ASP Isotopes Inc. 10-K

Item 1. Business Overview We are 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. We have an exclusive license to use proprietary technology, the Aerodynamic Separation Process (“ASP technology”), originally developed and licensed to us by Klydon Proprietary Ltd (“Klydon”), for the production, distribution, marketing and sale of all isotopes. Our initial focus is on the production and commercialization of enriched Carbon-14 (“C-14”), Molybdenum-100 (“Mo-100”) and Silicon-28 (“Si-28”). Klydon has agreed to provide us a first commercial-scale isotope enrichment plant located in South Africa. We believe the C-14 we may develop using the ASP technology may be used in the development of new pharmaceuticals and agrochemicals. We believe that the Mo-100 we 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. We believe the Si-28 we may develop using the ASP technology may be used to develop advanced semiconductors and in quantum computing. We also intend to develop the ASP technology to produce enriched Uranium-235 (“U-235”). We believe that the U-235 we may develop using the ASP technology may be commercialized as a nuclear fuel component for use in the new generation of HALEU-fuelled small modular reactors that are now under development for commercial and government uses. In addition, we are 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. The aerodynamic separation technique has its origins in the South African uranium enrichment program in the 1980s and the ASP technology has been developed during the last 18 years by the scientists at Klydon. In Klydon’s testing, the ASP technology has demonstrated efficacy and commercial scalability in the enrichment of oxygen-18 and silicon-28. ASP Isotopes Inc. was incorporated in Delaware in September 2021 to acquire assets and license intellectual property rights related to the production of Mo-100 using the ASP technology. In January 2022 we also licensed intellectual property rights related to the production of U-235 using the ASP technology. In July 2022, we licensed intellectual property rights related to the production of all isotopes using the ASP technology. We operate principally through subsidiaries: ASP Isotopes Guernsey Limited (the holding company of ASP Isotopes South Africa (Proprietary) Limited and Enlightened Isotopes (Pty) Ltd), which will be focused on the development and commercialization of high value, low volume isotopes for highly specialized end markets (such as C-14, Mo-100 and Si-28).; Enriched Energy LLC, which will be focused on the development and commercialization of uranium for the nuclear energy market; and ASP Isotopes UK Ltd, which is the licensee of the ASP technology under the exclusive license agreement with Klydon. Our corporate structure and ownership of our subsidiaries is set forth in the chart below: 5 Recent Events Completion of First Company Owned Plant Our wholly owned subsidiary, ASP Isotopes South Africa (Pty) Ltd successfully completed the construction of our first Company owned plant, for light isotopes, during the first quarter of 2023. This facility located in Pretoria, South Africa, will, when fully commissioned, satisfy the production to fulfill our obligations to our prospective C-14 customer. We employ 27 persons at this facility. We expect to conclude the construction of a second larger plant later in 2023. Klydon Agreements On November 1, 2021, ASP Isotopes South Africa (Proprietary) Ltd (“ASP South Africa”) and Klydon (Proprietary) Limited (“Kyldon”), as the contractor, entered into a contract under which Klydon was to supply ASP South Africa with a complete turnkey isotope enrichment plant (the “Turnkey Contract”). Among other things, the activities required to be undertaken or performed by Klydon include taking control of the assets acquired in the Molybdos Business Rescue Auction and the design of an isotope enrichment facility; the supply of components, equipment and labor required for the construction; the installation, testing and commissioning of the isotope enrichment plant; securing all required approvals, regulatory authorizations and other required consents for the operation of the plant; providing training to local ASP South Africa personnel to enable them to operate the plant going forward; and providing warranties in relation to the performance targets of the plant which are required to be met. 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, and the Company plans to perfect its interests in the assets as soon as practicable. Private Placement On March 14, 2023, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a single institutional investor (the “Purchaser”), pursuant to which we issued, in a private placement (the “Offering”), an aggregate of (i) 3,164,557 shares (the “Shares”) of our common stock, par value $0.01 per share (the “Common Stock”); and (ii) warrants (the “Common Warrants”) to purchase up to an aggregate of 3,164,557 shares of Common Stock (the “Common Warrant Shares”), at a purchase price of $1.58 per one (1) share of Common Stock and accompanying Common Warrant, for a total gross proceeds of approximately $5.0 million, before deducting placement agent fees and other offering expenses. The Common Warrants have an exercise price of $1.75 per share, are exercisable on or after September 17, 2023 and will expire on September 18, 2028. The Offering closed on March 17, 2023 (the “Closing”). The Offering was conducted pursuant to the exemption from the registration requirements of the Securities Act, available under Section 4(a)(2) and/or Rule 506(b) of Regulation D. We engaged H.C. Wainwright & Co., LLC (the “Placement Agent”) to act as its exclusive placement agent in connection with the Offering, pursuant to the engagement letter (the “Engagement Letter”), dated as of February 15, 2023, between the Company and the Placement Agent. Pursuant to the Engagement Letter, we paid the Placement Agent (i) a total cash fee equal to 7.0% of the aggregate gross proceeds of the Offering; (ii) a management fee of 1.0% of the aggregate gross proceeds of the Offering; and (iii) reimbursement of certain expenses. In addition, we issued to the Placement Agent, or its designees warrants (the “PA Warrants”) to purchase up to 221,519 shares of Common Stock (the “PA Warrant Shares”) at an exercise price of $1.975 per share. The PA Warrants are exercisable on or after September 17, 2023 and will expire on September 18, 2028. 6 We received net proceeds of approximately $4.5 million from the Offering, after deducting the Placement Agent fees and other Offering expenses. We plan to use the net proceeds from the Offering for working capital and general corporate purposes. In connection with the Offering, on March 14, 2023, we entered into a Registration Rights Agreement with the investor (the “Registration Rights Agreement”) pursuant to which we are required to file a registration statement with the Securities and Exchange Commission (the “SEC”) to register for resale the Shares and the Common Warrant Shares. We are required to use our best efforts to cause the registration statement to be declared effective by the SEC by April 28, 2023 or in the event of a “full review” by the SEC, by May 29, 2023. The Registration Rights Agreement imposed a penalty of 2% monthly of the total financing amount if the registration statement was not filed by March 29, 2023, which we failed to do. As such, we are obligated to pay a penalty of $100,000 to the Purchaser. Our Strategy Complete development and commissioning of our first enrichment facilities located in Pretoria, South Africa. We intend to complete the development and construction of two enrichment facilities located in Pretoria, South Africa. We currently have two enrichment facilities in Pretoria, South Africa under either construction or commissioning. The first facility is designed to enrich light isotopes such as Carbon-14. The second facility, which is substantially larger than the first, should have the potential to enrich kilogram quantities of isotopes such as Molybdenum-100 and/or Silicon-28. In October 2021, we acquired physical assets, including equipment, of Molybdos (Pty) Limited (Molybdos) located at the plant after having been declared the winner of a competitive auction process under Section 45 of the South Africa Consumer Protection Act, 2008 (the Molybdos Business Rescue Auction) and we licensed the ASP technology for the production of Mo-100 from Klydon Proprietary Ltd (Klydon). We subsequently entered into a turnkey contract with Klydon pursuant to which Klydon agreed to provide us a first commercial-scale isotope enrichment plant. The activities to be undertaken or performed by Klydon include: taking control of the assets acquired by us in the Molybdos Business Rescue Auction; the design of an enrichment facility; the supply of required components, equipment and labor; the installation, testing and commissioning of the enrichment facility; securing all required approvals, regulatory authorizations and other required consents for the operation of the plant; providing training to local ASP Isotopes South Africa (Proprietary) Limited personnel to enable them to operate the plant going forward; and providing warranties in relation to the performance targets of the plant which are required to be met. Klydon will also be responsible for liaising with the relevant South African authorities including the South African Non-Proliferation Council, the Nuclear Suppliers Group and International Atomic Energy Agency to ensure that the enrichment plant is compliant with international laws and guidelines. In July 2022, we acquired a pilot plant, previously used by Klydon Proprietary Ltd (Klydon) to enrich Silicon-28 up to an abundance of 96.6%. This enriched Silicon-28 was then used for experimental work in the solar and electronics industries. We have spent the subsequent six months refurbishing and upgrading the facility so that it can produce commercial quantities of Carbon-14. In September 2022, we entered into a Memorandum of Understanding (MOU) with a North American customer for the entire capacity of this facility, under which we will supply the customer with C-14 enriched to 85%. The timing, quantity and supply date are subject to future agreement between the parties. The MOU states that the customer will supply the feedstock and we will enrich it under a tolling agreement. Demonstrate the capability to produce C-14, Mo-100 and Si-28 using the ASP technology and capitalize on the opportunity to solve many supply chain challenges that currently exist. We intend to demonstrate the capability to produce C-14, Mo-100 and Si-28 at a scale that can support anticipated customer demand for all three isotopes. Historically, Russia has been the sole supplier of C-14, which is used as a tracer in the development of new pharmaceuticals and agrochemicals. The supply chain has been inherently fragile with inconsistent service. Subject to the supply of feedstock from our customer, we intend to start the enrichment of C-14 during 2024. 7 Mo-100 as alternative and potentially more convenient production route for Tc-99m used in nuclear medical diagnostic procedures. Mo-99’s decay product, technetium-99m (Tc-99m), is used in medical procedures to diagnose heart disease and cancer, to study organ structure and function, and to perform other important medical applications. We intend to offer our Mo-100 to customers that may convert Mo-100 into Mo-99 or directly into Tc-99m, and we believe that the use of Mo-100 in this way will be an attractive alternative route to production of Tc-99m for a number of reasons. · Only a small number of major reactors located around the world (e.g., Australia, Belgium, the Netherlands and South Africa) produce large-scale amounts of Mo-99, and these reactors are taken off-line periodically for refueling and maintenance and go off-line on an unscheduled basis due to the need for extended repairs, which results in a global Mo-99 supply chain that is lengthy, complex and prone to interruption and has experienced supply shortages. Customers that could use and stockpile Mo-100 would not have to manage the periodic shortages and supply chain challenges related to Mo-99. · Mo-99 (a radioisotope with a 66-hour half-life) decays and loses activity in transit, so it must be moved through the supply chain quickly to minimize decay losses and it cannot be stockpiled. Mo-100 (a stable isotope of molybdenum that does not decay) will not decay in transit, so the supply chain would not be dependent on elapsed time from production of Mo-100 to the delivery of a Tc-99m dose to a hospital or clinic. · Mo-99 (with decay product Tc-99m) must be shipped in shielded transport containers that comply with the regulatory requirements for safe transport of radioactive material. Mo-100 is stable (non-radioactive) and therefore does not have the same handling and shipping requirements. Isotopically enriched silicon is regarded as a promising material for semiconductor quantum information due to very long coherence times and its compatibility with the readily available industrial platform. We believe that the ASP technology is ideally suited to the production of this isotope because ASP technology has the ability to enrich molecules of low molecular mass. Other electronic gasses that can likely be enriched using ASP Technology include disilane and germane. Continue identifying potential offtake customers and strategic partners for our isotopes. We have already seen significant interest from potential offtake customers for the isotopes that we intend to produce. In November, 2022 we entered a 25-year supply agreement for highly enriched Mo-100 with BRICEM (Beijing Research Institute of Chemical Engineering Metallurgy). The contract has a value of up to $27.0 million per annum. We have had or are currently in active dialogue with many other potential customers that could use the entire anticipated annual capacity of an initial plant. In September 2022, we entered into an MOU for a tolling agreement with a potential Canadian Customer for the entire capacity of our C-14 production facility. We are currently in discussions with potential customers that have interest in entering into long term supply agreements for kilogram quantities of Si-28 and larger quantities of Zn-68 and Cl-37. Demonstrate the capability to produce high-assay low-enriched uranium (HALEU) using the ASP technology and meet anticipated demand for the new generation of HALEU-fueled small modular reactors and advanced reactor designs that are now under development for commercial and government uses. We plan to begin research and development for the enrichment of uranium to demonstrate our capability to produce HALEU using the ASP technology. We anticipate a future demand for HALEU for the new generation of HALEU-fueled small modular reactors (SMRs) and advanced reactor designs that are now under development for commercial and government uses. SMRs are viewed as being cheaper, safer, and more versatile than traditional large scale nuclear reactors and development of the new technology is receiving considerable funding from the U.S. Department of Energy, as well as from the governments of other countries. There is currently no commercial production of HALEU in the United States and there has been a reliance on delivery from other countries, particularly Russia. We are currently conducting a feasibility study with respect to constructing an enrichment facility in either the United States or an international location. We would need to obtain approval of the U.S. Nuclear Regulatory Commission to produce HALEU in a U.S.-based facility. 8 Our Strengths ASP technology developed by Klydon. The aerodynamic separation technique has its origins in the South African uranium enrichment program in the 1980s and the ASP technology has been developed during the last 18 years by the scientists at Klydon. To date, the scientists at Klydon have constructed two ASP plants for the enrichment of oxygen-18 and silicon-28 in Pretoria, South Africa, which were commissioned in October 2015 and July 2018, respectively. While the technology has not yet been used to enrich either Molybdenum or Uranium or heavier isotopes, we believe the success of the enrichment process for oxygen-18 and silicon-28 has demonstrated the efficacy and commercial scalability of the ASP technology from laboratory to commercial. We have exclusive worldwide licenses from Klydon for the production of all isotopes and, if our research and development is successful (and subject to obtaining applicable regulatory approvals and appropriate licenses), we plan to commercialize many different isotopes produced using the ASP technology. To date, we have completed the construction of one isotope enrichment facility, but we have not yet produced any commercial quantities of isotopes and we have not yet demonstrated the ability to produce any isotope in commercial quantities using ASP technology. High barriers to entry. We have exclusive worldwide licenses to the ASP technology for the production of all isotopes. Klydon has spent the last 18 years and tens of millions of dollars developing the aerodynamic separation technique used in the ASP technology, generating critical trade secrets. We believe our competitors lag behind us in terms of the technical expertise of our senior management and the know-how contained in the aerodynamic separation technique, and will be unable to replicate the expected results of the ASP technology, even as we expect to continue to improve the existing technology and processes. Additionally, the high capital costs of development of proprietary technologies, significant lead times required to construct new enrichment facilities, as well as stringent regulatory and operating requirements applicable to enrichment facilities, adds to the significant barriers to entry for smaller competing market participants. ASP technology is a flexible platform with the potential to produce many different isotopes that could serve a large addressable markets. ASP technology is a flexible platform, compact in size and weight, and easily scaled to industrial level with number of separation devices added in parallel. The ASP technology also has few moving parts, with low capital and operating costs in comparison to alternatives. The technology is particularly efficient at enriching isotopes of low atomic mass. We believe that, assuming receipt of required regulatory approvals and governmental permits, the ASP technology can be deployed quickly and with a relatively minimal capital cost, to enrich many different isotopes that we believe consumers require both today and in the future in end markets such as healthcare, technology and energy. We also believe that the ASP technology is well-positioned to address a substantial global HALEU market that is contemplating a transition from petroleum-based energy to energy produced in a new generation of HALEU-fuelled SMRs and advanced reactors. ASP technology is designed to be low cost, low energy, and environmentally friendly. We recently completed the construction of our first isotope enrichment facility using SP technology located in Pretoria, South Africa. The ASP technology is designed to be scalable, low cost, low energy, and environmentally friendly, with no radioactive waste or hazardous materials produced in the process and planned arrangements to reuse chemical by-products. Experienced team Our board of directors and advisers have specialized expertise in isotopes enrichment, R&D, technology, plant development and manufacturing. Dr Einar Ronander, who serves as Chief Scientific Adviser to our board of directors, and Dr Hendrik Strydom, one of our directors, previously co-founded Klydon. The scientific team at Klydon combined has decades of experience in research and development of isotopes enrichment and amassed deep knowledge in the field. Our board of directors and our management team also has broad experience and successful track records in biopharmaceutical research, chemicals, manufacturing and commercialization, as well as in business, operations, and finance. Our board of directors’ and management team’s experience was gained at leading companies and financial institutions that include, Barclays Capital, Bear Stearns, Deutsche Bank, Highbridge Capital, Investec Bank, Lehman Brothers, LyondellBasell, Morgan Stanley and Soros Fund Management. 9 Technical Background What are Isotopes? Isotopes are two or more types of atoms that have the same atomic number (number of protons in their nuclei) and position in the periodic table (and hence belong to the same chemical element), and that differ in nucleon numbers (mass numbers) due to different numbers of neutrons in their nuclei. While all isotopes of a given element have almost the same chemical properties, they have different atomic masses and physical properties. The number of protons within the atom’s nucleus is called atomic number and is equal to the number of electrons in the neutral (non-ionized) atom. Each atomic number identifies a specific element, but not the isotope; an atom of a given element may have a wide range in its number of neutrons. The number of nucleons (both protons and neutrons) in the nucleus is the atom’s mass number, and each isotope of a given element has a different mass number. For example, carbon-12, carbon-13, and carbon-14 are three isotopes of the element carbon with mass numbers 12, 13, and 14, respectively. The atomic number of carbon is 6, which means that every carbon atom has 6 protons so that the neutron numbers of these isotopes are 6, 7, and 8 respectively. There are 23 isotopes of Silicon, all of which have 14 protons and 14 neutrons but have between 8 and 30 neutrons. The table below shows a selection of those isotopes. Three isotopes are stable which have mass numbers of 28, 29 and 30 which have 14, 15 and 16 neutrons respectively. The other 20 isotopes are radioactive and decay with short half lives and are therefore do not typically exist in naturally occurring silicon. In naturally occurring silicon, the isotope with atomic mass of 28 is usually the most abundant, typically accounting for approximately 92.22% of the material. The isotope with atomic mass of 29 typically accounts for 4.69% of the material and the isotope with atomic mass of 30 typically accounts for 3.09% of the material. Molybdenum has 33 known isotopes, ranging in atomic mass from 83 to 115, as well as four metastable nuclear isomers. Seven isotopes occur naturally, with atomic masses of 92, 94, 95, 96, 97, 98, and 100. All unstable isotopes of molybdenum decay into isotopes of zirconium, niobium, technetium, and ruthenium. Uranium is a naturally occurring radioactive element that has no stable isotope. It has two primordial isotopes, uranium-238 and uranium-235, which have long half-lives and are found in appreciable quantity in the Earth’s crust. The decay product, uranium-234 is also found. Other isotopes such as uranium-233 have been produced in breeder reactors. In addition to isotopes found in nature or nuclear reactors, many isotopes with far shorter half-lives have been produced, ranging from U-214 to U-242 (with the exception of U-220 and U-241). The standard atomic weight of natural uranium is 238.02891 with 99.27% of naturally occurring uranium being the isotope with an atomic mass of 238.051. Selected isotopes of Silicon Selected isotopes of Molybdenum Selected isotopes of Uranium Nuclide Protons Neutrons Isotopic Mass Half Life Natural abundance Nuclide Protons Neutrons Isotopic Mass Half Life Natural abundance Nuclide Protons Neutrons Isotoopic Mass Half Life Natural abundance 22 14 8 22.036 29 ms 91 42 49 90.912 15.49 min 225 92 133 225.029 62 ms 23 14 9 23.025 42.3 ms 92 42 50 91.907 Stable 14.65% 226 92 134 226.029 269 ms 24 14 10 24.012 140 ms 93 42 51 92.907 4000 y 227 92 135 227.031 1.1 m 25 14 11 25.004 220 ms 94 42 52 93.905 Stable 9.19% 228 92 136 228.031 9.1 m 26 14 12 25.992 2.245 s 95 42 53 94.906 Stable 15.87% 229 92 137 229.034 57.8 m 27 14 13 26.987 4.15 s 96 42 54 95.905 Stable 16.67% 230 92 138 230.034 20.23 d 28 14 14 27.977 Stable 92.22% 97 42 55 96.906 Stable 9.58% 231 92 139 231.036 4.2 d 29 14 15 28.977 Stable 4.69% 98 42 56 97.905 Stable 24.29% 232 92 140 232.037 68.9 y 30 14 16 29.974 Stable 3.09% 99 42 57 98.908 2.75 d 233 92 141 233.04 1.592 e5 y Trace 31 14 17 30.975 157.36 min 100 42 58 99.907 Stable 9.74% 234 92 142 234.041 2.455 e5 y Trace 32 14 18 31.974 153 y trace 101 42 59 100.910 14.61 m 235 92 143 235.044 7.038 e8 y 0.72% 33 14 19 32.978 6.18 s 102 42 60 101.910 11.3 m 236 92 144 236.046 2.342 e7 y Trace 34 14 20 33.979 2.77 s 103 42 61 102.913 67.5 s 237 92 145 237.049 6.752 d Trace 35 14 21 34.985 780 ms 104 42 62 103.914 60 s 238 92 146 238.051 4.468 e9 y 99.27% 36 14 22 35.987 450 ms 105 42 63 104.917 35.6 s 239 92 147 239.054 23.45 m 37 14 23 36.993 90 ms 106 42 64 105.918 8.73 s 240 92 148 240.057 14.1 h Trace 38 14 24 37.996 90 ms 107 42 65 106.922 3.5 s 242 92 150 242.063 16.8 m 10 Methods of Separation and Enrichment of Isotopes Isotope enrichment is the process of concentrating specific isotopes of a chemical element by removing other isotopes. During the last century, a number of different methods have been developed to separate and enrich isotopes. The current separation or enrichment processes are based either on the atomic weight of the isotope, small differences in chemical reaction rates produced by different atomic weights or are based on properties not directly connected to atomic weight such as nuclear resonances. Diffusion Often performed on gases, but also on liquids, the diffusion method relies on the fact that in thermal equilibrium, two isotopes with the same energy will have different average velocities. The lighter atoms (or the molecules containing them) will travel more quickly and be more likely to diffuse through a membrane. The difference in speeds is proportional to the square root of the mass ratio, so the amount of separation is small and many cascaded stages are needed to obtain high purity. This method is expensive due to the work needed to push gas through a membrane and the many stages necessary. Centrifugal Centrifugal methods rapidly rotate the material allowing the heavier isotopes to go closer to an outer radial wall. This too is often done in gaseous form using a Zippe-type centrifuge. A Zippe-type centrifuge relies on the force resulting from centripetal acceleration to separate molecules according to their mass, and can be applied to most fluids. The dense (heavier) molecules move towards the wall and the lighter ones remain close to the center. The centrifuge consists of a rigid body rotor rotating at full period at high speed. Concentric gas tubes located on the axis of the rotor are used to introduce feed gas into the rotor and extract the heavier and lighter separated streams. For U-235 production, the heavier stream is the waste stream and the lighter stream is the product stream. Modern Zippe-type centrifuges are tall cylinders spinning on a vertical axis, with a vertical temperature gradient applied to create a convective circulation rising in the center and descending at the periphery of the centrifuge. Diffusion between these opposing flows increases the separation by the principle of countercurrent multiplication. In practice, since there are limits to how tall a single centrifuge can be made, several such centrifuges are connected in series. Each centrifuge receives one input and produces two output lines, corresponding to light and heavy fractions. The input of each centrifuge is the output (light) of the previous centrifuge and the output (heavy) of the following stage. This produces an almost pure light fraction from the output (light) of the last centrifuge and an almost pure heavy fraction from the output (heavy) of the first centrifuge. Electromagnetic Electromagnetic separation is mass spectrometry on a large scale, so it is sometimes referred to as mass spectrometry. It uses the fact that charged particles are deflected in a magnetic field and the amount of deflection depends upon the particle’s mass. It is very expensive for the quantity produced, as it has an extremely low throughput, but it can allow very high purities to be achieved. This method is often used for processing small amounts of pure isotopes for research or specific use (such as isotopic tracers), but is impractical for industrial use. Laser In this method, a laser is tuned to a wavelength which excites only one isotope of the material and ionizes those atoms preferentially. The resonant absorption of light for an isotope is dependent upon its mass and certain hyperfine interactions between electrons and the nucleus, allowing finely tuned lasers to interact with only one isotope. After the atom is ionized it can be removed from the sample by applying an electric field. This method is often abbreviated as AVLIS (atomic vapor laser isotope separation). This method has only recently been developed as laser technology has improved, and is currently not used extensively. 11 Chemical Methods Although isotopes of a single element are normally described as having the same chemical properties, this is not strictly true. In particular, reaction rates are very slightly affected by atomic mass. Techniques using this are most effective for light atoms such as hydrogen. Lighter isotopes tend to react or evaporate more quickly than heavy isotopes, allowing them to be separated. This is how heavy water is produced commercially Gravity Isotopes of carbon, oxygen, and nitrogen can be purified by chilling these gases or compounds nearly to their liquefaction temperature in very tall (200 to 700 feet (61 to 213 m)) columns. The heavier isotopes sink and the lighter isotopes rise, where they are easily collected. The Aerodynamic Separation Process (ASP) Technology ASP technology is proprietary technology licensed from Klydon which succeeds earlier work, first detailed in the scientific media in the mid-1970s, relating to an industrial scale enrichment plant for uranium that was constructed utilizing the so-called “stationary-wall centrifuge”. The original technology was highly energy consuming and was not able to compete on an economic basis with other methods of isotope separation. The innovative development of the ASP technology over the past 18 years has culminated in a more advanced separation device that we believe can compete on a commercial scale with other methods of isotope separation. The ASP separation device separates both gas species and isotopes in a volatile state via an approximate flow pattern as shown below. Gas flow pattern inside ASP separation device. The ASP enrichment process uses an aerodynamic technique similar to a stationary wall centrifuge. The isotope material in raw gas form enters the stationary tube at high speed by tangential injection through finely placed and sized openings in the surface of the tube. The gas then follows a flow pattern that results in two gas vortexes occurring around the geometrical axis of the separator. The isotope material becomes separated in the radial dimension as a result of the spin speed of the isotope material reaching several hundred meters per second. An axial mass flow component in each tube feeds isotope material to the respective ends of the separator where the collection of the portions of isotope material is accomplished. The advantages of ASP technology are as follows: · No moving parts, with low capital and operating costs in comparison to alternatives. · Compact in size and weight. · Easily scaled to industrial level with number of separation devices added in parallel. 12 · The separation process occurs inside a closed cylindrical container and is a volume technology, i.e., the process efficiency is not affected by poisoning of surface contaminates as is the case for surface separation processes. · ASP operates very efficiently at molecular masses below 100 atomic mass units, unlike other separation processes which are more efficient higher masses, which ASP can achieve equally well or to a superior degree. · ASP easily separates hydrogen gas from other gas components, e.g., harvesting hydrogen gas from carbon monoxide and carbon dioxide and altering the ratio of syngas mixture. · With the right material choice ASP handles even the most corrosive gases. · ASP can separate any isotopes that have a gaseous or volatile chemical compound. · Most of the subsystems are procured from off-the-shelf components. · An ASP plant can be constructed in any country that adheres to the International Atomic Energy Agency (IAEA) protocols for the protection of dual use technology. ASP Plant Configuration The figure below shows a schematic of an ASP cascade in operation. The cascade consists of several enrichment stages, connected in a 1-up-1-down cascade configuration. The stages can be grouped into segments. (This method of organizing stages is not reflected in the figure) The bold blue arrows represent flows of the element into and out of the cascade: · H is the product, enriched in the isotope · L is the tails, stripped of the isotope · F = FX + FY is the feed stream at natural isotopic composition: · FX is the feed into the product stream of an adjoining stage. · FY is the feed into the tails stream of an adjoin Each stage in the cascade is operated in one of two configurations: (1) A net backward flow of the isotope: Xi > Yi. These stages are referred to as “product”, situated in the so-called “product cascade section”, and their flows are marked with an “H” subscript. (2) A net forward flow of isotope: Xi < Yi. These stages are referred to as “tails”, situated in the so-called “tails cascade section”, and their flows are marked with an “L” subscript. 13 The red arrows represent the addition or extraction of carrier gas from the process. The arrows have been added for clarity and orientation, but the mass flows of the carrier gas will be ignored in the rest of the discussion as it pertains to the isotope mass flows only (as represented by the blue arrows). The carrier gas mass flows can be superimposed on any isotope mass balance using the molar mass characteristics of the ASP stages (see below). The block marked “GS” represents the gas separator: a piece of equipment used to separate the carrier gas from the element of interest to the degree necessary to provide a suitable reflux stream to the tails cascade section. The blue squares are simply suitable areas where streams can be split or mixed. An ASP stage is characterized by functions of Y, the flow of isotope in its tails stream. The characteristics of interest are: · á (Y): the separation factor between the tails and product streams. · MY(Y): the molar mass of the tails stream. · MX(Y): the molar mass of the product stream. · P(Y): the stage’s power usage. · X(θ , Y): the flow of Zinc in the product stream, where θ= Y/(X+Y) is the cut defined in terms of isotope flows. Note the following: · á is the ratio of the tails and product stream abundance ratios. · Y, X(θ,Y) and α(Y) describe the stage’s behaviour with regards to Zinc, while MY(Y) and MX(Y) defines its behaviour with regards to the carrier gas. · P, the stage’s power usage, depends on the ASP separator, but also on factors such as compressor efficiency, friction losses etc. It is therefore a partial function of stage design. · It is possible to define Pmin, the theoretical minimum energy usage of a stage, by assuming 100% efficient compressors and no losses in the stage. Pmin is a function of the ASP separator only. In practice P is a more useful metric, as the contribution of compressor inefficiencies to power consumption is significant. · Except for X, the stage’s characteristics are not defined in terms of the cut θ, as they are simply not sensitive to it above a certain lower limit θmin. In practice θmin is small enough that it has no influence on the normal operating envelope of the stage. · X is per definition a function of Y via θas indicated. The cut of an ASP stage can be dynamically adjusted to any value larger than θmin, allowing its operating point to be changed online during production. All stages in the product cascade section are operated at the same point < XH,YH >, where XH > YH, ensuring that a net backward flow of the process element, H = XH — YH is achieved. This corresponds to a cut of less than 50% and ensures a positive flow of enriched product. All stages in the tails cascade section are operated at the same point < XL,YL >, where XL < YL, ensuring that a net backward flow of the process element, L = XL — YL is achieved. This corresponds to a cut of more than 50% and ensures a positive flow of stripped tails. Depending on the production requirements of the cascade the product and tails section operation points can be moved relative to each other during production, obtaining different combinations of H and L (and therefore different feeds F = H + L). The smaller H (or L) is chosen, the closer the product (or tails) section cut moves to 50%. If all stages are operated at a cut of 50%, the cascade is operated at full reflux, no product, tails, or feed streams are present, and the maximum process element concentration gradient will exist. 14 ASP Technology In Use To date, the scientists at Klydon have constructed two ASP plants for the enrichment of oxygen-18 and silicon-28 in Pretoria, South Africa, which were commissioned in October 2015 and July 2018, respectively, and remain fully operational. We believe the success of the enrichment of oxygen-18 and silicon-28 has demonstrated the efficacy and commercial scalability of the ASP technology. We are currently constructing two enrichment plants, which, if successful, will be able to produce C-14, Mo-100 and/or Si-28. Nuclear Medicine Nuclear medicine is a medical specialty that utilizes radioactive isotopes, referred to as radionuclides, to diagnose and treat disease. These radionuclides are incorporated into radiopharmaceuticals and introduced into the body by injection, swallowing, or inhalation. Physiologic/metabolic processes in the body concentrate the tracers in specific tissues and organs; the radioactive emissions from the tracers can be used to noninvasively image these processes or kill cells in regions where radionuclides have concentrated. Other types of noninvasive diagnostic procedures — for example, computed tomography (CT) and magnetic resonance imaging (MRI) — can detect anatomical changes in tissues and organs as the result of disease. Nuclear medicine procedures can often detect the physiological and metabolic changes associated with disease before any anatomical changes occur. Such procedures can be used to identify disease at early stages and evaluate patients’ early responses to therapeutic interventions. Single Photon Emission Computed Tomography (SPECT) generates three-dimensional (3D) images of tissues and organs using radionuclides that emit gamma rays; the most used radionuclide is Technitium-99m (Tc-99m), often referred to as the ‘work-horse’ of nuclear medicine. Individual gamma rays emitted from the decay of these radionuclides (i.e., single photon emissions) are detected using a gamma camera. This camera technology is used to obtain two-dimensional (2D) images; 3D SPECT images are computer generated from many 2D images recorded at different angles. Positron Emission Tomography (PET) generates 3D images of tissues and organs using tracers that emit positrons (i.e., positive electrons): for example, fluorine-18 (F-18). Annihilation reactions between the positrons from these radionuclides and electrons present in tissues and organs produce photons. (Two photons are emitted simultaneously for each annihilation reaction and essentially travel in opposite directions.) The photon pairs are detected with a camera having a ring of very fast detectors and electronics. PET images generally have a higher contrast and spatial resolution than do SPECT images. However, PET equipment is more expensive and therefore not as widely available as SPECT equipment. Additionally, most PET tracers have short half-lives (e.g., nitrogen-13 (N-13): 10 minutes, carbon-11 (C-11): 20 minutes, and F-18: 110 minutes), so they must be produced close to their point of use. Technetium-99m (Tc-99m)–the most widely used radioisotope in Nuclear Imaging Tc-99m is used in approximately 80 percent of all nuclear medicine procedures performed worldwide each year. Tc-99m is a particularly useful imaging radionuclide because it: · Has a sufficiently long half-life (~6 hours) to be usable in nuclear medicine procedures. · Emits energetic gamma rays (140 kiloelectron volts [keV]) that can be detected efficiently with widely available camera technologies. · Provides low patient doses for some procedures because of its short half-life and lack of alpha or beta radiations Tc-99m-based radiopharmaceuticals are used to diagnose disease in many tissue and organ systems, including bone, brain, heart, kidneys, liver, and lungs. About 50 percent of Tc-99m utilization in the United States is in nuclear cardiology, predominantly for myocardial perfusion imaging which images blood flow through heart muscle. Because Tc-99m has a half life of just 6 hours, it cannot be stored or shipped long distances and it is currently produced using a technetium generator, which contains Molybdenum-99 which has a half-life of about 66-hours. In the reactor, Mo-99 decays to Tc-99m by emitting a beta particle (an electron). About 88 percent of the decays produce Tc-99m, which subsequently decays to the ground state, Tc-99g, by emitting a gamma ray. About 12 percent of the decays produce Tc-99g directly. Tc-99g decays to stable (i.e., nonradioactive) ruthenium-99 (Ru-99) after emitting a beta particle. 15 Technetium generators are systems that store Mo-99 and allow its decay product, Tc-99m, to be recovered for use. Most technetium generators are designed to be used with high-specific-activity Mo-99 (>1,000 Ci/g) produced by U-235 fission. The generator consists of an alumina (Al2O3) column having the diameter of a large pencil along with associated filters and tubing for obtaining Tc-99m This apparatus is installed into radiation-shielded packages for shipment to Tc-99m suppliers. The generator includes both the package and its contained apparatus. Technetium generators can contain from 1 to 19 Ci of Mo-99, matched to address the needs and workloads of Tc-99m suppliers It takes 18-24 hours to prepare technetium generators for shipment. Preparation involves loading the molybdate solution onto the columns and sterilizing them; installing the columns, tubing, and filters into the shielded generator package; and packaging the generators for shipment. Tc-99m generators are typically shipped to Tc-99m suppliers within a day of their manufacture. Generators are shipped in regulatory-compliant boxes. The delivery methods can be air, ground, or a combination of both depending on customer location and contracted transportation network. The Mo-99 Market The global medical community depends on a reliable supply of the radioisotope Mo-99 for nuclear medical diagnostic procedures. As previously described, Mo-99’s decay product, technetium-99m (Tc-99m), is used in over 40,000 medical procedures in the United States each day to diagnose heart disease and cancer, to study organ structure and function, and to perform other important medical applications. In 2020, it is estimated (by Future Market Insights Inc, a global market research firm), that the Molybdenum 99 market generated revenues of approximately $3.8 billion. North America accounted for almost half of the Mo-99 demand. Approximately 62% of Mo-99 was used in hospitals while approximately 38% of Mo-99 use was in diagnostic centers. The Mo-99 Supply Chain The global Mo-99 supply chain is inherently fragile. The fragility stems primarily from two factors: 1. Mo-99 and its daughter isotope Tc-99m have short half-lives (66 and 6 hours, respectively) and therefore cannot be stockpiled. These radioisotopes need to be produced and delivered to the supply chain on a weekly or more frequent basis. 2. Global supply of Mo-99 currently relies on a small number of aging reactors worldwide and a small number of suppliers. The current Mo-99 supply chain is also lengthy and prone to interruption throughout its course. Recent Government Efforts to Increase Mo-99 Availability Given the regular supply side shortages in the Mo-99 market, and widely anticipated shutdown of many of the current reactors, there is considerable focus on alternative methods of Tc-99m production. In 2012, Congress passed the American Medical Isotopes Production Act (AMIPA), which directed the National Nuclear Security Administration (NNSA) to establish a technology-neutral program to support the establishment of domestic supplies of Mo-99 without the use of HEU. NNSA has implemented this by competitively awarding 50%/50% cost-shared cooperative agreements to commercial entities and providing funds to the Department of Energy’s (DOE) National Laboratories to support development of non-HEU Mo-99 production technologies. 16 NNSA currently manages cooperative agreements with three U.S. companies, all developing diverse Mo-99 production technologies: · NorthStar Medical Radioisotopes, LLC (Beloit, Wisconsin) · Neutron capture technology using molybdenum-98 targets · Accelerator-based technology using molybdenum-100 targets · SHINE Technologies, LLC (Janesville, Wisconsin) · Accelerator with fission technology to produce Mo-99 with an LEU solution target · Niowave, Inc. (Lansing, Michigan) · Superconducting electron linear accelerator with fission technology to produce Mo-99 with LEU targets Mo-100 as an Alternative Intermediate to Produce Mo-99 and Tc-99m Mo-100 is a stable isotope of molybdenum that does not decay. Naturally occurring molybdenum contains approximately 9.74% molybdenum-100. When highly enriched so that the Molybdenum contains >95% of the Mo-100 isotope, it can be used to produce either Mo-99 or Tc-99 via either photon-induced transmutation of Mo-100 into Mo-99 or via proton bombardment of Mo-100 into Tc-99m. The use of particle accelerators for the production of Mo-99 and direct production of Tc-99m has been studied extensively and the use of a particle accelerator conveys certain advantages and disadvantages. Accelerators produce ion beams and accelerate ions to higher energies by using oscillating electromagnetic fields. The accelerated particle beams have the capability of irradiating specific targets to produce Mo-99 and/or Tc-99m. We intend to offer our Mo-100 to customers that may convert Mo-100 into Mo-99 or Mo-100 directly into Tc-99m. We believe that customers will be able to convert Mo-100 into Mo-99 using a cyclotron or a linear accelerator. The Mo-99 can then be converted into Tc-99m using a technetium generator. The technetium generators that are currently available will likely require some modifications in order to use the Mo-99 that has been produced via a cyclotron or a linear accelerator. These modifications will likely mean that new generator will require approval by healthcare regulators such as the Food and Drug Administration (FDA) in the United States and the European Medicines Agency (EMA) in Europe. Customers may convert Mo-100 directly into Tc-99m using a cyclotron, which would eliminate the need for a technetium generator. To date, only one healthcare regulator (Health Canada) has approved the use of Tc-99m that has been directly produced from Mo-100 in a low powered cyclotron. We believe it is likely that healthcare regulators in other countries will also require clinical data to support the use of Tc-99m that is produced directly from Mo-100. ASP Technology for Silicon-28 Enrichment Si-28 is a stable isotope of silicon that does not decay. Isotopically enriched Si-28 is regarded as an ideal host material for semiconducting quantum computing due to the lack of Si-29 nuclear spins. The presence of Si-29 in concentrations above 500 parts per million (ppm) (0.05%) prevents effective performance. The lower the concentration of Si-29, the better a silicon quantum processor will perform in terms of computational power, accuracy and reliability. Unlike traditional centrifuges, which are suited to enriching gases with a high molecular mass, ASP Technology is highly suited to of enriching gases with a low molecular mass such as silane (SiH4). Quantum computers are expected to be thousands or millions of times more powerful than the most advanced of today’s conventional computers, opening new frontiers and opportunities in many industries, including medicine, artificial intelligence, cybersecurity, global logistics and global financial systems. Many countries around the world are investing heavily in the development of quantum computing technology, with governments and key corporates (such as Intel, IBM, Google, Microsoft and others) vying for leadership in this emerging strategic industry. ASP Technology for Carbon-14 Enrichment C-14 is a radioactive isotope of carbon with a half life of 5,700 years that has a natural abundance of 1 part per trillion. The different isotopes of carbon do not differ appreciably in their chemical properties. This resemblance is used in chemical and biological research, in a technique called carbon labelling: carbon-14 atoms can be used to replace nonradioactive carbon, in order to trace chemical and biochemical reactions involving carbon atoms from any given organic compound. 17 Carbon-14 is produced as a waste product in certain nuclear reactors. In September 2022, we entered into an MOU with a potential Canadian Customer that provides consulting services to many nuclear reactors in North America. Under the terms of the MOU, it is anticipated that the customer will supply C-14 already enriched to at least 0.5%, which it sources from the waste products of nuclear reactors. We will enrich the C-14 to an abundance of over 85% under a “take or pay” agreement. The customer will be responsible for all non-enrichment activities and all marketing and sales of all finished product. ASP Technology for Uranium Enrichment We believe our ASP technology is also capable of enriching Uranium, which we may be able to commercialize as a nuclear fuel component for use in the new generation of HALEU-fuelled small modular reactors that are now under development for commercial and government uses. Uranium is a naturally occurring element and is mined from deposits located in Kazakhstan, Canada, Australia, and several other countries including the United States. According to the World Nuclear Association (“WNA”), there are adequate measured resources of natural uranium to fuel nuclear power at current usage rates for about 90 years. In its natural state, uranium is principally comprised of two isotopes: uranium-235 (“U-235”) and uranium-238 (“U-238”). The concentration of U-235 in natural uranium is only 0.711% by weight. Most commercial nuclear power reactors require LEU fuel with a U-235 concentration greater than natural uranium and up to 5% by weight. Future reactor designs currently under development will likely require higher U-235 concentration levels of up to 20%. Uranium enrichment is the process by which the concentration of U-235 is increased (see discussion on HALEU demand below). Separative work units (“SWU”) are a standard unit of measurement that represents the effort required to transform a given amount of natural uranium into two components: enriched uranium having a higher percentage of U-235 and depleted uranium having a lower percentage of U-235. The SWU contained in LEU is calculated using an industry standard formula based on the physics of enrichment. The amount of enrichment deemed to be contained in LEU under this formula is commonly referred to as its SWU component and the quantity of natural uranium deemed to be contained in LEU under this formula is referred to as its uranium or “feed” component. Currently, it is fairly common practice to purchase both the SWU and uranium components of LEU from the enrichment company. Therefore, LEU prices typically consist of two prices or components: SWU and uranium. The following outlines the steps for converting natural uranium into LEU fuel, commonly known as the nuclear fuel cycle: · Mining and Milling. Natural, or unenriched, uranium is removed from the earth in the form of ore and then crushed and concentrated. · Conversion. Uranium ore concentrates (“UO”) are combined with fluorine gas to produce uranium hexafluoride (“UF”), a solid at room temperature and a gas when heated. UF is shipped to an enrichment plant. · Enrichment. UF is enriched in a process that increases the concentration of the U isotope in the UF from its natural state of 0.711% up to 5%, or LEU, which is usable as a fuel for current light water commercial nuclear power reactors. Future commercial reactor designs may use uranium enriched up to 20% U, or HALEU. · Fuel Fabrication. LEU is then converted to uranium oxide and formed into small ceramic pellets by fabricators. The pellets are loaded into metal tubes that form fuel assemblies, which are shipped to nuclear power plants. As the advanced reactor market develops, HALEU may be converted to uranium oxide, metal, chloride or fluoride salts, or other forms and loaded into a variety of fuel assembly types optimized for the specific reactor design. · Nuclear Power Plant. The fuel assemblies are loaded into nuclear reactors to create energy from a controlled chain reaction. Nuclear power plants generate approximately 20% of U.S. electricity and 10% of the world’s electricity. · Used Fuel Storage. After the nuclear fuel has been in a reactor for several years, its efficiency is reduced and the assembly is removed from the reactor’s core. The used fuel is warm and radioactive and is kept in a deep pool of water for several years. Many utilities have elected to then move the used fuel into steel or concrete and steel casks for interim storage. The World is Transitioning to Newer Smaller Reactors As the world transitions to a decarbonized electric grid, society is gradually decreasing its reliance on fossil fuels and increasing its reliance on “clean energy”. There appears to be bipartisan support for the growth of nuclear energy and the Biden Administration has identified carbon-free nuclear power as an essential part of achieving a net-zero CO2 economy by 2050. Nuclear power, through the operating light water reactor fleet and the deployment of advanced reactors, is poised to be an increasing contributor to carbon free energy in the U.S. and internationally. The United States leads the world in technology innovation with more developers of advanced reactors than any other country. Small modular reactors (SMRs) are advanced nuclear reactors that have a power capacity of up to 300 MW(e) per unit, which is about one-third of the generating capacity of traditional nuclear power reactors. SMRs, which can produce a large amount of low-carbon electricity, are: · Small — physically a fraction of the size of a conventional nuclear power reactor. · Modular — making it possible for systems and components to be factory-assembled and transported as a unit to a location for installation. · Reactors — harnessing nuclear fission to generate heat to produce energy. Many of the benefits of SMRs are inherently linked to the nature of their design — small and modular. Given their smaller footprint, SMRs can be sited on locations not suitable for larger nuclear power plants. Prefabricated units of SMRs can be manufactured and then shipped and installed on site, making them more affordable to build than large power reactors, which are often custom designed for a particular location, sometimes leading to construction delays. SMRs offer savings in cost and construction time, and they can be deployed incrementally to match increasing energy demand. In comparison to existing reactors, proposed SMR designs are generally simpler, and the safety concept for SMRs often relies more on passive systems and inherent safety characteristics of the reactor, such as low power and operating pressure. This means that in such cases no human intervention or external power or force is required to shut down systems, because passive systems rely on physical phenomena, such as natural circulation, convection, gravity and self-pressurization. These increased safety margins, in some cases, eliminate or significantly lower the potential for unsafe releases of radioactivity to the environment and the public in case of an accident. SMRs have reduced fuel requirements. Power plants based on SMRs may require less frequent refueling, every 3 to 7 years, in comparison to between 1 and 2 years for conventional plants. Some SMRs are designed to operate for up to 30 years without refueling. SMRs are under construction or in the licensing stage in Argentina, Canada, China, Russia, South Korea and the United States of America. Within the last five years significant legislation supporting the development and deployment of advanced reactors has been enacted: the Nuclear Innovation and Modernization Act, the Nuclear Energy Innovation and Capabilities Act, the Energy Act of 2020 and the Infrastructure Investment and Jobs Act. In addition, Congress established and funded the Advanced Reactor Demonstration Program which now supports two advanced reactor demonstrations to be deployed within seven years and eight other advanced reactor projects. SMRs will require a different grade of enriched Uranium Many advanced reactors, including the majority of the Advanced Reactor Demonstration Program awardees, will require High Assay Low Enriched Uranium (HALEU), and fuel forms very different from those manufactured for the current Light Water Reactors (LWRs). For example, the current generation of LWRs uses fuel enriched to less than 5% uranium-235. In contrast, many advanced non-LWR designs require enrichments between 5% and 20% with most above 10%. Currently it is not possible to purchase HALEU between 10% and 20% from a commercial enricher in the United States. In the U.S., the infrastructure for the front-end of the fuel cycle for the utilization of low enriched uranium up to 5% U-235 is well defined. The U.S. has mining, conversion, enrichment, fabrication, and transportation capability. However, the infrastructure for producing and utilizing HALEU, in particular enrichments above 10%, is not established in the U.S. The mining and conversion infrastructure are common to all enrichment levels. 18 In 2020, the Department of Energy (DOE) selected two companies for awards under the Advanced Reactor Demonstration Program (ARDP) Pathway 1: Advanced Reactor Demonstrations. Both reactor designs require HALEU and can be operational in about seven years. Today, it is estimated that the companies selected for the demonstration pathway will require HALEU for their reactors beginning in 2024 to support fuel fabrication ahead of reactor startup. In addition, one of the companies under Pathway 2: Risk Reduction for Future Demonstrations will require HALEU in the 2024-2025 timeframe and other companies in Pathway 2 and 3 of the ARDP will also require HALEU. Privately funded companies are also working to deploy HALEU fueled reactors by the mid-2020s. The Nuclear Energy Institute (NEI) believes that it is virtually impossible for HALEU to be provided to these companies in the needed quantities and timeframes from DOE inventories or commercial enrichers located in the U.S or Western Europe. Therefore, acquiring HALEU from other international suppliers will be required in the near term to support the larger goal of deploying advanced reactors in the U.S. in a timely manner. Deploying these reactors before 2030 will support climate goals and position the U.S. to be a strong exporter of advanced reactor technology. Per the recent NEI white paper, a robust domestic HALEU infrastructure is necessary to support both the domestic deployment of advanced reactors and the export of U.S. advanced reactor technologies requiring HALEU. In a letter to the DOE captioned “Updated Need for High-Assay Low Enriched Uranium” dated December 20, 2021, the NEI provided an estimate of what U.S. HALEU demand may be during the next 15 years: Estimated Annual Requirements for High Assay Low Enriched Uranium to 2035 (MTU/yr) Company A B C D E F G H I J Total Cumulative Year 2022 0.1 0.4 0.2 1.1 0.0 1.8 1.8 2023 0.1 3.1 4.4 0.1 7.7 9.5 2024 1.0 5.6 0.2 3.0 1.5 6.6 0.1 18.0 27.5 2025 1.0 3.8 0.4 3.0 5.0 11.0 1.6 25.8 53.3 2026 1.0 15.1 4.9 10.0 2.0 24.2 13.2 1.7 72.1 125.4 2027 1.0 26.5 7.9 4.0 24.2 13.2 1.9 78.7 204.1 2028 1.0 37.8 16.6 13.0 23.0 24.2 13.2 2.0 130.8 334.9 2029 1.0 26.3 1.8 30.5 17.0 18.0 14.0 24.2 16.5 2.4 151.7 486.6 2030 1.0 34.4 1.8 40.4 46.0 18.0 30.0 24.2 16.5 2.7 215.0 701.6 2031 23.0 42.5 6.2 53.0 29.0 22.0 33.0 24.2 16.5 2.9 252.3 954.0 2032 35.0 52.9 12.5 67.6 46.0 40.0 50.0 48.4 19.8 3.1 375.3 1329.2 2033 47.0 63.5 32.2 82.1 46.0 32.0 80.0 48.4 19.8 3.2 454.2 1783.4 2034 58.0 76.1 62.4 96.7 46.0 36.0 80.0 48.4 19.8 3.7 527.1 2310.5 2035 70.0 90.9 96.0 112.4 91.0 29.0 50.0 48.4 22.0 4.1 613.8 2924.3 Notes: · The material needs listed above are in metric tons of uranium per year and are a small amount compared to the approximately 2000 MTU used annually by the existing fleet of reactors. · The material needs listed above include enrichments between 10.9 and 19.75% U-235. · The year the material is needed is for fuel fabrication. Insertion in the reactor and reactor operations will occur in a later year. 19 · The material needs that are less than 1 MTU/year are for irradiation samples, lead test rods and lead test fuel assemblies. · The material needs represent a few scenarios · The deployment of an advanced fuel design for the existing fleet of light-water reactors. · The deployment of multiple reactors of the same design that will not require refueling for many years. · The deployment of reactors that have annual refueling requirements. · These reactors include a range of sizes from a few Megawatt electric to 100s of Megawatt electric. · The data above does not include utilities that are considering enrichment between 5% and 10%. ASP Technology is ideally suited to the production of HALEU We believe that we are in a very different position to many of the entrenched domestic and international enrichers. Our innovative isotope enrichment process has a number of advantages over traditional gas centrifuges and other novel approaches currently being explored by other companies: cheaper in Capex, faster in construction, more flexible in design and location. We estimate that the capital cost of constructing an ASP plant for uranium enrichment is approximately 75% cheaper than that of a traditional gas centrifuge enrichment facility. Our manufacturing plants are modular, so our construction time is likely faster and more flexible than competing technologies. Our enrichment facilities are smaller than traditional gas centrifuges which means we can place them near fuel fabrication facilities for enhanced security of production and transportation. Our operating costs of enriching uranium to 15.5% - 19.75% U-235 should be comparable to or cheaper than costs for other methods of uranium enrichment. The table below compares the ASP process with a traditional gas centrifuge when applied to a 20 mT plant. ASP Plant Gas Centrifuge Separation mechanism Stationary Wall Centrifuge Differential diffusion Capital Cost per plant <$150 million >$800 million Energy use (kWh) per SWU <500 50-240 Construction time 2-3 years 2-3 years Levelized cost per SWU* $65 $140 * for enrichment from 0.71% U235 to 5% U235 We are currently conducting a feasibility study with respect to constructing an enrichment facility in either the United States or an international location. Construction of a new ASP enrichment facility in US would be done in three phases. The first phase would involve the construction and validation of an ASP test bench, the engineering design of the first segment and obtaining required permits and licenses from regulators. Excluding the licensing process, we expect this phase would take approximately 9-12 months. The second phase would involve the construction of the first segment and control systems for the plant and the engineering design of the additional stages. We expect this stage would take approximately 9-12 months, resulting in the plant capable of operating in a close-loop setup which would demonstrate enrichment and start to produce small quantities of enriched Uranium. The third phase would involve the construction of the remaining segments that will complete the plant and the commissioning phase. We expect this phase would take approximately 20-30 months and the production volume would gradually ramp up to the final capacity of 20 metric tons per year. Importantly, subject to licensure, we can produce commercial quantities of HALEU by 2026 that would satisfy the anticipated demand from all the advanced reactor currently in development. We can supply HALEU at a price lower than the HALEU currently imported from international enrichers and considerably lower than any potential domestic supply that may evolve. 20 Much of the control systems, compressors and hardware used in a uranium enrichment plant would be similar to parts used to construct our Molybdenum plant in Pretoria. Our molybdenum plant uses molybdenum hexafluoride (MoF6) and a Uranium pant would use uranium hexafluoride (UF6). Intellectual Property Our business will depend on the proprietary ASP technology that we licensed from Klydon. To date, we and Klydon have relied exclusively on trade secrets and other intellectual property laws, non-disclosure agreements with our respective employees, consultants, vendors, potential customers and other relevant persons and other measures to protect our intellectual property, and intend to continue to rely on these and other means. As we intend to transition into the commercialization of isotopes, we envision our intellectual property and its security becoming more vital to our future. Pursuing patent protection remains part of the intellectual property protection philosophy and strategy and the advisability of establishing provisional patent rights is continuously assessed on a case-by-case basis in respect of both conceptual aspects and the specific applications thereof. Such assessments are made in consultation with regulatory bodies and with due consideration to the prospects of successfully obtaining patent protection in light of any disclosure constraints that are imposed by such bodies. NMS Letter On October 25, 2022, our outside counsel received a letter (the “NMS 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 for the separation of isotopes of Molybdenum that have medical applications to ASP Isotopes Inc. by Klydon violates a pre-existing exclusive sub-license to the ASP technology granted to Radfarma, as more fully described below. NMS and ASP Isotopes had previously been briefly in discussions regarding a potential future collaboration on technology and product development. However, these preliminary discussions have not been active for several months, after death of a lead NMS scientist and ASPI decision to explore other options. The NMS Letter makes reference to: (1) a license agreement entered into on October 25, 2013 by Klydon and API Labs Pharmaceuticals (Proprietary) Limited (“API Labs”) to license the ASP technology for enriching certain isotopes of the element Molybdenum (“2013 API Labs License”); and (2) an exclusive sub-license to the ASP technology granted on October 1, 2019 to Radfarma, as licensee, by API Labs and SaPhotonica Limited (“SaPhotonica”), as licensors (the “2019 Radfarma Sub-License”). The NMS Letter states that Radfarma is a joint venture that is 45% owned by NMS and 45% owned by SaPhotonica. The NMS Letter asserts, among other things, that the grant of a license to the ASP technology to ASP Isotopes Inc. by Klydon violates a covenant in the 2019 Radfarma Sub-License that the licensors shall not be entitled, directly or indirectly, to use, grant or otherwise give the rights, or any similar rights, which were granted to Radfarma under the 2019 Radfarma Sub-License to any other person for use in the territory. The sub-license granted to Radfarma in the 2019 Radfarma Sub-License related to the use of intellectual property rights related to the ASP technology for the separation of isotopes of Molybdenum that have medical applications. “Territory” is defined in the 2019 Radfarma Sub-License as “the Kingdom of Norway for the construction of the 20-kilogram capacity plants; and means the international market where distribution agreements can be produced .” The NMS Letter asserts that while Klydon purported to give to ASP Isotopes Inc. a license to market the ASP technology globally, these rights were already granted to Radfarma. The NMS Letter includes a request for ASP Isotopes Inc. to enter into discussions for an agreement with NMS based on terms proposed in previous correspondence from NMS. The previous correspondence from NMS included the following key prerequisites to a possible cooperation between NMS and ASP Isotopes Inc.:(1) NMS will be granted the right to set up an enrichment facility for a Mo-100 in Norway; (2) NMS will be granted the exclusive rights to sales, marketing, and distribution in Europe, while ASPI gets similar rights for the rest of the world; and (3) NMS will support the development of the Mo-100 target production and Mo-99 generator production and if required the sales operations of ASPI. 21 The NMS Letter does not include a threat of litigation against ASP Isotopes Inc. or any parties to the 2013 API Labs License or 2019 Radfarma Sub-License. However, if the licensed rights granted to us are found to be invalid or unenforceable (in whole or in part), or if our exclusive license agreement with Klydon is terminated or Klydon, as licensor, fails to abide by the terms of our exclusive license agreement, our ability to commercialize our future isotopes would suffer and our business, results of operations and financial condition may be adversely affected. If the prior sub-license granted to Radfarma is found to be valid, we would be required to cease using the ASP technology for the separation of isotopes of Molybdenum that have medical applications (unless we were able to obtain a license from Radfarma), and we would focus our business operations on the enrichment of isotopes other than Molybdenum.For example, instead of continuing to pursue the production of Molybdenum-100, we could focus on the production and commercialization of zinc, silicon and/or chlorine using the ASP technology. We expect that our Mo-100 plant in South Africa would need to be redesigned and retrofitted in order to produce other isotopes, which would take approximately six months and cost approximately $1.0 million. See “Risk Factors — Risks Related to Our Intellectual Property” — “We have received a letter asserting that the license for the ASP technology granted to us from Klydon, which is critical to our business, may be invalid because these rights were already granted to a third party, Radfarma” and “Our license for the ASP technology with Klydon may be found to infringe third party intellectual property rights.” Based on information currently available, and after consultation with legal counsel in South Africa, management believes that our exclusive license for the enrichment of Molybdenum-100 and all other isotopes from Klydon are valid and the company will vigorously defend its rights. Regulatory Environment We are subject to a variety of laws and regulations, including but not limited to those of the United States and South Africa, that impose regulatory systems that govern many aspects of our operations, including our research and development activities involving the enrichment of isotopes in South Africa. In addition, these jurisdictions impose trade controls requirements that restrict trade to comply with applicable export controls and economic sanctions laws and requirements, and legal requirements that are intended to curtail bribery and corruption. There are a number of regulators and treaties that govern and control our business and industry. The two principal ones that control and regulate the manufacturing of isotopes at our isotope enrichment facility in South Africa are the International Atomic Energy Agency (IAEA) and the Nuclear Non-Proliferation Treaty (NPT). The IAEA is an international organization that seeks to promote the peaceful use of nuclear energy, and to inhibit its use for any military purpose, including nuclear weapons. The IAEA was established as an autonomous organization on 29 July 1957. Though established independently of the United Nations through its own international treaty, the IAEA Statute, the IAEA reports to both the United Nations General Assembly and Security Council. The IAEA statute currently has 173 member states, including South Africa. The IAEA is authorized to conclude agreements with member states, in terms of which agreements the agency would perform certain functions and the relevant member states would be placed under certain obligations. The IAEA has concluded an extensive suite of agreements with South Africa. These agreements can be viewed on the website of the IAEA ( https://www.iaea.org/resources/legal/country-factsheets ) and include agreements that govern the physical protection of nuclear material, the notification of nuclear accidents, assistance in the case of nuclear accidents, nuclear safety, civil liability, and technical cooperation. The Treaty on the Non-Proliferation of Nuclear Weapons, commonly known as the Non-Proliferation Treaty or NPT, is an international treaty whose objective is to prevent the spread of nuclear weapons and weapons technology, to promote cooperation in the peaceful uses of nuclear energy, and to further the goal of achieving nuclear disarmament and general and complete disarmament. Our South African subsidiary is registered with the South African Council for the Non-Proliferation of Weapons of Mass Destruction in terms of the Non-Proliferation of Weapons of Mass Destruction Act, 1993. Our registration certificate is valid until September 3, 2023. Representatives from the South African Council for the Non-Proliferation of Weapons of Mass Destruction regularly inspect our facility and conduct tests to monitor the activities that are taking place at our facilities. In South Africa, government Notice 493 relates to nuclear-related dual-use equipment, materials and software and related technologies which can be used in their entirety or in part for the separation of uranium isotopes. ASP is classified as a dual use technology under the protocols of the IAEA and, as such, is subject to the controls that are implemented under these protocols. These controls comprise requirements that include: · membership of the IAEA and adherence to its protocols; · membership of the Nuclear Suppliers Group (NSG) and adherence to its protocols; 22 · agreement to an “additional protocol” in light of uranium enrichment capabilities; · local laws that require permits for possession, operation and commercialization and regular reporting; · ad hoc inspections by the IAEA on 24 hour and in some cases 2 hours pre-warning; · requirement for proposed patent applications to be approved at ministerial level; and · cross-border technology transfer to be handled by the respective governments and approved by IAEA. These regulations place strict limitations on what we can and cannot do. Security measures at our production facility and our offices are stringent. Access to our manufacturing plant is highly controlled. All employees and all visitors to the manufacturing plant are pre-screened by the South African Council for the Non-Proliferation of Weapons of Mass Destruction before being allowed employment or entry into the facility. Some of our suppliers also need to be registered with the South African Council for the Non-Proliferation of Weapons of Mass Destruction. Many of our computer systems are not connected to the external internet and confidential information is secured at a controlled location. Currently, the production, distribution or sale of Mo-100 is not regulated by a healthcare regulator such as the Food and Drug Administration (FDA) in the USA, Health Canada in Canada, the European Medicines Agency in Europe and similar regulators in other countries. However, products that are produced from Mo-100 (such as Mo-99 and Tc-99m in a linear accelerator or cyclotron) are regulated by healthcare regulators and our customers are required to operate under the licensure of these healthcare regulators. Currently, the production and use of Tc-99m from Mo-100 in a cyclotron is only approved in one country (Canada). Some of our future isotopes may also be regulated by healthcare regulators such as the Food and Drug Administration (FDA) in the USA, Health Canada in Canada, the European Medicines Agency in Europe and similar regulators in other countries. U.S. laws restrict the ability of U.S. companies, U.S. citizens and U.S. permanent residents, or U.S. persons, from involvement in certain types of transactions with countries, businesses and individuals that have been targeted by U.S. economic sanctions. For example, U.S. persons are precluded from undertaking virtually any activity of any kind on the part of any U.S. person with regard to any potential or actual transactions involving Cuba, Iran and Sudan without the prior approval of the U.S. Department of Treasury’s Office of Foreign Assets Control, or OFAC. OFAC also administers U.S. sanctions against a lengthy list of entities and individuals, wherever they may be located, that the United States considers to be closely associated with these sanctioned countries or that are considered terrorists or traffickers in either narcotics or weapons of mass destruction. Furthermore, U.S. economic sanctions forbid U.S. persons from circumventing direct U.S. restrictions or from facilitating transactions by non-U.S. persons if those activities are forbidden to U.S. persons. Penalties for violating provisions such as these can include significant civil and criminal fines, imprisonment and loss of tax credits or export privileges. The Foreign Corrupt Practices Act of 1977, or the FCPA, as amended by the Omnibus Trade and Competitiveness Act of 1988 and the International Anti-Bribery and Fair Competition Act of 1998, makes it a criminal offense for a U.S. corporation or other U.S. domestic concern to make payments, gifts or give anything of value directly or indirectly to foreign officials for the purpose of obtaining or retaining business, or to obtain any other unfair or improper advantage. In addition, the FCPA imposes accounting standards and requirements on publicly traded U.S. corporations and their foreign affiliates, which are intended to prevent the diversion of corporate funds to the payment of bribes and other improper payments, and to prevent the establishment of “off books” slush funds from which such improper payments can be made. We are also subject to laws and regulations covering subject matter similar to that of the FCPA that have been enacted by countries outside of the United States. For example, the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions was signed by the members of the Organization for Economic Cooperation and Development and certain other countries in December 1997. The Convention requires each signatory to enact legislation that prohibits local persons and firms from making payments to foreign officials for the purpose of obtaining business or securing other unfair advantages from foreign governments. Failure to comply with these laws could subject us to, among other things, penalties and legal expenses, which could harm our reputation and have a material adverse effect on our business, financial condition and results of operations. 23 Compliance with the myriad of export control laws of the various jurisdictions in which we do business is a challenge for any company involved in export activities within the nuclear and defense end markets. We have compliance systems in our U.S. and non-U.S. subsidiaries to identify those products and technologies that are subject to export control regulatory restrictions and, where required, we obtain authorization from relevant regulatory authorities for sales to foreign buyers or for technology transfers to foreign consultants, companies, universities or foreign national employees. We also have a compliance system that is intended to proactively address potential compliance issues including those related to export control, trade sanctions and embargoes, as well as anti-bribery situations, and we are implementing this through such mechanisms as training, formalizing contracting processes, performing diligence on agents and continuing to improve our record-keeping and auditing practices with respect to third-party relationships and otherwise. Thus far, as part of our compliance system, for instance, we have developed a Code of Ethics and Conduct that informs all of our employees of their compliance obligations. Furthermore, we have developed an ethics and conduct training program that all of our employees are required to undertake, as well as other targeted compliance training relevant to their position, such as specific FCPA training for all of our worldwide controllers. Violations of any of the various U.S. or non-U.S. export control laws can result in significant civil or criminal penalties, or even loss of export privileges, as mentioned above. We recognize that an effective compliance program can help protect the reputation and relationship of a regulated company with the regulatory agencies administering these laws and regulations. In the United States, each of the regulatory agencies administering these laws and regulations has a voluntary disclosure program that offers the possibility of significantly reduced penalties, if any are applicable, and we intend to use these programs as part of our overall compliance program, as necessary. Employees As of December 31, 2022, we employed four full-time employees. As of March 23, 2023, we employ approximately 31 people on a full-time basis, 27 of whom work at our newly completed plant in South Africa. Of the total employees, 7 are in Research and Development, 15 are in construction and manufacturing and 5 are in general management. None of our employees are subject to collective bargaining agreements. We consider our relationship with our employees to be good. Facilities We lease our research and development facility in Pretoria, South Africa under a lease with a term expiring on December 31, 2030. We believe that our existing facilities are adequate to meet our current needs. Legal Proceedings We are currently not a party to any material legal proceedings. 24