US NUCLEAR : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

Overview

The following Management’s Discussion and Analysis of Financial Condition and
Results of Operations (“MD&A”) is intended to help the reader understand US
Nuclear Corp, our operations and our present business environment. MD&A is
provided as a supplement to-and should be read in conjunction with-our
consolidated financial statements and the accompanying notes thereto contained
in “Item 8. Financial Statements and Supplementary Data” of this report on Form
10-K. This discussion contains forward-looking statements that reflect our
plans, estimates and beliefs. Our actual results may differ materially from
those anticipated in these forward-looking statements.

We were incorporated in Delaware on February 14, 2012, and on March 2, 2012, we
filed a registration statement on Form 10 to register with the U.S. Securities
and Exchange Commission as a public company. We were originally organized as a
vehicle to investigate and, if such investigation warrants, acquire a target
company or business seeking the perceived advantages of being a publicly held
corporation.

On April 18, 2012, Richard Chiang, then our sole director and shareholder,
entered into a Stock Purchase Agreement whereby Mr. Goldstein of US Nuclear Corp
purchased 10,000,000 shares of our common stock from Mr. Chiang, which
constituted 100% of our issued and outstanding shares of common stock. Mr.
Chiang then resigned from all positions. Subsequently, on May 18, 2012, the
Registrant appointed Mr. Chiang to serve as a member of the Board of Directors.
He resigned from this position on March 31, 2013.

Since our acquisition of Overhoff Technology in 2006, we have had discussions
with other companies in our industry for an acquisition. While we targeted
Overhoff due to its unique position in the tritium market, we had not commenced
an acquisition since our Overhoff Technology acquisition; we believe in part the
reason was due to lack of additional capital, our status as a privately-held
entity at the time, and focus on developing our own products. We will seek out
companies whom our management believes will provide value to our customers and
will complement our business. We will focus on diversifying our product line
into a larger range so that our customers and vendors may have a more expansive
experience in type, choice, options, price and selection. We also believe that
with a more diverse product line we will become more competitive as our industry
is intensely competitive.

Generally, our product concentration places a heavy reliance on our Overhoff
Technology division; however, in 2020 we derived 46.9% of our total revenues
from sales made by Overhoff and Optron to one customer. We expect to encounter a
continuation of this trend unless we are successful in diversifying our client
base, executing our acquisition strategy and experience increases in business
from our Technical Associates division.

Our international revenues were 23% of our total revenue in 2020. We expect this
to increase over time as we continue to field new orders inquires and engage new
customers overseas. We believe that Korea and China will likely be a larger
contributor to revenue within the next few years. While we maintain steady
growth domestically, the international side of our business may be a larger
component as nuclear technology and rapid development for clean energy grows
abroad. Additionally, the Company relies on continued growth and orders from
CANDU reactors (Canada Deuterium Uranium), and rapid development of the next
generation of nuclear reactors called Molten Salt Reactors, (MSR) and
Liquid-Fluoride Thorium Reactors (LFTR), all of which purchase tritium detection
and monitor products. There can be no assurances as to our growth projections
and our risk profile as we depend upon increased foreign customers for business.

For the next twelve months, we anticipate we will need approximately $5,000,000
in additional capital to fund our business plans. If we do not raise the
required capital we may not meet our expenses and there can be no assurance that
we will be able to do so and if we do, we may find the cost of such financing to
be burdensome on the Company. Additionally, we may not be able to execute on our
business plans due to unforeseen market forces such as lower natural gas prices,
difficulty attracting qualified executive staff, general downturn in our sector
or by competition as we operate in an extremely competitive market for all

of
our product offerings.

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Robert I. Goldstein, our President, Chief Executive Officer and Chairman of the
Board of Directors also maintains a position as President of Gold Team Inc., a
Delaware company that invests in industrial real estate properties for
investment purposes. He holds an 8% interest in Gold Team Inc. and spends
approximately 5 hours per week with affairs related to Gold Team Inc. The
Company leases its current facilities from Gold Team Inc. which owns both the
Canoga Park, CA and Milford, Ohio properties at an expense of $7,000 for each
facility per month.

On May 31, 2016, we entered into an Asset Purchase Agreement with Electronic
Control Concepts (“ECC”) whereby the Company purchased certain tangible and
intangible assets of ECC. ECC a small manufacturer of test and maintenance
meters for x-ray machines both medical and industrial. We acquired ECC to give a
boost to our current x-ray related product and hospital/medical product sales.

Results of Operations

For the year ended December 31, 2020 compared to the year ended December 31,
2019

Year Ended December 31, Change
2020 2019 $ %
Sales $ 1,752,976$ 3,540,387$ (1,787,411 ) -50.5 %
Cost of goods sold 1,278,469 1,605,447 (326,978 ) -20.4 %
Gross profit 474,507 1,934,940 (1,460,433 ) -75.5 %
Selling, general and administrative expenses 2,558,553 4,394,844 (1,836,291 ) -41.8 %
Loss from operations (2,084,046 ) (2,459,904 ) 375,858 -15.3 %
Other expense (1,454,057 ) (700,869 ) (753,188 ) -107.5 %
Loss before provision for income taxes (3,538,103 ) (3,160,773 ) 377,330 11.9 %
Provision for income taxes – – – –
Net income (loss) $ (3,538,103 )$ (3,160,773 )$ 377,330

Revenue for the year ended December 31, 2020 was $1,752,976 compared to
$3,540,387 for the year ended December 31, 2019. The decrease of $1,787,411 or
-50.5% is a result of an overall decrease in revenue across all subsidiaries due
to the Coronavirus pandemic. The revenue breakdown for the year ended December
31, 2020 is as follows:

North America 77 %
Asia (including Japan) 20 %
Other 3 %

Our gross margin for the year ended December 31, 2020 was 27.1% as compared to
54.7% for the year ended December 31, 2019. The decrease in gross margin is due
to a decrease in sales while cost of goods sold remained consistent.

General and administrative expense for the year ended December 31, 2020
decreased by $1,836,291 or 41.8% to $2,558,553 down from $4,394,844 for the year
ended December 31, 2019. The decrease is attributed to the Company’s overall
decrease in revenue and an effort to conserve cash.

Other expense for the year ended December 31, 2020 was $1,454,057, an increase
of $753,188 from $700,869 for 2019. Other expense consists of write down of
investments, interest expense, loss on issuance of convertible debenture,
amortization of debt discount, equity loss in investment.

Net loss for the year ended December 31, 2020 was $3,538,103 compared to net
loss of $3,160,773 for the year ended December 31, 2019.

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Liquidity and Capital Resources

Our operations have historically been financed by our majority stockholder. As
funds were needed for working capital purposes, our majority stockholder would
loan us the needed funds. During the year ended December 31, 2020, the Company’s
majority shareholder paid expenses on behalf of the Company of $40,000, loaned
an additional $520,600 to the Company and was repaid $616,801.. We anticipate
the growth of our business through the sales of shares of our common stock and
loans from our majority stockholder if necessary.

At December 31, 2020, total assets decreased by $1,086,128 or 30.7% from
$3,541,036 at December 31, 2019 due to a decrease in cash and accounts
receivable.

At December 31, 2020, total liabilities decreased by 14.8% to $1,607,748 from
$1,840,872 at December 31, 2019 due to a decrease in accrued liabilities and a
decrease in lines of credit balances.

Critical Accounting Policies

Our financial statements and related public financial information are based on
the application of accounting principles generally accepted in the United States
(“US GAAP”). US GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenues and expenses amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial

statements.

Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, “Income
Taxes.” ASC 740 requires a company to use the asset and liability method of
accounting for income taxes, whereby deferred tax assets are recognized for
deductible temporary differences, and deferred tax liabilities are recognized
for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion, or all of, the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of
enactment.

Under ASC 740, a tax position is recognized as a benefit only if it is “more
likely than not” that the tax position would be sustained in a tax examination,
with a tax examination being presumed to occur. The amount recognized is the
largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test,
no tax benefit is recorded. The adoption had no effect on the Company’s
consolidated financial statements.

We believe the following is among the most critical accounting policies that
impact our consolidated financial statements. We suggest that our significant
accounting policies, as described in our financial statements in the Summary of
Significant Accounting Policies, be read in conjunction with this Management’s
Discussion and Analysis of Financial Condition and Results of Operations.

We qualify as an “emerging growth company” under the JOBS Act. As a result, we
are permitted to, and intend to, rely on exemptions from certain disclosure
requirements. For so long as we are an emerging growth company, we will not

be
required to:

? have an auditor report on our internal controls over financial reporting

pursuant to Section 404(b) of the Sarbanes-Oxley Act;

? comply with any requirement that may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firm rotation or a

supplement to the auditor’s report providing additional information about the

audit and the financial statements (i.e., an auditor discussion and analysis);

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? submit certain executive compensation matters to shareholder advisory votes,

such as “say-on-pay” and “say-on-frequency;” and

? disclose certain executive compensation related items such as the correlation

between executive compensation and performance and comparisons of the CEO’s

compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth
company can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards. In other words, an emerging growth company can delay the adoption of
certain accounting standards until those standards would otherwise apply to
private companies. We have elected to take advantage of the benefits of this
extended transition period. Our financial statements may therefore not be
comparable to those of companies that comply with such new or revised accounting
standards.

We will remain an “emerging growth company” for up to five years, or until the
earliest of (i) the last day of the first fiscal year in which our total annual
gross revenues exceed $1 billion, (ii) the date that we become a “large
accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of
1934, which would occur if the market value of our ordinary shares that is held
by non-affiliates exceeds $700 million as of the last business day of our most
recently completed second fiscal quarter or (iii) the date on which we have
issued more than $1 billion in non-convertible debt during the preceding three
year period.

As an emerging growth company, the company is exempt from Section 14A and B of
the Securities Exchange Act of 1934 which require the shareholder approval of
executive compensation and golden parachutes.

The Company is an Emerging Growth Company under the JOBS Act of 2012, but the
Company has irrevocably opted out of the extended transition period for
complying with new or revised accounting standards pursuant to Section 107(B) of
the JOBS Act.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.

Contractual Obligations

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the
Company is not required to provide this information.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the
Company is not required to provide this information.

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