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 March 31, 2024

☐	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 $0.01per 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 May 10, 2024, the registrant had 51,762,833 shares of common stock, $0.01 par value per share, outstanding.

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		Page
PART I.	FINANCIAL INFORMATION	5
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Month Periods ended March 31, 2024 and 2023	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Month Periods ended March 31, 2024 and 2023	7
	Condensed Consolidated Statements of Cash Flows for the Three Month Periods ended March 31, 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	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signatures		40

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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 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;

·	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;

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·	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;

·	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;

·	we are subject to 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;

·	our inability to implement and maintain effective internal controls; and

·	other factors that are described in “Risk Factors,” on page [•].

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.

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PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

ASP Isotopes Inc.

Condensed Consolidated Balance Sheets

(unaudited)

	March 31, 2024			December 31, 2023
Assets
Current assets:
Cash	$	23,890,811		$	7,908,181
Accounts receivable		354,083			216,504
Receivable from noncontrolling interests		—			721,548
Prepaid expenses and other current assets		1,931,708			1,664,023
Total current assets		26,176,602			10,510,256
Property and equipment, net		14,362,828			10,712,839
Operating lease right-of-use assets, net		1,480,266			1,258,701
Goodwill		3,165,531			3,267,103
Other noncurrent assets		200,217			1,793,014
Total assets	$	45,385,444		$	27,541,913

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,222,658		$	1,111,819
Accrued expenses		1,768,767			1,311,245
Notes payable		206,570			470,396
Finance lease liabilities – current		60,835			61,941
Operating lease liabilities – current		504,425			336,564
Deferred revenue		882,000			882,000
Other current liabilities		1,274,091			1,500,000
Share liability		413,000			—
Total current liabilities		7,332,346			5,673,965
Deferred tax liabilities		57,398			110,578
Convertible notes payable, at fair value		22,017,458			—
Finance lease liabilities – noncurrent		185,407			207,092
Operating lease liabilities – noncurrent		1,112,817			1,066,647
Other liabilities		1,653,000			1,653,000
Total liabilities		32,358,426			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 March 31, 2024 and December 31, 2023		—			—
Common stock, $0.01 par value; 500,000,000 shares authorized, 48,598,276 and 48,923,276 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		485,983			489,233
Additional paid-in capital		42,283,907			40,567,003
Accumulated deficit		(30,787,385	)		(23,839,300	)
Accumulated other comprehensive loss		(1,464,711	)		(920,982	)
Total ASP Isotopes stockholders’ equity		10,517,794			16,295,954
Noncontrolling interests		2,509,224			2,534,677
Total stockholders’ equity		13,027,018			18,830,631
Total liabilities and stockholders’ equity	$	45,385,444		$	27,541,913

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 March 31, 2024			Three Months Ended March 31, 2023

Revenue	$	840,354		$	-
Cost of goods sold		561,484			-
Gross profit		278,870			-
Operating expenses:
Research and development		215,134			207,334
Selling, general and administrative		5,878,546			3,517,490
Total operating expenses		6,093,680			3,724,824
Loss from operations		(5,814,810	)		(3,724,824	)
Other income (expense):
Foreign exchange transaction loss		(24,343	)		(935	)
Change in fair value of convertible notes payable		(953,710	)		-
Change in fair value of share liability		(218,000	)		110,285
Interest income		12,188			396
Interest expense		(13,788	)		-
Total other (expense) income		(1,197,653	)		109,746
Loss before income tax expense		(7,012,463	)		(3,615,078	)
Income tax provision		47,619			-
Net loss before allocation to noncontrolling interests		(6,964,844	)		(3,615,078	)
Less: Net loss attributable to noncontrolling interests		(16,759	)		-
Net loss attributable to ASP Isotopes Inc. shareholders	$	(6,948,085	)	$	(3,615,078	)
Net loss per share attributable to ASP Isotopes Inc. shareholders, basic and diluted	$	(0.16	)	$	(0.12	)
Weighted average shares of common stock outstanding, basic and diluted		44,561,844			29,141,525

Comprehensive loss:
Net loss before allocation to noncontrolling interests	$	(6,964,844	)	$	(3,615,078	)
Foreign currency translation		(543,729	)		(1,003,853	)
Total comprehensive loss before allocation to noncontrolling interests		(7,508,573	)		(4,618,931	)
Less: Comprehensive loss attributable to noncontrolling interests		(7,530	)		-
Comprehensive loss attributable to ASP Isotopes Inc.	$	(7,501,043	)	$	(4,618,931	)

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)

	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

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

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)

	Three Months Ended March 31,
	2024			2023
Cash flows from Operating activities
Net loss	$	(6,964,844	)	$	(3,615,078	)
Adjustments to reconcile net loss to cash used in operating activities:
Foreign exchange transaction gain from intercompany		(26,387	)		-
Depreciation		103,210			-
Stock-based compensation		1,713,654			2,144,099
Convertible note payable for non-cash issuance costs		513,748			-
Share liability for non-cash consultant expense		195,000			266,200
Change in fair value of share liability		218,000			(110,285	)
Change in fair value of convertible notes payable		953,710			-
Change in right-of-use lease asset		98,658			17,034
Change in deferred tax liabilities		(49,771	)		-
Changes in operating assets and liabilities:
Accounts receivable		(144,392	)		-
Receivable from noncontrolling interest		699,510			-
Prepaid expenses and other current assets		(299,130	)		203,959
Other noncurrent assets		(60,203	)		(34	)
Accounts payable		(54,988	)		(388,443	)
Accrued expenses		505,480			47,404
Operating lease liability		(101,700	)		(9,821	)
Other current liabilities		(270,024	)		-
Net cash used in operating activities		(2,970,469	)		(1,444,965	)
Cash flows from investing activities
Purchases of property and equipment		(1,245,825	)		(362,056	)
Net cash used in investing activities		(1,245,825	)		(362,056	)
Cash flows from financing activities
Proceeds from issuance of common stock		-			5,000,000
Distribution to noncontrolling interest in VIE		(8,429	)		-
Proceeds from issuance of convertible notes payable		20,550,000			-
Payment of notes payable		(263,141	)		-
Payment of principal portion of finance leases		(14,435	)		(506,390	)
Net cash provided by financing activities		20,263,995			4,493,610
Net change in cash		16,047,701			2,686,589
Effect of exchange rate changes on cash		(65,071	)		6,561
Cash - beginning of period		7,908,181			2,389,140
Cash - end of period	$	23,890,811		$	5,082,290

Supplemental disclosures of non-cash investing and financing activities:
Right-of-use asset obtained in exchange for lease liability	$	364,458		$	-
Purchase of property and equipment included in accounts payable	$	1,188,655		$	337,158
Purchase of property and equipment included in other noncurrent liabilities	$	1,653,000		$	-
Settlement of share liability	$	-		$	75,750

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. 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 wholly-owned subsidiary of ASP Guernsey, was incorporated in July 2022. ASP Isotopes Inc.’s subsidiary Enriched Energy, LLC was incorporated in January 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 has an exclusive license to use proprietary technology, the Aerodynamic Separation Process (“ASP technology”), originally developed and licensed to the Company by Klydon Proprietary Ltd (“Klydon”), for the production, distribution, marketing and sale of all 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 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.

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 may 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.

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. The Company received net proceeds from the IPO, after deducting underwriting discounts and commissions but before deducting offering costs, of approximately $3,800,000.

Liquidity and Going Concern Uncertainty

The accompanying 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 $6,964,844 and $3,615,078 for the three months ended March 31, 2024 and 2023, 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 $23,890,811 as of March 31, 2024, along with gross proceeds of approximately $5,500,000 received in April 2024 through the issuance of common stock from the exercise of warrants (see Note 12), 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.

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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.

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. 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, when recorded, 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 income (loss).

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 three months ended March 31, 2024 and 2023.

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Our foreign subsidiaries held cash of approximately $886,179 and $1,963,000 as of March 31, 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.

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 March 31, 2024 and 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 the 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 March 31, 2024 and 2023 is as follows:

	Revenues				Net Loss Before Taxes
Segment	Three Months Ended March 31, 2024		Three Months Ended March 31, 2023		Three Months Ended March 31, 2024			Three Months Ended March 31, 2023
Specialist isotopes and related services	$	840,354	$	-	$	(4,933,456	)	$	(3,615,078	)
Nuclear fuels		-		-		(2,079,007	)		-
	$	840,354	$	-	$	(7,012,463	)	$	(3,615,078	)

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.

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The Company’s share liability (Note 12) is measured as a Level 1 fair value on a recurring basis and was $413,000 as of March 31, 2024. There was no share liability as of December 31, 2023. The Company’s convertible notes payable (Note 5) is measured as a Level 3 fair value on a recurring basis and was $22,017,458 as of March 31, 2024. There were no transfers among Level 1, Level 2 or Level 3 categories in the three months ended March 31, 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 of additional liability		-		669,700
Fair value adjustment		-		194,540
Settlement of share liability		-		(1,004,695	)
Balance as of December 31, 2023		-		-
Fair value of additional liability		21,063,748		195,000
Fair value adjustment		953,710		218,000
Balance as of March 31, 2024	$	22,017,458	$	413,000

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.

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.

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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 collectibility 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 collectibility issues. In determining the amount of the allowance for credit losses, we consider historical collectibility 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 March 31, 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.

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.

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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.

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.

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.

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 months ended March 31, 2024 or 2023.

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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 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.

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.

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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 months ended March 31, 2024, the Company recognized revenue of $840,354. 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 months ended March 31, 2023.

The following table presents changes in the Company’s accounts receivable for the three months ended March 31, 2024:

Balance as of December 31,

2023

Additions

Deductions

Balance as of

March 31,

2024

Accounts receivable

216,504

840,354

(702,775

)

354,083

4. Property and Equipment

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

	Useful Lives (Years)		March 31, 2024			December 31, 2023
Construction in progress		-	$	12,696,806		$	9,108,923
Tools, machinery and equipment	3 - 8			1,562,867			1,458,654
Computer equipment	3 - 4			88,349			60,447
Vehicles		5		38,610			39,849
Software		5		1,589			1,639
Office furniture		7		88,968			59,588
Leasehold improvements		5		25,340			21,446
Property and equipment, at cost				14,502,529			10,750,546
Less accumulated depreciation				(139,701	)		(37,707	)
Property and equipment, net			$	14,362,828		$	10,712,839

The Company is currently building plants in Pretoria, South Africa and all costs incurred are considered construction in progress because the work is not complete as of March 31, 2024 and December 31, 2023. There was no depreciation expense as it relates to the construction in progress for the three months ended March 31, 2024 and 2023. Depreciation expense for all other asset categories was $103,210 for the three months ended March 31, 2024. No depreciation expense was recorded for the three months ended March 31, 2023.

5. Accrued Expenses

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

	March 31, 2024		December 31, 2023
Accrued professional	$	587,093	$	447,295
Accrued salaries and other employee costs		1,028,330		845,344
Accrued other		153,344		18,606
Total accrued expenses	$	1,768,767	$	1,311,245

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6. Notes Payable

Convertible Notes Payable

In March 2024, the Company issued convertible notes payable (“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 were expensed in selling, general and administrative costs in the condensed consolidated statement of operations for the three months ended March 31, 2024.

The Convertible Notes are payable on demand in March 2029 and bear an annual interest rate of 6% for the first year 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 Convertible Notes upon the date of issue was $21,063,748. The fair value of the Convertible Notes as of March 31, 2024 has been determined to be $22,017,458 and the resultant change in fair value of $953,710 has been recorded in other income and expense in the condensed consolidated statement of operations for the three months ended March 31, 2024. As of March 31, 2024, the total principal and accrued interest of the Convertible Notes is $21,146,850.

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 March 31, 2024 and December 31, 2023, the promissory note payable balance was $31,142 and $31,827, respectively, and continues to be automatically extended on a monthly basis.

Promissory Note Payable

In November 2023, the Company executed a promissory note payable with a finance company 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 months ended March 31, 2024, the Company recorded interest expense of $6,748. As of March 31, 2024 and December 31, 2023, the promissory note payable balance was $175,428 and $438,569, respectively.

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 March 31, 2024 and December 31, 2023. There was no deferred revenue recorded as of January 1, 2023 and March 31, 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 March 31, 2024 and therefore the liability of $1,653,000 continues to be recorded as an other liability as of March 31, 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 includes the building of a plant that can support the production of at least 5kgs of Mo-100. 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.

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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.

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 $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 March 31, 2024 is $1,235,250. 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. Lease

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.

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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. In the consolidated balance sheet as of March 31, 2024, the Company has a ROU asset balance of $590,277 and a current and non-current lease liability of $54,644 and $603,026, respectively, relating to this ROU lease asset. In the consolidated balance sheet as of December 31, 2023, the Company has a ROU asset balance of $626,548 and a current and non-current lease liability of $53,504 and $637,348, respectively, relating to this ROU lease asset.

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. In the consolidated balance sheet as of March 31, 2024, the Company has a ROU asset balance of $334,590 and a current and non-current lease liability of $166,119 and $168,470, respectively, relating to this ROU lease asset.

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. In the consolidated balance sheet as of March 31, 2024, the Company has a ROU asset balance of $61,055 and a current and non-current lease liability of $20,096 and $41,745, respectively, relating to this ROU lease asset. In the consolidated balance sheet as of December 31, 2023, the Company has a ROU asset balance of $68,089 and a current and non-current lease liability of $19,608 and $48,805, respectively, relating to this ROU lease asset.

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

SEC Form 10-Q filed by ASP Isotopes Inc.