities		1,948,914			1,936,361
Operating lease liability - noncurrent		648,185			742,443
Total liabilities		2,597,099			2,678,804
Commitments and contingencies (Note 6)
Stockholders’ equity
Preferred stock, $0.01 par value; 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2023 and December 31, 2022		-			-
Common stock, $0.01 par value; 500,000,000 shares authorized, 37,385,684 and 35,907,127 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		373,857			359,071
Additional paid-in capital		26,455,828			16,756,426
Accumulated deficit		(15,454,490	)		(7,553,066	)
Accumulated other comprehensive (loss) income		(1,211,552	)		255,030
Total stockholders’ equity		10,153,699			9,817,461
Total liabilities and stockholders’ equity	$	12,750,798		$	12,496,265

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

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ASP Isotopes Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Operating expenses:
Research and development	$	252,880		$	153,389		$	460,214		$	446,440
General and administrative		4,094,664			674,570			7,612,154			1,239,772
Total operating expenses		4,347,544			827,959			8,072,368			1,686,212
Loss from operations		(4,347,544	)		(827,959	)		(8,072,368	)		(1,686,212	)
Other income (expense):
Foreign exchange transaction loss		-			-			(935	)		-
Change in fair value of share liability		60,100			-			170,385			-
Interest income		1,098			789			1,494			1,454
Total other income		61,198			789			170,944			1,454
Net loss	$	(4,286,346	)	$	(827,170	)	$	(7,901,424	)	$	(1,684,758	)
Net loss per share, basic and diluted	$	(0.14	)	$	(0.03	)	$	(0.27	)	$	(0.07	)
Weighted average shares of common stock outstanding, basic and diluted		29,796,065			27,109,754			29,535,060			25,798,098

Other comprehensive loss:
Net loss	$	(4,286,346	)	$	(827,170	)	$	(7,901,424	)	$	(1,684,758	)
Foreign currency translation		(472,673	)		354,528			(1,476,526	)		125,271
Total comprehensive loss	$	(4,759,019	)	$	(472,642	)	$	(9,377,950	)	$	(1,559,487	)

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

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ASP Isotopes Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

										Accumulated
										Other
							Additional			Comprehensive						Total
	Common Stock						Paid-in			(loss)			Accumulated			Stockholders'
	Shares			Amount			Capital			Income			Deficit			Equity
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		$	(1,211,552	)	$	(15,454,490	)	$	10,153,699

Balance as of December 31, 2021		20,652,500		$	206,525		$	8,380,343		$	18,723		$	(2,607,927	)	$	5,997,664
Issuance of common stock and warrants, net of issuance costs of $285,024		1,187,605			11,876			2,078,310			-			-			2,090,186
Issuance of common stock upon exercise of warrants		7,194,847			71,948			(71,948	)		-			-			-
Stock-based compensation		-			-			20,803			-			-			20,803
Foreign currency translation		-			-			-			(229,257	)		-			(229,257	)
Net loss		-			-			-			-			(857,588	)		(857,588	)
Balance as of March 31, 2022		29,034,952		$	290,349		$	10,407,508		$	(210,534	)	$	(3,465,515	)	$	7,021,808
Issuance of common stock, net of issuance costs of $95,723		372,175			3,722			644,904			-			-			648,626
Stock-based compensation		-			-			210,745			-			-			210,745
Foreign currency translation		-			-			-			354,528			-			354,528
Net loss		-			-			-			-			(827,170	)		(827,170	)
Balance as of June 30, 2022		29,407,127		$	294,071		$	11,263,157		$	143,994		$	(4,292,685	)	$	7,408,537

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

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ASP Isotopes Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Six Months Ended June 30,
	2023			2022
Cash flows from Operating activities
Net loss	$	(7,901,424	)	$	(1,684,758	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation		167			-
Stock-based compensation		4,518,785			231,548
Fair value of common stock to consultants		496,300			-
Change in fair value of share liability		(170,385	)		-
Changes in right-of-use lease asset		32,553			37,476
Changes in operating assets and liabilities:
Deferred offering costs		-			(154,200	)
Prepaid expenses and other current assets		294,971			(321,778	)
Other noncurrent assets		(48,747	)		-
Accounts payable		(351,830	)		(35,716	)
Accrued expenses		446,564			576,601
Lease liability		(18,844	)		(32,722	)
Net cash used in operating activities		(2,701,890	)		(1,383,549	)
Cash flows from investing activities
Purchases of property and equipment		(508,607	)		(1,732,595	)
Net cash used in investing activities		(508,607	)		(1,732,595	)
Cash flows from financing Activities
Proceeds from issuance of common stock and warrants		5,000,000			3,119,560
Common stock issuance costs		(506,390	)		(255,965	)
Repayment of notes payable		-			(13,046	)
Net cash provided by financing activities		4,493,610			2,850,549
Net change in cash		1,283,113			(265,595	)
Effect of exchange rate changes on cash		(46,088	)		125,285
Cash - beginning of period		2,389,140			2,953,721
Cash - end of period	$	3,626,165		$	2,813,411

Supplemental disclosures of non-cash investing and financing activities:
Settlement of liabilities with related party	$	626,223		$	-
Share liability for non-cash issuance costs	$	-		$	124,782
Unpaid financing fees	$	-		$	-
Purchase of property and equipment included in accounts payable	$	318,900		$	855,404
Settlement of share liability	$	75,570		$	-

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

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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 Holdings Limited (“ASP Guernsey”), has its principal operations in Guernsey. ASP Guernsey’s subsidiary, ASP Isotopes Holdings South Africa Proprietary Limited (“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. ASP Isotopes UK Ltd, a wholly-owned subsidiary of the Company, was incorporated in July 2022. Enriched Energy, LLC, a wholly-owned subsidiary of the Company, was incorporated in January 2022. ASP Isotopes Inc. and its subsidiaries are collectively referred to as “the Company” throughout these consolidated statements.

The Company is a pre-commercial 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. 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 is working on the completion and commissioning of a first commercial-scale isotope enrichment plant located in South Africa for the enrichment of C-14 and has started planning additional plants. The Company believes the C-14 it may develop using the ASP technology could be used in the development of new pharmaceuticals and agrochemicals. The Company believes that the Mo-100 it may develop using the ASP technology could have 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.

The Company also intends to use the ASP technology to produce enriched Uranium-235 (“U-235”). The Company believes that the U-235 it may develop using the ASP technology could be commercialized as a nuclear fuel component for use in the new generation of HALEU-fueled small modular reactors that are now under development for commercial and government uses. In addition, the Company is considering future development of the ASP technology for the separation of Zinc-68, Ytterbium-176, Zinc-67, Nickel-64 and Xenon-136 for potential use in the healthcare target end market, and Chlorine -37 and Lithium-6 for potential use in the nuclear energy target end market.

Liquidity and Going Concern Uncertainty

The accompanying condensed consolidated financial statements have been prepared on a basis which assumes the Company is a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from any uncertainty related to the Company’s ability to continue as a going concern. Such adjustments could be material. The Company has experienced net losses and negative cash flows from operating activities since its inception. The Company incurred net losses of $7,901,424 and $1,684,758 for the six months ended June 30, 2023 and 2022, respectively. 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.

The Company currently expects that its cash of $3,626,165 as of June 30, 2023, will not be sufficient to fund its operating expenses and capital requirements for more than 12 months from the date the financial statements are issued. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Additional funding will be necessary to complete construction of the first enrichment facility and begin operations, and although the Company has plans to seek additional funding, these plans are not currently probable.

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 further scale back or discontinue the advancement of product candidates, further reduce headcount, reorganize, merge with another entity, or cease operations.

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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, 2022.

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 the valuation of equity instruments and estimating our accrued research and development expenses. 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. and its wholly-owned subsidiaries and, beginning in 2023, the 80% owned Enlightened Isotopes. All intercompany balances and transactions have been eliminated in consolidation. For the three and six months ended June 30, 2023 and 2022, there was no other corporate activity for Enlighted Isotopes other than its formation and therefore there was no non-controlling interest to report on the consolidated balance sheet and no net loss attributable to non-controlling interest on the consolidated statement of operations to report. See Note 9.

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 subsidiary ASP South Africa 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 ASP South Africa are recorded in their South African Rand functional currency and translated into the U.S. dollar reporting currency of the Company at the exchange rate on the balance sheet date. Revenue, when recorded, and expenses of ASP South Africa are recorded in their South African Rand functional currency 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 income (loss). The effect of exchange rate changes on intercompany transactions of a long term and permanent nature are credited or charged directly to a separate component of stockholder’s equity.

Concentration of Credit Risk and other Risks

Cash balances are maintained at U.S. financial institutions and 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 three and six months ended June 30, 2023 and 2022.

Our foreign subsidiaries held cash of approximately $106,000 and $38,000 as of June 30, 2023 and December 31, 2022, 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.

Cash

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 no cash equivalents as of June 30, 2023 and December 31, 2022.

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Segment Information

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. 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.

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 9) is now measured as a Level 1 fair value on a recurring basis and was $390,800 as of June 30, 2023. There were no transfers among Level 1, Level 2 or Level 3 categories in the six months ended June 30, 2023. There was a transfer of the share liability from Level 3 to Level 1 as a result of our IPO in the fourth quarter of 2022 as further discussed in Note 9. The following table provides a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3 then Level 1 following the IPO in the fourth quarter of 2022):

	Share Liability
Balance, December 31, 2021		116,200
Fair value of additional common stock issuable		174,782
Fair value adjustment		(150,527	)
Balance, December 31, 2022		140,455
Less settlement of share liability		(75,570	)
Fair value of additional common stock issuable		496,300
Fair value adjustment		(170,385	)
Balance, June 30, 2023	$	390,800

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.

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.

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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 5 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 3) 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.

Leases

Leases are accounted for in accordance with ASC 842, which establishes a right-of-use model (“ROU”) that requires a lessee to recognize an ROU asset and corresponding lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement as well as the reduction of the right-of-use asset. The new standard provides a number of optional practical expedients in transition. The Company has elected to apply (i) the practical expedient, which allows us to not separate lease and non-lease components, for new leases and (ii) the short-term lease exemption for all leases with an original term of less than 12 months, for purposes of applying the recognition and measurements requirements in the new standard.

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.

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.

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. Fair value would be assessed using a discounted cash flows or other appropriate measures of fair value. The Company did not recognize any impairment losses for the three and six months ended June 30, 2023 or 2022.

Research and Development Costs

Research and development costs consist primarily of fees paid to consultants 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.

General and Administrative Costs

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.

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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 in the same manner in which the award recipients’ payroll costs are classified or in which the award recipients’ service payments are classified.

Prior to the Company’s IPO in November 2022, there was no public market of the Company’s common stock. The fair value of the shares of common stock underlying the Company’s share-based awards was estimated on each grant date by the Company’s board of directors based on then current facts and circumstances. To determine the fair value of the Company’s common stock underlying option grants, the board of directors considered, among other things, input from management and recent third-party financings consummated by the Company.

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.

The Company has generated net losses since inception and accordingly has not recorded a provision for income taxes.

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, Florida, South Africa and Guernsey as its major tax jurisdictions. Refer to Note 12 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

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires measurements and recognition of expected credit losses for financial assets. In April 2019, the FASB issued clarification to ASU 2016-13 within ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments- Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The ASU 2016-13 guidance became effective as of January 1, 2023, and must be adopted using a modified retrospective approach, with certain exceptions. The adoption of ASU No. 2016-13 during the six months ended June 30, 2023 did not have a material impact on the financial statements.

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.

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3. Property and Equipment

Property and equipment consist of the following:

	June 30, 2023			December 31, 2022
Construction in progress	$	7,728,182		$	8,200,595
Office equipment		7,151			-
Total cost		7,735,333			8,200,595
Accumulated deprecation		(167	)		-
Net book value	$	7,735,166		$	8,200,595

The Company is currently building out and qualifying the plant and office space in South Africa. All costs incurred are considered construction in progress because the work is not complete as of June 30, 2023 and December 31, 2022.

Depreciation expense for the three and six months ended June 30, 2023 was $167. There was no depreciation expense for the three and six months ended June 30, 2022.

4. Accrued Expenses

Accrued expenses consisted of accrued professional fees and employee compensation costs as of June 30, 2023 and December 31, 2022.

5. Notes Payable

During 2021, the Company executed promissory notes payable with two individuals with an aggregate principal balance of approximately $46,900 (35,000 GBP). The notes were due after a period of two months, followed by mutually agreed upon monthly extensions, and do not bear interest. Subsequent to the issuance of the notes payable, one of the individuals became an officer of the Company.

In March 2022, one of the promissory notes totaling $13,046 (10,000 GBP) was repaid in full. As of June 30, 2023 and December 31, 2022, the total promissory notes payable balance was $33,854 and have been automatically extended on a monthly basis.

6. Commitments and Contingencies

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 includes the building of a plant that can support the production of at least 5kgs of Mo-100, and is expected to be completed in the second half of 2023. The contracted cost for this phase is $6,800,000. The second phase of the project includes the production to be increased to 20kgs of Mo-100 with an additional cost of $6,000,000. The Company can modify the contract scope and overall costs and the contract can be cancelled by either party. As of June 30, 2023 and December 31, 2022, approximately $7,233,000 has been paid under this contract and recorded as construction in progress within property and equipment.

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 8 and 9.

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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 former 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 believe these claims have no merit.

7. Lease

The Company accounts for leases in accordance with ASC 842 (Note 2). The Company is party to two leases in South Africa. One is an operating lease in Pretoria, South Africa for office and laboratory space. The other is a short term operating lease in Pretoria, South Africa that includes office and laboratory space.

The operating lease 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 is approximately 7.5% based on the remaining lease term of the applicable lease. Consequently, a ROU lease asset of approximately $952,521 with a corresponding lease liability of approximately $952,521 based on the present value of the minimum rental payments of such lease was recorded at the inception of the lease. In the consolidated balance sheet as of June 30, 2023, the Company has a ROU asset balance of $642,422 and a current and non-current lease liability of $46,565 and $648,185, respectively, relating to the ROU lease asset. The balance of both the ROU lease asset and the lease liabilities primarily consists of future payments under the Company’s lease in South Africa.

The short term operating lease commenced in April 2023 with the initial term set to expire in April 2024. The Company has applied the short-term lease practical expedient from the guidance in ASC 842 and will expense the monthly rent as incurred.

Quantitative information regarding the Company’s operating lease for the three and six months ended June 30, 2023 and 2022 is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Lease Cost
Operating lease cost	$	28,069		$	34,739		$	59,229		$	70,997
Other Information
Operating cash flows paid for amounts included in the measurement of lease liabilities	$	21,572		$	24,836		$	45,520		$	50,757
Operating lease liabilities arising from obtaining right-of-use assets	$	-		$	-		$	-		$	-
Remaining lease term (years)		7.50			8.50			7.75			8.75
Discount rate		7.5	%		7.5	%		7.5	%		7.5	%

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Future lease payments under noncancelable leases are as follows as of June 30, 2023:

	Operating Leases
Future Lease Payments
2023 (remaining six months)	$	48,546
2024		100,733
2025		108,288
2026		116,409
2027		125,140
Thereafter		434,602
Total lease payments	$	933,718
Less: imputed interest		(238,968	)
Total lease liabilities	$	694,750
Less current portion		(46,565	)
Lease liability - noncurrent	$	648,185

Lease expense from the short term operating lease for the three and six months ended June, 30, 2023 was $36,530. Future lease payments under the short term operating lease as of June 30, 2023 is $108,721.

8. 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 9.

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. Klydon has the right to terminate the exclusivity of the Klydon license agreement in the event that the licensee ceases to carry on activities related to isotope enrichment for a period longer than 24 consecutive months. The $400,000 due to Klydon is in accounts payable as of December 31, 2022.

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, will be 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 6), pursuant to which the Company acquired certain intellectual property from Klydon(“Klydon Acquisition”). 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.

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9. Stockholders’ Equity

Preferred stock

ASP Isotopes Inc. had 10,000,000 shares of preferred stock authorized, of which no shares were issued and outstanding as of June 30, 2023 and December 31, 2022.

In conjunction with the formation of Enlightened Isotopes in March 2023, in exchange for 3,000,000 shares of common stock held by an officer and scientific advisor of ASP Isotopes Inc., Enlighted Isotopes issued 2,500 shares of convertible preferred stock. These shares convert into common stock of Enlighted Isotopes at any time upon the election of the preferred stockholders such that these two investors will own 20% of the then outstanding shares on a fully diluted basis. The Company will report the non-controlling interest of future net income or loss on the consolidated balance sheet and statement of operations.

Common stock

The Company had 500,000,000 shares of common stock authorized, of which 37,385,684 shares were issued and outstanding as of June 30, 2023. 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, 2023.

During 2022, prior to the IPO, the Company issued 1,559,780 shares of common stock at $2.00 per share for gross proceeds of $3,119,560. The Company incurred $255,965 in cash issuance costs and is required to issue 120,491 shares of common stock to the placement agent with an initial fair value of $240,982. In October 2022, the Company amended its agreement with the placement agent for the shares issued from November 2021 through the first nine months of 2022. The shares of common stock issuable to the placement agent was reduced from 120,491 shares to 57,250 shares. The fair value of the 57,250 shares issuable to the placement agent as of December 31, 2022 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 57,250 shares of common stock.

In November 2022, the Company was required to issue shares of common stock with a fair value totaling $50,000 to a consultant. As of June 30, 2023, these shares had yet to be issued.

In November 2022, the Company completed its IPO, selling an aggregate of 1,250,000 shares of common stock at a price to the public of $4.00 per share, not including 187,500 shares of common stock issuable pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock. The Company received net proceeds from the IPO, after deducting underwriting discounts and commissions but before deducting offering costs, of approximately $3.8 million.

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 issuable to the two consultants was $56,800 and $85,400 as of June 30, 2023 and March 31, 2023, respectively resulting in a change in fair value of share liability of $

SEC Form 10-Q filed by ASP Isotopes Inc.