ASP Isotopes Inc. 10-K

Item 8. Financial Statements and Supplementary Data ASP Isotopes Inc. Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 274 ) 63 Consolidated Balance Sheets as of December 31, 2023 and 2022 64 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2023 and 2022 65 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2023 and 2022 66 Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022 67 Notes to Consolidated Financial Statements 68 62 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of ASP Isotopes Inc Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of ASP Isotopes Inc. and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred recurring operating losses and negative cash flows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ EisnerAmper LLP We have served as the Company’s auditor since 2022. EISNERAMPER LLP Iselin, New Jersey April 10, 2024 63 Table of Contents ASP Isotopes Inc. Consolidated Balance Sheets December 31, 2023 2022 Assets Current assets: Cash $ 7,908,181 $ 2,389,140 Accounts receivable 216,504 — Receivable from noncontrolling interests 721,548 — Prepaid expenses and other current assets 1,664,023 913,005 Total current assets 10,510,256 3,302,145 Property and equipment, net 10,712,839 8,200,595 Operating lease right-of-use assets, net 1,258,701 853,889 Goodwill 3,267,103 — Other noncurrent assets 1,793,014 139,636 Total assets $ 27,541,913 $ 12,496,265 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 1,111,819 $ 1,354,903 Accrued expenses 1,311,245 361,246 Notes payable 470,396 33,854 Finance lease liabilities – current 61,941 — Operating lease liabilities – current 336,564 45,903 Deferred revenue 882,000 — Other current liabilities 1,500,000 — Share liability — 140,455 Total current liabilities 5,673,965 1,936,361 Deferred tax liabilities 110,578 — Finance lease liabilities – noncurrent 207,092 — Operating lease liabilities – noncurrent 1,066,647 742,443 Other liabilities 1,653,000 — Total liabilities 8,711,282 2,678,804 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 December 31, 2023 and 2022 — — Common stock, $ 0.01 par value; 500,000,000 shares authorized, 48,923,276 and 35,907,127 shares issued and outstanding as of December 31, 2023 and 2022, respectively 489,233 359,071 Additional paid-in capital 40,567,003 16,756,426 Accumulated deficit ( 23,839,300 ) ( 7,553,066 ) Accumulated other comprehensive (loss) income ( 920,982 ) 255,030 Total ASP Isotopes stockholders’ equity 16,295,954 9,817,461 Noncontrolling interests 2,534,677 — Total stockholders’ equity 18,830,631 9,817,461 Total liabilities and stockholders’ equity $ 27,541,913 $ 12,496,265 The accompanying notes are an integral part of these consolidated financial statements. 64 Table of Contents ASP Isotopes Inc. Consolidated Statements of Operations and Comprehensive Loss Year Ended December 31, 2023 Year Ended December 31, 2022 Revenue $ 433,026 $ - Cost of goods sold 294,056 - Gross profit 138,970 - Operating expenses: Research and development 764,581 1,273,536 Selling, general and administrative 15,416,388 3,825,512 Total operating expenses 16,180,969 5,099,048 Loss from operations ( 16,041,999 ) ( 5,099,048 ) Other income (expense): Foreign exchange transaction gain 45,753 - Change in fair value of share liability ( 194,540 ) 150,527 Interest income 9,074 3,382 Interest expense ( 118,547 ) - Total other (expense) income ( 258,260 ) 153,909 Loss before income tax expense ( 16,300,259 ) ( 4,945,139 ) Income tax provision 6,133 - Net loss before allocation to noncontrolling interests ( 16,294,126 ) ( 4,945,139 ) Less: Net loss attributable to noncontrolling interests ( 7,892 ) - Net loss attributable to ASP Isotopes Inc. shareholders $ ( 16,286,234 ) $ ( 4,945,139 ) Net loss per share attributable to ASP Isotopes Inc. shareholders, basic and diluted $ ( 0.49 ) $ ( 0.18 ) Weighted average shares of common stock outstanding, basic and diluted 33,066,708 26,793,748 Comprehensive loss: Net loss before allocation to noncontrolling interests $ ( 16,294,126 ) $ ( 4,945,139 ) Foreign currency translation ( 1,176,012 ) 236,307 Total comprehensive loss before allocation to noncontrolling interests ( 17,470,138 ) ( 4,708,832 ) Less: Comprehensive loss attributable to noncontrolling interests 27,255 - Comprehensive loss attributable to ASP Isotopes Inc. $ ( 17,497,393 ) $ ( 4,708,832 ) The accompanying notes are an integral part of these consolidated financial statements. 65 Table of Contents ASP Isotopes Inc. Consolidated Statements of Changes in Stockholders’ Equity Common Stock Additional Paid-in Accumulated Other Comprehensive Accumulated Noncontrolling Total Stockholders’ Shares Amount Capital Income Deficit Interests Equity Balance as of December 31, 2021 20,652,500 $ 206,525 $ 8,380,343 $ 18,723 $ ( 2,607,927 ) $ — $ 5,997,664 Issuance of common stock, net of issuance costs of $380,747 1,559,780 15,598 2,723,214 — — — 2,738,812 Issuance of common stock in connection with initial public offering, net of issuance costs of $1,209,496 1,250,000 12,500 3,778,004 — — — 3,790,504 Issuance of common stock upon exercise of warrants 7,194,847 71,948 ( 71,948 ) — — — — Issuance of restricted shares 5,250,000 52,500 ( 52,500 ) — — — — Stock-based compensation — — 1,999,313 — — — 1,999,313 Foreign currency translation — — — 236,307 — — 236,307 Net loss — — — — ( 4,945,139 ) — ( 4,945,139 ) 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, net of issuance costs of $563,473 13,117,067 131,171 13,434,851 — — — 13,566,022 Issuance of common stock for non-cash issuance costs 472,582 4,726 ( 4,726 ) — — — — Issuance of common stock to settle share liability 150,000 1,500 226,500 228,000 Settlement of liability with related parties — — 626,223 — — — 626,223 Settlement of liability with consultants 519,750 5,198 771,497 — — — 776,695 Cancellation of common stock received in exchange for issuance of convertible preferred stock in subsidiary ( 3,000,000 ) ( 30,000 ) 30,000 — — — — Issuance of restricted shares 1,756,750 17,567 ( 17,567 ) — — — — Stock-based compensation — — 8,743,799 — — — 8,743,799 Noncontrolling interest in ASP Rentals — — — — — 721,548 721,548 Acquisition of PET Labs — — — — — 1,821,021 1,821,021 Foreign currency translation — — — ( 1,176,012 ) — — ( 1,176,012 ) Net loss — — — — ( 16,286,234 ) ( 7,892 ) ( 16,294,126 ) 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 The accompanying notes are an integral part of these consolidated financial statements. 66 Table of Contents ASP Isotopes Inc. Consolidated Statements of Cash Flows Year Ended December 31, 2023 Year Ended December 31, 2022 Cash flows from Operating activities Net loss $ ( 16,294,126 ) $ ( 4,945,139 ) Adjustments to reconcile net loss to cash used in operating activities: Foreign exchange transaction gain from intercompany ( 44,649 ) - Depreciation 37,433 - Stock-based compensation 8,743,799 1,999,313 Issuance of common stock to consultant 669,700 50,000 Change in fair value of share liability 194,540 ( 150,527 ) Change in right-of-use lease assets 104,528 72,570 Change in deferred tax liability 16,655 - Changes in operating assets and liabilities, net of acquisition amounts: Accounts receivable 237,952 - Prepaid expenses and other current assets ( 546,097 ) ( 671,924 ) Other noncurrent assets ( 59,324 ) ( 146,435 ) Accounts payable ( 224,598 ) 570,600 Accrued expenses 873,705 319,048 Operating lease liability ( 85,775 ) ( 37,399 ) Tax liability current ( 22,787 ) - Deferred revenue 882,000 - Other current liabilities 104,652 - Net cash used in operating activities ( 5,412,392 ) ( 2,939,893 ) Cash flows from investing activities Purchases of property and equipment ( 2,331,343 ) ( 4,473,164 ) Cash paid for acquisition of business, net of cash acquired ( 121,848 ) - Net cash used in investing activities ( 2,453,191 ) ( 4,473,164 ) Cash flows from financing activities Proceeds from issuance of common stock 14,129,495 8,119,959 Common stock issuance costs ( 563,473 ) ( 1,465,461 ) Proceeds from issuance of notes payable 526,282 - Payments of notes payable ( 87,713 ) - Payment of bank loan ( 609,499 ) Payment of principal portion of finance leases ( 9,601 ) ( 13,046 ) Net cash provided by financing activities 13,385,491 6,641,452 Net change in cash 5,519,908 ( 772,005 ) Effect of exchange rate changes on cash ( 867 ) 207,424 Cash – beginning of year 2,389,140 2,953,721 Cash – end of y ear $ 7,908,181 $ 2,389,140 Supplemental disclosures of non-cash investing and financing activities: Issuance of common stock in lieu of commissions $ 75,570 $ — Settlement of liabilities with related party $ 626,223 $ — Share liability for non-cash issuance costs $ — $ 124,782 Seller financed portion of investment in PET Labs Pharmaceuticals $ 1,500,000 $ - Purchase of property and equipment included in accounts payable $ 453,985 $ 745,628 Right-of-use assets obtained in exchange for lease liability $ 70,607 $ — The accompanying notes are an integral part of these consolidated financial statements. 67 Table of Contents ASP Isotopes Inc. Notes to 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 Isotopes UK Ltd, a wholly-owned subsidiary of the Company, was incorporated in July 2022. Enriched Energy, LLC, a wholly-owned subsidiary of the Company, was incorporated in January 2022. ASP Rentals Proprietary Limited (“ASP Rentals”) a variable interest entity (“VIE”) of ASP South Africa, has its principal 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”). Klydon has agreed to provide the Company a first commercial-scale isotope enrichment plant located in South Africa. 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 $ 3.8 million. 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 $ 16,294,126 and $ 4,945,139 for the years ended December 31, 2023 and 2022, respectively. The Company anticipates it will need to continue to raise capital through additional equity and/or debt financings and/or collaborative development agreements to fund its operations. The Company currently expects that its cash of $ 7,908,181 as of December 31, 2023, along with gross proceeds of $20,550,000 received in March 2024 through the issuance of convertible promissory notes and gross proceeds of approximately $5,500,000 received in April 2024 through the issuance of common stock from the exercise of warrants (see Note 16), will not be sufficient to fund its operating expenses and capital requirements for more than 12 months from the date the financial statements are issued. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Additional funding will be necessary to complete construction of the first enrichment facility and begin operations, and although the Company has plans to seek additional funding, these plans are not currently probable. There can be no assurance that the Company will achieve or sustain positive cash flows from operations or profitability. The Company is in the process of seeking additional debt and equity financing. However, such funding may not be available on a timely basis on terms acceptable to the Company, or at all. If the Company is unable to raise additional capital when required or on acceptable terms, the Company may be required to further scale back or discontinue the advancement of product candidates, further reduce headcount, reorganize, merge with another entity, or cease operations. 68 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation and Use of Estimates The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of the Company’s 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 consolidated financial statements and accompanying notes. The most significant estimates in the Company’s consolidated financial statements relate to stock based compensation and the accounting for the acquisition. 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 consolidated financial statements include the accounts of ASP Isotopes Inc., its subsidiaries and, beginning in 2023, the 80% owned Enlightened Isotopes, the 51% owned PET Labs Pharmaceuticals (see Note 11) and the 24% owned ASP Rentals (see Note 11). All intercompany balances and transactions have been eliminated in consolidation. For the year ended December 2023, there was no corporate activity for Enlightened Isotopes other than its formation and therefore there was no non-controlling interest to report on the consolidated balance sheet and no net loss attributable to non-controlling interest on the consolidated statement of operations and comprehensive loss to report. See Note 10. Currency and Currency Translation The consolidated financial statements are presented in U.S. dollars, the Company’s reporting currency. The functional currency of ASP Isotopes Inc. and ASP Guernsey is the U.S. dollar. The functional currency of the Company’s subsidiary ASP South Africa and PET Labs Pharmaceuticals is the South African Rand. Adjustments that arise from exchange rate changes on transactions of each group entity denominated in a currency other than the functional currency are included in other income and expense in the consolidated statements of operations. Assets and liabilities of ASP South Africa and PET Labs Pharmaceuticals are recorded in their South African Rand functional currency and translated into the U.S. dollar reporting currency of the Company at the exchange rate on the balance sheet date. Revenue, when recorded, and expenses of ASP South Africa and PET Labs Pharmaceuticals are recorded in their South African Rand functional currency and translated into the U.S. dollar reporting currency of the Company at the average exchange rate prevailing during the reporting period. Resulting translation adjustments are recorded to other comprehensive income (loss). Concentration of Credit Risk and other Risks Cash balances are maintained at U.S. financial institutions and may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $ 250,000 per depositor, per insured bank for each account ownership category. Although the Company currently believes that the financial institutions with whom it does business, will be able to fulfill their commitments to the Company, there is no assurance that those institutions will be able to continue to do so. The Company has not experienced any credit losses associated with its balances in such accounts for the years ended December 31, 2023 and 2022. Our foreign subsidiaries held cash of approximately $ 1,963,000 and $ 38,000 as of December 31, 2023 and 2022, respectively, which is included in cash on the consolidated balance sheets. Our strategic plan does not require the repatriation of foreign cash in order to fund our operations in the U.S., and it is our current intention to indefinitely reinvest our foreign cash outside of the U.S. If we were to repatriate foreign cash to the U.S., we would be required to accrue and pay U.S. taxes in accordance with applicable U.S. tax rules and regulations as a result of the repatriation. Cash The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents are stated at fair value and may include money market funds, U.S. Treasury and U.S. government-sponsored agency securities, corporate debt, commercial paper and certificates of deposit. The Company had no cash equivalents as of December 31, 2023 and 2022. 69 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) Segment Information As of December 31, 2023, the Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions, specialist isotopes and related services. The financial information is regularly reviewed by the chief operating decision maker (“CODM”) in deciding how to allocate resources. The Company’s CODM is its chief executive officer. Fair Value of Financial Instruments Accounting guidance defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets; Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. There was no share liability as of December 31, 2023. The Company’s share liability (Note 12) measured at Level 3 fair value on a recurring basis was $ 140,455 as of December 31, 2022. There was a transfer of the share liability from Level 3 to Level 1 as a result of our IPO in the year ended December 31, 2022. The following table provides a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 1): Share Liability Balance as of December 31, 2021 $ 116,200 Additional liability for issuance of common stock 174,782 Fair value adjustment ( 150,527 ) Balance as of December 31, 2022 140,455 Additional liability for issuance of common stock 669,700 Settlement of share liability with issuance of common stock ( 1,004,695 ) Fair value adjustment 194,540 Balance as of December 31, 2023 $ - 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. 70 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) 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’s evaluates a transaction’s performance obligations to determine if promised goods or services in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, the Company considers whether the goods or services are integral or dependent to other goods or services in the contract. The Company determines the transaction price based on the agreed government rates for the promised goods in the contract. The consideration is recognized as revenue when control is transferred for the related goods. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. The Company receives payments from its customers based on billing schedules established in each contract. Upfront payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. An allowance for expected credit losses is estimated for those accounts receivable considered to be uncollectible based upon historical experience and management's evaluation of outstanding accounts receivable. We maintain an allowance for expected credit losses for accounts receivable, which is recorded as an offset to accounts receivable, and changes in such are classified as selling, general and administrative expense in the Consolidated Statements of Operations and Comprehensive Loss. We assess 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. At December 31, 2023 and 2022 there was no allowance for expected credit losses. 71 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) 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. 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 8 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 (see 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. 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. 72 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) 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. Leases The Company accounts for leases 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, operating lease liabilities current and operating 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. Fair value would be assessed using a discounted cash flows or other appropriate measures of fair value. The Company did not recognize any impairment losses for the years ended December 31, 2023 and 2022. 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. 73 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) 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. Prior to the Company’s IPO, there was no public market of the Company’s common stock. The fair value of the shares of common stock underlying the Company’s share-based awards was estimated on each grant date by the Company’s board of directors based on then current facts and circumstances. To determine the fair value of the Company’s common stock underlying option grants, the board of directors considered, among other things, input from management and recent third-party financings consummated by the Company. Income Taxes Deferred income tax assets and liabilities arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Prior to the acquisition of 51% of PET Labs Pharmaceuticals, 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. 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. 74 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) 3. Revenue In connection with our acquisition of 51 % ownership of PET Labs Pharmaceuticals, we manufacture and sell nuclear medical doses for PET scanning in South Africa. During the period October 31, 2023 through December 31, 2023, the Company recognized revenue of $ 443,026 . The following table presents changes in the Company’s accounts receivable from the PET Labs Pharmaceuticals acquisition date of October 31, 2023 through December 31, 2023: Balance as of October 31, 2023 Additions Deductions Balance as of December 31, 2023 Accounts receivable $ 460,165 $ 433,026 $ ( 676,687 ) $ 216,504 4. Property and Equipment Property and equipment as of December 31, 2023 and 2022 consisted of the following: Useful Lives (Years) December 31, 2023 2022 Construction in progress - $ 9,108,923 $ 8,200,595 Tools, machinery and equipment 3 - 8 1,458,654 — Computer equipment 3 - 4 60,447 — Vehicles 5 39,849 — Software 5 1,639 — Office furniture 7 59,588 — Leasehold improvements 5 21,446 — Property and equipment, at cost 10,750,546 8,200,595 Less accumulated depreciation ( 37,707 ) — Property and equipment, net $ 10,712,839 $ 8,200,595 The Company is currently building out plants in Pretoria, South Africa and all costs incurred are considered construction in progress because the work is not complete as of December 31, 2023 and 2022. There was no depreciation expense as it relates to the construction in progress for the year ended December 31, 2023 and 2022. Depreciation expense for all other asset categories was $ 37,433 for the year ended December 31, 2023. No depreciation expense was recorded for the year ended December 31, 2022. 5. Accrued Expenses Accrued expenses as of December 31, 2023 and 2022 consisted of the following: December 31, 2023 2022 Accrued professional $ 447,295 $ 247,125 Accrued salaries and other employee costs 845,344 98,875 Accrued other 18,606 15,246 Total accrued expenses $ 1,311,245 $ 361,246 75 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) 6. Notes Payable During 2021, the Company executed promissory notes payable with two individuals with an aggregate principal balance of approximately $ 46,900 (35,000 GBP). The notes were due after a period of two months, followed by mutually agreed upon monthly extensions, and do not bear interest. Subsequent to the issuance of the notes payable, one of the individuals became an officer of the Company. In March 2022, one of the promissory notes totaling $ 13,046 (10,000 GBP) was repaid in full. As of December 31, 2022, the total promissory notes payable balance was $ 33,854 and have been automatically extended on a monthly basis. As of December 31, 2023, the total promissory notes payable balance was $ 31,827 . In conjunction with the acquisition of 51 % of PET Labs Pharmaceuticals, ASP assumed a liability to a bank. Prior to December 31, 2023, the bank loan balance of $ 609,500 was paid off entirely. 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 installment payments which began in December 2023. The Company recorded interest expense of $ 2,249 for the year ended December 31, 2023. 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 December 31, 2023. The Company did not recognize any deferred revenue as of December 31, 2022 or January 1, 2022. 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. The Company is 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. Klydon Proprietary Limited In November 2021, the Company entered into an agreement with Klydon Proprietary Limited (“Klydon”) to design and build a plant to enrich Molybdenum in South Africa. The initial phase of the project includes the building of a plant that can support the production of at least 5kgs of Mo-100, and is expected to be completed in the second half of 2023. The contracted cost for this phase is $ 6,800,000 . The second phase of the project includes the production to be increased to 20kgs of Mo-100 with an additional cost of $ 6,000,000 . The Company can modify the contract scope and overall costs and the contract can be cancelled by either party. As of December 31, 2022 and 2021, approximately $ 7,233,000 and $ 1,800,000 , respectively, has been paid under this contract and recorded as construction in progress within property and equipment. Klydon performed a portion of the services required under the Turnkey Contract; however, services were incomplete and many of the services were not completed within the time frame required. As a result, Klydon and ASP South Africa entered into an Acknowledgement of Debt Agreement dated November 30, 2022, whereby Klydon (i) agreed to pledge its assets (the “Pledged Assets”) to ASP South Africa to secure its performance of the Turnkey Contract by December 31, 2022, and (ii) acknowledged that ASP South Africa would suffer damages in the amount of $ 6,050,000 (“Damage Amount”) should it fail to perform. Under the Acknowledgement of Debt Agreement, the Pledged Assets would serve as collateral for Klydon’s obligation to pay the Damage Amount should Klydon fail to perform. In connection therewith, also on November 30, 2022, ASP South Africa and Klydon entered into a Deed of Security Agreement whereby, if Klydon failed to complete its obligations under the Turnkey Contract by December 31, 2022, all of Klydon’s rights of any nature to and interests of any nature in the Pledged Assets would be transferred to ASP South Africa. Klydon failed to complete its obligations under the Turnkey Contract by December 31, 2022, however, the Company did not perfect its interests in the assets until April 4, 2023. The Company did not believe that the amounts owed by Klydon were realizable, nor did the Company know the timing of any recovery payments. Therefore, a loss recovery receivable was not recorded at any time prior to April 4, 2023. On April 4, 2023, the Company perfected its interest under the Acknowledgement of Debt Agreement, pursuant to which the Company acquired certain intellectual property from Klydon (“Klydon Settlement”). In addition, the Company acquired Klydon’s interest in four entities which are inactive and in the process of being dissolved. The Company has concluded that the Klydon Settlement is accounted for under ASC 805, Business Combinations as an asset acquisition since the assets acquired were concentrated in a single identifiable asset from a related party. In conjunction with the Klydon Settlement, the Company recorded an increase to additional paid-in capital for the settlement of all liabilities owed to Klydon at the time of settlement totaling $ 626,223 . Two individuals who are officers and board members of Klydon, one who is now an officer of ASP Isotopes Inc. and the other who is now a scientific advisor of ASP Isotopes Inc., received warrants to purchase common stock of the Company and therefore are considered related parties. See Notes 10 and 12. 76 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) Contingencies From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues liabilities for such matters when future expenditures are probable and such expenditures can be reasonably estimated. On October 25, 2022, the Company received a letter from a law firm acting on behalf of Norsk medisinsk syklotronsenter AS (“NMS”), asserting, among other things, that the grant of a license to the ASP technology to the Company by Klydon violates a pre-existing exclusive sub-license to the ASP technology granted to Radfarma. The asserted claims, arbitration and/or litigation could include claims against the Company, the Company’s licensor (Klydon), or Klydon’s present or former sub-licensors alleging infringement of intellectual property rights with respect to the ASP technology on which our company relies. The Company recorded legal costs totaling $ 78,304 which was paid to Klydon’s attorneys to settle this claim. As of December 31, 2023, Radfarma has relinquished all claims and ASP Isotopes owns the rights to the licenses originally held by Klydon and acquired by ASP Isotopes. 9. Leases The Company accounts for facility leases in accordance with ASC 842 (Note 2). The Company is party to five facility leases in South Africa for office, manufacturing and laboratory space. A lease for office and laboratory space in Pretoria, South Africa commenced in October 2021 with the initial term set to expire in December 2030 . The Company has applied the guidance in ASC 842 and has determined that it should be classified as an operating lease. The Company’s incremental borrowing rate for this lease is 7.5 % based on the remaining lease term of the applicable lease. Consequently, a ROU lease asset of $ 952,521 with a corresponding lease liability of $ 952,521 based on the present value of the minimum rental payments of such lease was recorded at the inception of the lease. 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. In the consolidated balance sheet as of December 31, 2022, the Company has a ROU asset balance of $ 853,889 and a current and non-current lease liability of $ 45,903 and $ 742,443 , respectively. A lease for additional production space in Pretoria, South Africa commenced in April 2023 with the initial term expiring in March 2024 and the Company is maintaining the lease under the agreed upon monthly extensions. The Company has applied the guidance in ASC 842 and has determined that this lease is a short term lease and expenses the monthly payments as incurred. 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 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 on the present value of the minimum rental payments of such lease was recorded at the date of ASP Isotopes acquisition of 51% of PET Labs Pharmaceuticals. In the consolidated balance sheet as of December 31, 2023, the Company has a ROU asset balance of $ 564,064 and a current and non-current lease liability of $ 263,452 and $ 380,494 , respectively, relating to this ROU lease asset. Dr. Gerdus Kemp, an officer of PET Labs Pharmaceuticals and an employee of ASP Isotopes UK Ltd is the sole owner of the facility under this lease agreement. A lease for additional production space in Pretoria, South Africa commenced prior to October 31, 2023 with the initial term expiring in March 2024 and the Company is maintaining the lease under the agreed upon monthly extensions. The Company has applied the guidance in ASC 842 and has determined that this lease is a short term lease effective on the date of ASP Isotopes acquisition of 51% of PET Labs Pharmaceuticals and expensed the monthly payments for the two months ended December 31, 2023. 77 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) Quantitative information regarding the Company’s operating lease liabilities is as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Operating Lease Cost Operating lease cost $ 178,610 $ 125,667 Other Information Operating cash flows paid for amounts included in the measurement of lease liabilities $ 153,988 $ 93,211 Operating lease liabilities arising from obtaining right-of-use assets $ 70,607 $ — Weighted average remaining lease term (years) 4.62 8.00 Weighted average discount rate 10.24 % 7.5 % Future lease payments under noncancelable operating lease liabilities are as follows as of December 31, 2023: Operating Leases Future Lease Payments 2024 $ 462,220 2025 471,911 2026 228,395 2027 128,669 2028 138,320 Thereafter 308,540 Total lease payments $ 1,738,055 Less: imputed interest ( 334,844 ) Total lease liabilities $ 1,403,211 Less current portion ( 336,564 ) Lease liability – noncurrent $ 1,066,647 The Company records the expense from short term leases as incurred. For the year ending December 31, 2023, the Company recorded $ 121,312 in rent expense from its short term leases in Pretoria, South Africa. The remaining lease payments due in 2024 are $ 37,263 . The Company accounts for finance leases in accordance with ASC 842 (Note 2). Subsequent to the acquisition of 51% of PET Labs Pharmaceuticals, the Company is party to nine finance leases in South Africa for certain fixed assets. Quantitative information regarding the Company’s finance lease liabilities is as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Finance Lease Cost Interest on lease liabilities $ 5,059 $ — Other Information Operating cash flows paid for amounts included in the measurement of finance lease liabilities $ 9,601 $ — Amortization of right-of-use assets $ 6,445 $ — Weighted average remaining lease term (years) 3.9 — Weighted average discount rate 11.3 % — % Future lease payments under noncancelable finance lease liabilities are as follows as of December 31, 2023: Finance Leases Future Lease Payments 2024 $ 89,167 2025 85,272 2026 77,787 2027 63,690 2028 17,187 Thereafter — Total lease payments $ 333,103 Less: imputed interest ( 64,070 ) Total lease liabilities $ 269,033 Less current portion ( 61,941 ) Lease liability – noncurrent $ 207,092 78 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) 10. License Agreements In September 2021, the Company licensed certain intellectual property from Klydon for the development, production distribution, marketing and sale of Mo-100. The license term is 999 years, unless terminated earlier by either party under certain provisions. Any development efforts improving the intellectual property performed by either Klydon or the Company will be the property of Klydon. There are no upfront, milestone payments, nor royalties on product sales over the term of the license. Two individuals who are officers and board members of Klydon received warrants to purchase common stock of the Company. (See Note 12.) In January 2022, the Company licensed certain intellectual property from Klydon for the development, production distribution, marketing and sale of uranium isotope U-235 (“U-235”). The license term is 999 years, unless terminated earlier by either party under certain provisions. Any development efforts improving the intellectual property performed by either Klydon or the Company will be the property of Klydon. The Company paid an upfront fee of $ 100,000 , which was expensed to research and development expense. The Company is required to pay a nominal royalty per Kg of product sold plus 10 % royalties on product net profits over the term of the contract. One of the officers, who is also a board member of Klydon, became a board member and consultant of ASP Isotopes Inc. and an employee of ASP Guernsey in January 2022. In July 2022, ASP Isotopes UK Ltd (a subsidiary of the Company) entered into a license agreement with Klydon, as licensor, pursuant to which ASP Isotopes UK Ltd acquired from Klydon an exclusive license to use, develop, modify, improve, subcontract and sublicense certain intellectual property rights relating to the ASP technology for the production, distribution, marketing and sale of all isotopes produced using the ASP technology (the “Klydon license agreement”). The Klydon license agreement superseded and replaced the Mo-100 license and U-235 license described in Note 8 above. The Klydon license agreement is royalty-free, has a term of 999 years and is worldwide for the development of the ASP technology and the distribution, marketing and sale of isotopes. Future production of isotopes is limited to member countries of the Nuclear Suppliers Group. In connection with the Klydon license agreement the Company agreed to make an upfront payment of $ 100,000 (to be included within the payments we make under the Turnkey Contract) and deferred payments of $ 300,000 over 24 months, which was expensed to research and development expense. Klydon has the right to terminate the exclusivity of the Klydon license agreement in the event that the licensee ceases to carry on activities related to isotope enrichment for a period longer than 24 consecutive months. The $ 400,000 due to Klydon is in accounts payable as of December 31, 2022. In July 2022, ASP South Africa acquired assets comprising a dormant Silicon-28 aerodynamic separation processing plant from Klydon for ZAR 6,000,000 (which at the then current exchange rate was approximately $ 354,000 ), which was recorded to property and equipment, would have been payable to Klydon on the later of 180 days of the acquisition and the date on which the assets generate any revenues of any nature. On April 4, 2023, the Company perfected its interest under the Acknowledgement of Debt Agreement (see Note 8), pursuant to which the Company acquired certain intellectual property from Klydon (“Klydon Settlement”). The Company concluded that the Klydon Acquisition is accounted for under ASC 805, Business Combinations as an asset acquisition since the assets acquired were concentrated in a single identifiable asset from a related party. In conjunction with the Klydon Settlement, the Company recorded an increase to additional paid-in capital for the settlement of all liabilities owed to Klydon at the time of settlement totaling $ 626,223 . 11. Acquisitions PET Labs Pharmaceuticals In October 2023, the Company completed the PET Labs Pharmaceuticals Acquisition, a provider of nuclear medical doses for use in PET scans in South Africa. The acquisition of PET Labs Pharmaceuticals was intended to accelerate the distribution of the Company’s pipeline. The acquisition of PET Labs Pharmaceuticals has been accounted for as a business combination in accordance with ASC 805. Pursuant to the terms of the agreement, the Company acquired 51 % of the common shares issued and outstanding for total purchase consideration of $ 2,000,000 in cash of which $ 500,000 was paid up front and the balance of $ 1,500,000 is expected to be paid in the second half of 2024. In addition to the purchase consideration, the Company has an option to purchase the remaining 49 % of the issued and outstanding shares for an agreed consideration totaling $ 2,200,000 . No consideration or value relating to this option was recognized as it was not considered probable at the time of acquisition and as of December 31, 2023. 79 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) The Company incurred approximately $ 4,000 in transaction costs related to the PET Labs Acquisition, which is recorded in general and administrative expenses in Consolidated Statement of Operations and Comprehensive Loss in the year ended December 31, 2023. Dr. Gerdus Kemp is an officer of PET Labs Pharmaceuticals and, effective November 1, 2023, an employee of ASP Isotopes UK Ltd. In addition, Dr. Kemp controls the remaining 49% ownership of PET Labs Pharmaceuticals. The following table summarizes the preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed: Consideration Cash $ 500,000 Present value of balance due 1,395,348 $ 1,895,348 Recognized amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents $ 378,152 Accounts receivable 460,165 Other current assets 184,457 Property and equipment 821,926 Right of use assets 592,304 Financial liabilities ( 1,248,699 ) Right of use liabilities ( 677,163 ) Total identifiable net assets 511,142 Noncontrolling interest (1,821,021 ) Goodwill 3,205,227 $ 1,895,348 Goodwill arising from the acquisition as of October 31, 2023 of $ 3,205,227 was attributable mainly to certain existing doctor and service center relationships, which are not identifiable as a separate intangible asset, along with buyer specific synergies expected to arise from the acquisition. The Company expects that no goodwill from this acquisition will be deductible for income tax purposes. The Company considered the contractual value of accounts receivable to be the same as the fair value and expects the full amount to be collected. The results of PET Labs Pharmaceuticals have been included in the consolidated financial statements from the date of the acquisition. The changes to the carrying value of goodwill is as follows: Balance as of October 31, 2023 (acquisition date) $ 3,205,227 Translation adjustment 61,876 Balance as of December 31, 2023 $ 3,267,103 Unaudited Pro Forma Financial Information The following unaudited pro forma financial information shows the results of the Company’s operations for the years ended December 31, 2023 and 2022 as if the acquisition had occurred on January 1, 2022. The unaudited pro forma financial information is presented for information purposes only and is not necessarily indicative of the Company’s performance had the acquisition occurred as of that date. The unaudited pro forma information is also not intended to be a projection of future results due to the integration of the acquired operations of PET Labs Pharmaceuticals. The unaudited pro forma information reflects the effects of applying the Company’s accounting policies to the combined historical financial information of the Company and PET Labs Pharmaceuticals. Pro Forma 2023 2022 Revenue $ 3,614,776 $ 3,065,098 Net loss $ ( 15,783,485 ) $ ( 4,291,993 ) Net loss per common share $ ( 0.48 ) $ ( 0.16 ) 80 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) ASP Rentals In December 2023, the Company entered into Shareholders Agreement (“ASP Rentals Shareholders Agreement”) with ASP Rentals, an equipment financing service provider in South Africa. In conjunction with the ASP Rental Shareholders Agreement, the Company entered into an Asset Sale Agreement and an Asset Rental Agreement in order to facilitate the financing of energy equipment recently purchased by ASP South Africa. ASP Rentals is considered a variable interest entity, and the Company is the primary beneficiary and therefore ASP Rentals has been consolidated in accordance with ASC 810. Pursuant to the terms of the ASP Rentals Shareholders Agreement, as of December 31, 2023 ASP South Africa is obligated to acquire and ASP Rentals is obligated to issue 24% of the common shares of ASP Rentals to be issued and outstanding for total purchase consideration of ZAR 3,300,829 (which at the exchange rate as of December 31, 2023 was $180,387) . As of December 31, 2023 these amounts are eliminated in consolidation. As of December 31, 2023, ASP Rentals has a receivable and an obligation to issue 76 % of the common shares of ASP Rentals with non-affiliates for an aggregate of ZAR 13,203,317 (which at the exchange rate as of December 31, 2023 was $ 721,548 ). As of December 31, 2023, the Company has recorded $ 721,548 as a receivable from noncontrolling interest in current assets and a non-controlling interest in equity. Consideration for all common shares of ASP Rentals was received in January 2024. In January 2024, a total of ZAR 14,351,431 (which at the exchange rate as of December 31, 2023 was $784,291) was transferred between ASP Rentals and ASP South Africa per the terms of the ASP Sale Agreement and Asset Rental Agreement, excluding VAT . Therefore, no interest income nor interest expense was recognized for the year ended December 31, 2023. 12. Stockholders’ Equity Preferred stock The Company has 10,000,000 shares of preferred stock authorized, of which no shares were issued and outstanding as of December 31, 2023 and December 31, 2022. Common stock The Company has 500,000,000 shares of common stock authorized, of which 48,923,276 shares were issued and outstanding as of December 31, 2023. Common stockholders are entitled to one vote for each share of outstanding common stock held at all meetings of stockholders and written actions in lieu of meetings. Common stockholders are entitled to receive dividends for each share of outstanding common stock, if and when declared by the Board. No dividends have been declared or paid by the Company through December 31, 2023. During 2022, prior to the IPO, the Company issued 1,559,780 shares of common stock at $2.00 per share for gross proceeds of $ 3,119,560 . The Company incurred $ 255,965 in cash issuance costs and is required to issue 120,491 shares of common stock to the placement agent with an initial fair value of $ 240,982 . In October 2022, the Company amended its agreement with the placement agent for the shares issued from November 2021 through the first nine months of 2022. The shares of common stock issuable to the placement agent was reduced from 120,491 shares to 57,250 shares. The fair value of the 57,250 shares issuable to the placement agent as of December 31, 2022 was $ 90,455 . The fair value of the 57,250 shares issuable to the placement agent just prior to settlement in March 2023 was $ 75,570 , resulting in a change in fair value of share liability of $ 14,885 for the three months ended March 31, 2023. In March 2023, the Company settled this share liability by issuing 57,250 shares of common stock. In November 2022, the Company was required to issue shares of common stock with a then fair value totaling $ 50,000 to a consultant. The fair value of the 12,500 shares issued in August 2023 was $ 18,125 . The resulting change in fair value income of the share liability was $ 31,875 for the year ended December 31, 2023. In November 2022, the Company completed its IPO, selling an aggregate of 1,250,000 shares of common stock at a price to the public of $ 4.00 per share, not including 187,500 shares of common stock issuable pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock. The Company received net proceeds from the IPO, after deducting underwriting discounts and commissions but before deducting offering costs, of approximately $ 3.8 million. 81 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) In February 2023, the Company was required to issue an aggregate of 100,000 shares of common stock to two consultants. The Company determined that the fair value of these two awards was $ 1.55 and $ 1.90 per share, respectively, for a total value of $ 172,500 . The fair value of these shares issued in August 2023 to the two consultants was $ 145,000 . The resulting change in fair value income of the share liability was $ 27,500 for the year ended December 31, 2023. In March 2023, the Company was required to issue an aggregate of 100,000 shares of restricted common stock pursuant to a settlement agreement that vests immediately. The Company determined that the fair value of this award was $ 0.94 per share for a total value of $ 93,700 . The fair value of these shares issued in August 2023 was $ 145,000 . The resulting change in fair value of the share liability expense was $ 51,300 for the year ended December 31, 2023, respectively. In March 2023, an officer and scientific advisor of the Company exchanged an aggregate of 3,000,000 shares of ASP Isotopes Inc. common stock for 2,500 shares of Enlighted Isotopes convertible preferred stock. In conjunction with the exchange, Enlighted Isotopes transferred the common shares of ASP Isotopes Inc. to ASP Isotopes and then ASP Isotopes immediately cancelled all 3,000,000 shares. The Company will report the non-controlling interest of future net income or loss on the consolidated balance sheet and statement of operations and comprehensive loss. As of December 31, 2023, negligible activity has been recorded for Enlighted Isotopes. In March 2023, the Company’s non-employee board members agreed to receive the 2022 cash director fees totaling $ 45,000 in shares of common stock. As of December 31, 2023, these shares had yet to be issued. In March 2023, the Company issued 3,164,557 shares of the Company’s common stock at a purchase price of $ 1.58 per share and warrants to purchase up to an aggregate of 3,164,557 shares of its common stock with an exercise price of $ 1.75 per share for gross proceeds of $ 5,000,000 . The Company incurred $ 506,390 in cash issuance costs and issued warrants to purchase up to an aggregate of 221,519 shares of common stock with an exercise price of $ 1.975 per share to the placement agent with an initial fair value of $ 179,116 . In May 2023, the Company was required to issue an aggregate of 100,000 shares of restricted common stock pursuant to a consultant. The Company determined that the fair value of this award was $ 0.65 per share for a total value of $ 65,100 . The fair value of these shares issued in November 2023 was $ 152,000 . The resulting change in fair value of the share liability expense was $ 86,900 for the year ended December 31, 2023. In May 2023, the Company was required to issue an aggregate of 50,000 shares of restricted common stock pursuant to a consultant. The Company determined that the fair value of this award was $ 0.62 per share for a total value of $ 30,900 . The fair value of these shares issued in November 2023 was $ 76,000 . The resulting change in fair value of the share liability expense was $ 45,100 for the year ended December 31, 2023. In July 2023, the Company was required to issue an aggregate of 150,000 shares to consultants. The Company determined that the fair value of these awards was $ 1.21 for a total value of $ 181,500 . The fair value of these shares issued in August 2023 was $248,000 . The resulting change in fair value of the share liability expense was $ 66,500 for the year ended December 31, 2023. In August 2023, the Company was required to issue an aggregate of 100,000 shares of restricted common stock pursuant to consultants. The Company determined that the fair value of this award was $ 1.26 per share for a total value of $ 126,000 . The fair value of the shares issued in August was $ 145,000 . This resulted in a change in fair value expense of the share liability of $ 19,000 for the year ended December 31, 2023. In October 2023, the Company entered into Securities Purchase Agreements with certain institutional and other accredited investors and certain directors of the Company to issue and sell an aggregate of 9,952,510 shares of the Company’s common stock, for aggregate cash consideration of $ 9,129,495 , as follows: (i) 8,459,093 shares to investors at a purchase price per share of $0.9105, (ii) 1,190,239 shares to investors at a purchase price per share of $0.9548, and (iii) 303,178 shares to directors at a purchase price per share of $0.96 . The Company incurred issuance costs equivalent to 5% of the gross proceeds from new investors which was settled in stock through the issuance of 472,582 shares to the placement agent and additional cash issuance costs totaling $ 57,083 . Activity of the share liabilities for the year ended December 31, 2023 is as follows: Share Liability as of December 31, 2022 New Share Liabilities in 2023 Mark to Market Adjustments in 2023 Liabilities Settled in 2023 Share Liabilities as of December 31, 2023 Share liabilities originated in 2022 $ 140,455 $ - $ ( 46,760 ) $ ( 93,695 ) $ - Share liabilities originated in 2023 669,700 241,300 ( 911,000 ) $ - $ 140,455 $ 669,700 194,540 ( 1,004,695 ) $ - 82 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) Common Stock Warrants In September 2021, the Company issued warrants to purchase 7,230,822 shares of common stock at an exercise price of $ 0.01 per share for no cash consideration to two parties for their field of knowledge related to the technical operations of the Company. These warrants were to expire in September 2023 . The Company determined that the fair value of common stock was $ 0.25 per share. The fair value of these warrants was initially determined to be $ 1,735,841 and was recorded as general and administrative expense. In January 2022, these warrants were net share settled into 7,194,847 shares of common stock per the terms of the underlying warrant agreements. The fair values of the warrants to purchase 3,386,076 shares of common stock issued in the year ended December 31, 2023 were estimated based on the Black-Scholes model, using the following assumptions: Expected volatility 60.3 % Weighted-average risk-free rate 3.44 % Expected term in years 5.5 Expected dividend yield 0 % 13. Stock Compensation Plan Equity Incentive Plan In October 2021, the Company adopted the 2021 Stock Incentive Plan (“2021 Plan”) that provided for the issuance of common stock to employees, nonemployee directors, and consultants. Recipients of incentive stock options are eligible to purchase shares of common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The 2021 Plan provided for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock awards and stock appreciation rights. The maximum contractual term of options granted under the 2021 Plan is ten years. The maximum number of shares initially available for issuance under the 2021 Plan was 6,000,000 . No further options were available to be issued under the 2021 Plan. In November 2022, the Company adopted the 2022 Equity Incentive Plan (“2022 Plan”) that provides for the issuance of common stock to employees, nonemployee directors, and consultants. Recipients of incentive stock options are eligible to purchase shares of common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The 2022 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock awards and stock appreciation rights. The maximum contractual term of options granted under the 2022 Plan is ten years. The number of shares of the Company’s common stock reserved for issuance under the 2022 Plan is equal to 5,000,000 , subject to an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2023 and continuing until, and including, the fiscal year ending December 31, 2033, equal to the lesser of 5% of the number of shares of the Company’s common stock outstanding on such date or an amount determined by the Company’s board of directors. As of December 31, 2023, 488,606 shares remain available for future grant under the Plan. Stock Options The following table sets forth the activity for the Company’s stock options during the periods presented: Number of Options Weighted- Average Exercise Price per Share Weighted Average Remaining Contractual Term (in Years) Aggregate Intrinsic Value Outstanding as of December 31, 2021 400,000 $ 0.25 9.8 $ 700,000 Granted 2,751,000 $ 2.00 Forfeited ( 250,000 ) $ 0.25 Outstanding as of December 31, 2022 2,901,000 $ 1.91 9.4 $ 199,500 Granted - $ - Forfeited ( 135,000 ) $ 2.00 Outstanding as of December 31, 2023 2,766,000 $ 1.91 8.4 $ 231,000 Exercisable as of December 31, 2023 1,662,450 $ 1.88 8.3 $ 172,545 Vested or expected to vest as of December 31, 2023 2,766,000 $ 1.91 8.4 $ 231,000 83 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) The fair values of the options granted were estimated based on the Black-Scholes model, using the following assumptions: Year Ended December 31, 2022 Expected volatility 62.6 % – 69.5 % Risk-free interest rate 1.68 % – 3.25 % Expected term in years 5.5 – 6.3 Expected dividend yield — % For the year ended December 31, 2022, the Company granted 2,751,000 options with an exercise price of $ 2.00 per share, of which 288,000 options were issued to nonemployee directors that vest in April 2023 and the remaining options generally vest monthly over three years. The weighted average grant date fair value of options granted during 2022 was $ 1.18 . No options were granted in the year ended December 31, 2023. The Company recorded stock compensation from options of $ 973,844 and $ 923,581 for the year ended December 31, 2023 and 2022, respectively. As of December 31, 2023, there was $ 1,268,758 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan, which is expected to be recognized over a weighted average period of approximately 1.3 years. Stock Awards In October 2021, the Company issued 1,500,000 shares of restricted common stock to its Chief Executive Officer. The number of shares that vest is dependent on achieving certain performance conditions and dependent market conditions upon the third anniversary from the date of grant. The Company determined that the fair value of this award was $ 0.25 per share for a total value of $ 375,000 . Upon the performance condition being considered probable, which has not been met as of December 31, 2023, the Company will recognize stock compensation expense over the remaining measurement period. In October 2021, the Company issued 600,000 shares of restricted common stock to a consultant who is also a member the board of directors, that vest annually over three years. The Company determined that the fair value of this award was $ 0.25 per share for a total value of $ 150,000 . The consulting agreement also included future awards of common stock for continued service, however in March 2023, the consulting agreement was amended and these future awards were cancelled. In July 2022, the Company issued 600,000 shares of restricted common stock to a consultant who is also a member the board of directors, that vest quarterly over one year. The Company determined that the fair value of this award was $ 2.00 per share for a total value of $ 1,200,000 . In July 2022, the Company issued 100,000 shares of restricted common stock to a consultant, that vests on the one-year anniversary of the grant. The Company determined that the fair value of this award was $ 2.00 per share for a total value of $ 200,000 . In November 2022, the Company issued 3,000,000 shares of restricted common stock to certain employees and directors, that vest two to four years from the date of the grant. The Company determined that the fair value of these awards was $ 2.63 per share for a total value of $ 7,890,000 . In December 2022, the Company issued an aggregate of 1,550,000 shares of restricted common stock to its Chief Executive Officer and Chairman, Interim Chief Financial Officer and a director that vest quarterly over one year from the date of the grant. The Company determined that the fair value of these awards was $ 1.58 per share for a total value of $ 2,449,000 . In March 2023, the Company issued an aggregate of 1,256,750 shares of restricted common stock to its Chief Executive Officer and Chairman and a director that vests quarterly over one year from the date of the grant. The Company determined that the fair value of these awards was $ 1.80 per share for a total value of $ 2,262,150 . In August 2023, the Company issued 300,000 and 200,000 shares of restricted common stock pursuant to one employee and one director for employment services, respectively. The Company determined that the fair value of these awards was $ 0.55 per share and $ 1.22 per share, respectively for a total combined value of $ 409,000 . In October 2023, the Company was obligated to issue $ 100,000 to a board member for his services. These shares were not awarded as of December 31, 2023, however, stock based compensation was recorded totaling $ 100,000 . 84 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) The Company recorded stock compensation from stock awards totaling $ 7,669,955 and $ 1,075,732 for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, there is $ 5,806,129 of unrecognized compensation cost related to the non-vested portion of stock awards that is expected to be recognized over the next 1.5 years. The following table summarizes awards and vesting of restricted common stock: Number of Shares Weighted Average Grant Date Fair Value Per Share Unvested as of December 31, 2021 2,100,000 $ 0.25 Granted 5,250,000 $ 2.24 Vested ( 350,000 ) $ 1.00 Unvested as of December 31, 2022 7,000,000 $ 1.75 Granted 1,756,750 $ 1.52 Vested ( 4,267,564 ) $ 1.84 Unvested as of December 31 2023 4,489,186 $ 1.42 Stock-based Compensation Expense Stock-based compensation expense for all stock awards recognized in the accompanying consolidated statements of operations is as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Selling, general and administrative $ 8,378,875 $ 1,798,043 Research and development 364,924 201,270 Total $ 8,743,799 $ 1,999,313 14. Net Loss Per Share The Company has reported losses since inception and has computed basic net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted-average number of shares of Common Stock outstanding for the period, without consideration for potentially dilutive securities. The Company computes diluted net loss per share of Common Stock after giving consideration to all potentially dilutive shares of common stock, including options to purchase common stock and warrants to purchase common stock, outstanding during the period determined using the treasury-stock and if-converted methods, except where the effect of including such securities would be antidilutive. Because the Company has reported net losses since inception, these potential shares of Common Stock have been anti-dilutive and basic and diluted loss per share were the same for all periods presented. The following table sets forth the computation of basic and diluted net loss per share: Year Ended December 31, 2023 Year Ended December 31, 2022 Numerator: Net loss attributable to ASP Isotopes shareholders $ ( 16,286,234 ) $ ( 4,945,139 ) Denominator: Weighted average common stock outstanding, basic and diluted 33,066,708 26,793,745 Net loss per share, basic and diluted $ ( 0.49 ) $ ( 0.18 ) 85 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) The following table sets forth the potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive: Year Ended December 31, 2023 Year Ended December 31, 2022 Options to purchase common stock 2,766,000 2,901,000 Restricted stock 4,489,186 7,000,000 Warrants to purchase common stock 3,386,076 — Total shares of common stock equivalents 10,641,262 9,901,000 15. Income Taxes The components of net loss before taxes are as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Domestic $ ( 12,892,377 ) $ ( 3,205,342 ) Foreign ( 3,407,882 ) ( 1,739,797 ) Total net loss before taxes $ ( 16,300,259 ) $ ( 4,945,139 ) The effective tax rate of the Company’s provision for income taxes differs from the federal statutory rate for the year ended December 31, 2023 and 2022 as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Tax computed at federal statutory rate 21.00 % 21.00 % Earnings in jurisdictions taxed at rates different from the statutory U.S. federal tax rate ( 0.58 )% ( 5.89 )% Non-deductible stock compensation expense ( 11.19 )% — % Permanent differences 0.24 % 0.64 % Other ( 2.44 )% 2.98 % Valuation allowance ( 7.00 )% ( 18.73 )% Income tax expense 0.03 % — Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards. Significant components of deferred tax assets (liabilities) are as follows: December 31, 2023 2022 Deferred tax assets: Net operating loss carryforwards $ 2,321,339 $ 496,751 Capitalized R&D costs 31,622 50,289 Share-based compensation 3,644 418,019 Accruals and reserves 12,647 — Right-of-use lease liability 276,134 243,113 Total deferred tax assets 2,645,386 1,208,172 Deferred tax liabilities: Property and equipment, net ( 256,315 ) — Right-of-use lease asset ( 339,850 ) ( 230,550 ) Total deferred tax liabilities ( 596,165 ) ( 230,550 ) Total net deferred tax assets 2,049,221 977,622 Less: valuation allowance ( 2,159,799 ) ( 977,622 ) Net deferred taxes (liabilities) assets $ ( 110,578 ) $ — 86 Table of Contents ASP Isotopes Inc. Notes to Consolidated Financial Statements (continued) The Company recorded income tax income totaling $ 6,133 from the activities of PET Labs Pharmaceuticals for the two months ended December 31, 2023. The Company has no income tax expense due to operating losses incurred for the year ended December 31, 2022. The valuation allowance increased by $ 1,182,177 and $ 926,104 in 2023 and 2022, respectively, due to the increase in the net deferred tax assets by the same amount; primarily due to net operating loss carryforwards. As of December 31, 2023, the Company has federal, state and South Africa NOLs available of $ 5,993,571 , $ 332,933 and $ 2,271,489 , respectively, to offset future taxable income, if any, for federal and state income tax purposes. The state NOLs are carried forward indefinitely until used and never expire. Under the Tax Act, federal NOLs utilized are limited to 80% of taxable income in any year where taxable income is determined without regard to the NOL deduction itself. The Tax Act generally eliminates the ability to carry back any net operating loss to prior taxable years, while allowing unused net operating losses to be carried forward indefinitely. The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more likely than not recognition threshold to be recognized. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest and penalties on the Company’s balance sheets and has not recognized interest and/or penalties in the statements of operations and comprehensive loss for the years ended December 31, 2023 and 2022. Uncertain tax positions are evaluated based upon the facts and circumstances that exist at each reporting period. Subsequent changes in judgment based upon new information may lead to changes in recognition, derecognition, and measurement. Adjustments may result, for example, upon resolution of an issue with the taxing authorities or expiration of a statute of limitations barring an assessment for an issue. As of December 31, 2023 and December 31, 2022, there were no uncertain tax positions. Ownership changes, as defined in the IRC, may limit the amount of net operating loss carryforwards that can be utilized annually to offset future taxable income pursuant to IRC Section 382 or similar provisions. Subsequent ownership changes could further affect the limitation in future years. The Company has not completed a study to assess whether a change of control has occurred or whether there have been multiple changes of control since the Company’s formation due to the significant complexity and cost associated with such study and because there could be additional changes in control in the future. As a result, the Company is not able to estimate the effect of the change in control, if any, on the Company’s ability to utilize net operating loss and research and development credit carryforwards in the future. 16. Subsequent Events On March 7, 2024, the Company’s wholly owned subsidiary Quantum Leap Energy received gross proceeds of $ 20,550,000 through the issuance of Convertible Promissory Notes with a stated interest rate of 6 % for the first year and 8 % thereafter. The maturity date of the Convertible Promissory Notes is March 7, 2029 . The Convertible Promissory Notes automatically convert into common shares upon Quantum Leap Energy’s closing of an IPO or other qualifying public transaction at 80 % of the share price taking into consideration a valuation cap. On April 9, 2024, the Company received approximately $ 5,500,000 from the issuance of 3,164,557 shares of common stock upon the exercise of a warrant held by an institutional investor. In conjunction with the exercise of the warrants, the same investor received a new warrant to purchase 1,225,000 shares of common stock at $ 3.90 per share. This new warrant becomes exercisable 6 months after issuance and expires on the fifth anniversary of the initial exercise date . 87 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.