10QSB 1 nsolq12002.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [x] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2002 -------------------------------------------------------------------------------- [ ] Transition Report under Section 13 or 15(d)of the Exchange Act For the Transition Period from ________ to ___________ -------------------------------------------------------------------------------- Commission file number 000-31959 --------- NUCLEAR SOLUTIONS, INC. ---------------------------------------------- (Name of Small Business Issuer in its Charter) NEVADA 88-0433815 ------------------------ -------------------------------- (State of Incorporation) (IRS Employer Identification No.) 1050 Connecticut Ave., N.W. Ste.1000, Washington, D.C. 20036 ----------------------------------------------------- --------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, (202) 772-3133 -------------- 1530 East Commercial St. Meridian, ID 838642 ------------------------------------------------------------- Former Name, former address and former fiscal year if changed since last report Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or Such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Applicable only to issuers involved in bankruptcy proceedings during the preceding five years Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] Applicable on to corporate issuers State the number of shares outstanding of each of the issuer's class of common equity, as of the latest practicable date: Transitional Small Business Disclosure Format (Check One) Yes [ ] No [x] PART I. FINANCIAL INFORMATION Item 1. Financial Statements................................. 3 Balance Sheet....................................... 4 Income Statement....................................... 5 Statements of Cash Flows.............................. 6 Notes to Financial Statements........................ 7-13 Item 2. Management's Discussion and Analysis of Plan of Operation......................................... 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings................................... 20 Item 2. Changes in Securities and Use of Proceeds........... 20 Item 3. Defaults upon Senior Securities..................... 20 Item 4. Submission of Matters to a Vote of Security Holders................................. 20 Item 5. Other Information.................................... 20 Item 6. Exhibits and Reports on Form 8-K..................... 22 Signatures..................................................... 23 2 NUCLEAR SOLUTIONS, INC. FORM 10-QSB PART I-FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. (Unaudited) As prescribed by Item 310 of Regulation S-B, the independent auditor has reviewed these unaudited interim financial statements of the registrant for the three months ended March 31, 2002. The financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. The unaudited financial statements of registrant for the three months ended March 31, 2002, follow. 3 Nuclear Solutions, Inc. [formerly Stock Watch Man, Inc.] (a Development Stage Company) Balance Sheets
BALANCE SHEETS (unaudited) March 31, December 31, Assets 2002 2001 --------- ---------- Current assets: Cash and equivalents $ - $ 2,128 Prepaid consulting fees 127,500 150,000 --------- ---------- Total Current Assets 127,500 152,128 --------- ---------- Fixed assets, net 18,720 3,690 Acquired technology, net 78,300 82,650 --------- ---------- $ 224,520 $ 238,468 ========= ========== Liabilities and Stockholders' Equity Current liabilities Checks issued in excess of cash $ 502 $ - Accounts payable - 16,180 Accrued expenses 666,801 51,015 Accrued payroll - 26,568 Accrued executive compensation 982,492 917,942 Accrued interest 800 242 Notes payable 275,000 - --------- ---------- Total current liabilities 1,925,595 1,011,947 --------- ---------- Convertible debt - related party 19,000 29,000 Stockholders' equity (deficit): Preferred stock, $0.0001 par value, 10,000,000 shares authorized, zero shares issued and outstanding - - Common stock, $0.0001 par value, 100,000,000 shares authorized; 20,850,000 shares issued and outstanding as of 3/31/02 12/31/01 2,058 2,085 Additional paid-in capital 797,915 797,915 Deferred compensation (550,361) (253,125) (Deficit) accumulated during development stage (1,969,714) (1,349,354) ---------- ---------- (1,720,075) (802,479) --------- ----------- $ 224,520 $ 238,468 ========= ===========
The accompanying notes are an integral part of these financial statements. 4 Nuclear Solutions, Inc. [formerly Stock Watch Man, Inc.] (a Development Stage Company) (unaudited) Statement of Operations
STATEMENT OF OPERATIONS Three Months Ending February 27, 1997 March 31, (Inception) to ----------------------- March 31, 2002 2001 2002 ---------- ---------- -------------- Revenue $ - $ - $ - ---------- ---------- -------------- Expenses: Depreciation and amortization 5,041 15 9,810 Consulting fees 207,1345 - 700,134 Legal fees 50,000 - 75,000 Executive compensation - related party 204,925 - 869,742 General and administrative expenses 152,702 5,036 314,228 ---------- ---------- -------------- Total expenses 619,802 5,051 1,968,914 ---------- ---------- -------------- Other (expense): Interest expense - related party (558) - (800) ---------- ---------- -------------- Net (loss) $ (620,360) $ (5,051) $ (1,969,714) ============ =========== ============== Weighted average number of common shares outstanding 20,850,000 2,127,500 ============= ============ Net (loss) per share $ (0.03) $ (0) ============= ============
The accompanying notes are an integral part of these financial statements. 5 Nuclear Solutions, Inc. [formerly Stock Watch Man, Inc.] (a Development Stage Company) (unaudited) Statement of Cash Flows
STATEMENT OF CASH FLOWS Three Months Ending February 27, 1997 March 31, (Inception) to ----------------------- March 31, 2002 2001 2002 ---------- ---------- -------------- Net (loss) $ (620,360) $ ( 5,051) $(1,969,714) Depreciation & amortization 5,041 15 94,185 Shares issued for consulting services - - 443,000 Shares issued for prepaid consulting services - - 200,000 Shares issued for legal fees - - 5,000 Adjustments to reconcile net (loss) to net cash provided (used) by operating activities: (Increase) in prepaid consulting services 22,500 - (127,500) Increase in checks written in Excess of cash 502 - 502 Decrease in accounts payable (16,180) - - Increase in accrued expenses 515,,786 - 666,801 Decrease in accrued payroll (26,568) - - Increase in executive compensation 65,550 - 898,117 Increase in accrued interest 558 - 800 ----------- ----------- ----------- Net cash provided (used) by operating activities 45,829 (5,036) 211,191 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets (15,720) - (19,757) ----------- ----------- ------------ Net cash (used) by investing activities (15,720) - (19,757) ----------- ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES Increase in notes payable 275,000 - 275,000 Convertible debt - related party (10,000) - 19,000 Issuance of common stock - - 44,828 Donated capital - - 20,100 (Increase) in deferred compensation (297,237) - (550,362) ----------- ----------- ------------ Net cash (used) by financing activities (32,237) - (191,434) ----------- ----------- ------------- Net (decrease) increase in cash (2,128) (5,036) - Cash - beginning 2,128 11,419 - ----------- ----------- ------------ Cash - ending cash $ - $ 6,383 $ - =========== =========== ============ Supplemental disclosures: Interest paid $ - $ - $ - =========== =========== ============ Income taxes paid $ - $ - $ - =========== =========== ============ Non-Cash financing activities: Number of shares issued for consulting services - - 1,950,000 =========== =========== ============ Number of shares issued for legal services - - 100,000 =========== =========== ============ Number of shares issued to acquire technology - - 17,872,500 =========== =========== ============
The accompanying notes are an integral part of these financial statements. 6 Nuclear Solutions, Inc. [formerly Stock Watch Man, Inc.] (a Development Stage Company) Notes NOTE 1 - BASIS OF PRESENTATION The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the period ended December 31, 2001 and notes thereto included in the Company's Form 10-KSB. The Company follows the same accounting policies in the preparation of interim reports. Results of operations for the interim periods are not indicative of annual results. NOTE 2 - GOING CONCERN These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As at March 31, 2002, the Company has not recognized revenue to date and has accumulated operating losses of approximately $1,969,714 since inception. The Company's ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable operations. Management plans to raise equity capital to finance the operating and capital requirements of the Company. Amounts raised will be used for further development of the Company's products, to provide financing for marketing and promotion, to secure additional property and equipment, and for other working capital purposes. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. NOTE 3 - PREPAID CONSULTING FEES As of March 31, 2002, the Company had a consulting agreement valued at $200,000. Amortization expense totaled $22,500 for the three-month period ended March 31, 2002. 7 Nuclear Solutions, Inc. [formerly Stock Watch Man, Inc.] (a Development Stage Company) Notes NOTE 4 - FIXED ASSETS The Company purchased fixed assets in the amount of $15,720 during the three- month period ended March 31, 2002. Depreciation expense totaled $691 for the three-month period ended March 31, 2002. NOTE 5 - ACQUIRED TECHNOLOGY As of March 31, 2002, the Company had licensed technology designed to render nuclear waste products environmentally harmless for a stated value of $87,000. Amortization expense totaled $4,350 for the three-month period ended March 31, 2002. NOTE 6 - ACCRUED EXECUTIVE COMPENSATION The Company had an Employment Agreement with Paul M. Brown, it's president, whereby the Company is to pay Mr. Brown an annual base salary of $250,000. For the three-month period ended March 31, 2002, the amount accrued was $142,667 and at Mr. Brown's discretion will be paid back either in cash or common stock at a price of $1 per share. The Company had an Employment Agreement with Dr. Qi Ao, the vice president of research & development, whereby the Company is to pay Mr. Ao an annual base salary of $175,000 which began on November 15, 2001. Also, as part of the agreement he will receive a $50,000 signing bonus which is due by August 15, 2002 and has stock options. Mr. Ao has to choose either 170,000 shares of the Company's $0.0001 par value common stock or the option to purchase 200,000 shares of the Company's $0.0001 par value common stock at $0.05 per share exercisable over three years. For the three-month period ended March 31, 2002, the amount accrued was $50,000. The Company hired Patrick Herda as the vice president of business development whereby the Company is to pay Mr. Herda an annual base salary of $150,000. For the three-month period ended March 31, 2002, the amount accrued was $62,325 and at Mr. Herda's discretion will be paid back either in cash or common stock at a price of $1 per share. The Company appointed Bry Behrmann as the Executive Vice President of the Company and the director of licensing development whereby the Company is to pay Mr. Behrmann an annual amount of 150,000 shares of the Company's $0.0001 par value common stock valued at $337,500. For the three-month period ended March 31, 2002, the amount accrued was $337,500 to be paid back with common stock. 8 Nuclear Solutions, Inc. [formerly Stock Watch Man, Inc.] (a Development Stage Company) Notes The Company appointed 6 individuals to the Company's Executive Advisory Board for a term of 1 year. Each individual is to receive 20,000 shares of the Company's $0.0001 par value common stock valued at $63,000 and the option to purchase 20,000 shares of the Company's $0.0001 par value common stock at $1 per share exercisable over one year. For the three-month period ended March 31, 2002, the amount accrued was $378,000 to be paid back with common stock. The Company hired Adrian Joseph as the vice president of special projects whereby the Company is to pay Mr. Joseph an annual base salary of $144,000. For the three-month period ended March 31, 2002, the amount accrued was $12,000 and at Mr. Joseph's discretion will be paid back either in cash or common stock at a price of $1 per share. NOTE 7 - CONVERTIBLE DEBT - RELATED PARTY On November 24, 2001 the Company executed a promissory note with Global Atomics, Inc. (GAI), a company owned solely by Paul M. Brown, the Company's president, in the amount of $14,000. The note bears an interest rate of 10% per annum and is due upon demand. At the request of GAI, any unpaid balance of principal and interest due will be converted in common stock at a rate of $1 per share. During the three-month period ended March 31, 2002, the Company paid GAI $10,000. As of March 31, 2002, the amount due is $4,000 in principal and $183 in accrued interest. On December 11, 2001 the Company executed a promissory note with International Fission Fuels, Inc. (IFFI), a company owned solely by Paul M. Brown, the Company's president, in the amount of $15,000. The note bears an interest rate of 10% per annum and is due upon demand. At the request of IFFI, any unpaid balance of principal and interest due will be converted in common stock at a rate of $1 per share. As of March 31, 2002, the amount due is $15,000 in principal and $375 in accrued interest. NOTE 8 - NOTES PAYABLE On January 2, 2002, the Company executed a promissory note with DMB Enterprises (DMB) whereby DMB loaned $275,000. The note will accrue an interest rate of 10% per annum and will begin accruing interest on April 1, 2002. This note is due upon demand and may be paid back in cash or common stock at a price of $0.75 per share. 9 Nuclear Solutions, Inc. [formerly Stock Watch Man, Inc.] (a Development Stage Company) Notes NOTE 9 - STOCK OPTIONS The Company has reserved for issuance an aggregate of 120,000 shares of common stock to six members of the Company's Executive Advisory Board for a period of one year at an exercise price of $1 per share.
Three Months ended Three Months ended March 31, 2002 March 31, 2001 ------------------ ------------------- Weighted Weighted Average Average Exercise Exercise Shares Price Shares Price ------------------ ------------------- Outstanding at beginning of period -- -- -- -- Granted 120,000 $1.00 -- -- Exercised -- -- -- -- Lapsed or cancelled -- -- -- -- ------- ------ ------- ------ Outstanding at end of period 120,000 $1.00 -- -- ------- ------ ------- ------ Options exercisable at end of period 120,000 -- ------- ------ ------- ------ Options available for future grant -- -- Weighted average minimum fair value of options granted during the period -- --
10 Nuclear Solutions, Inc. [formerly Stock Watch Man, Inc.] (a Development Stage Company) Notes The Company accounts for stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", under which no compensation cost for stock options is recognized for stock options awards granted at or above fair market value. Had compensation expense for the Company's Stock Option Plan been determined based upon fair values at the grant dates for awards under those plans in accordance with Statement of Financial Accounting Standards No. 123 ("SFAS 123") "Accounting for Stock-Based Compensation", the Company's net loss available to common stockholders would have been increased to the pro forma amounts indicated below. Additional stock option awards are anticipated in future years.
Three Months ended Three Months ended March 31, 2002 March 31, 2001 ------------------ ------------------ Net loss available To common stockholders: As reported $(620,360) $(5,051) ========== ======== Pro Forma $(878,360) $(5,051) ========== ========
The weighted average minimum fair value of options granted during the three years in the three-month period ended March 31, 2002, estimated on the date of grant were determined using the Black-Scholes option-pricing model and the following assumptions: dividend yield of 0%, expected volatility of 109%, risk- free interest rate range of 5.81% to 6.09% depending on the grant date, and an expected life of five years. 11 Nuclear Solutions, Inc. [formerly Stock Watch Man, Inc.] (a Development Stage Company) Notes The following table presents summarized information about stock options outstanding as of March 31, 2002.
Options Outstanding Options Exercisable ------------------- ------------------- Weighted Average Weighted Exercise Number Remaining Weighted Number Average Prices Outstanding Contractual Average Outstanding Exercise at 3/31/01 Life Exercise at 3/31/01 Price Price --------------------------------------------------------------------------- $1.00 120,000 1 year $1.00 120,000 $1.00 ---------------------------------------------------------------------------
NOTE 10 - COMMITMENTS On January 23, 2002, the Company hired John Dempsey as the executive vice president whereby the Company is to pay Mr. Dempsey an annual base salary of $120,000. During the three-month period ended March 31, 2002, Mr. Dempsey was paid $22,585. On February 28, 2002, the Company entered into an agreement with Los Alamos National Labs to provide support services for our MCNP computer simulation effort. The term is for one year and the Company paid $30,000. On March 4, 2002, the Company entered into a Research and License Agreement with Industrial Mathematics, Ltd. (IIM) in exchange for $325,000. The initial payment due is $40,000 with nineteen monthly payments of $15,000. The expected term of the research is 12 - 15 months and if the project is delivered on time and is successful, then the Company will issue shares of its $0.001 par value common stock valued at $100,000 based on the fair market value of the shares. IIM will receive royalties of 4% of net sales of the products. On March 28, 2002, the Company executed an investment banking agreement with I- Capital Investment (IC). The Company paid $25,000 as a retainer and upon the close of a financial deal will pay IC $125,000. In additional, IC will receive 50,000 shares of the Company's $0.001 par value common stock. 12 Nuclear Solutions, Inc. [formerly Stock Watch Man, Inc.] (a Development Stage Company) Notes NOTE 11 - RELATED PARTY TRANSACTIONS On January 23, 2002, the Company hired John Dempsey as the executive vice president whereby the Company is to pay Mr. Dempsey an annual base salary of $120,000. During the three-month period ended March 31, 2002, Mr. Dempsey was paid $22,585. The Company does not lease or rent any property. Office space is provided without charge by the president of the Company. Such costs are immaterial to the financial statements and, accordingly, have not been reflected therein. The officers and directors are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. Plan of Operation ----------------- Nuclear Solutions, Inc. is a development stage company engaged in research and development, organizational efforts, raising capital, and commercialization of commercially unproven, development stage technologies intended for remediation and treatment of various forms of radioactive waste. This discussion provides an analysis of our plan of operation for the next twelve months. The Company's current Plan of Operation, as set forth in this annual report will reflect a change in the plan of operation since the death of the company President and CEO, on April 7, 2002. The company intends to apply significant effort over the next twelve months to commercialize certain technologies and related businesses that management believes to be within two years of revenue generation. The company also intends to continue research and development in to the Hypercon(TM) ADS system for nuclear waste transmutation. We anticipate that we will incur significant capital costs for the continued development and marketing of our technologies. We will require additional financing to continue our planned operations during 2002. Management believes that it will be able to raise the necessary financing to continue planned operations. There is no guarantee that we will be able to successfully raise the required funds for operations, or that such funds will be available on terms satisfactory to us. Any inability to raise additional funds would require that we significantly scale back our planned operations and would lengthen the period of time required to bring technologies to the marketplace. Nuclear Wastewater Treatment Nuclear Solutions will undertake effort for the marketing and industrial optimization of GHR technology over the next twelve months. The company has entered into a research and licensing agreement with The Institute for Industrial Mathematics, Inc (IIM), of Beer-Sheva, Israel for the acquisition of GHR technology in March 2002. GHR is a proprietary technology that is intended for the removal of radioactive contaminants from water. It is a filterless chemical-physical reactor that can extract Tritium and Deuterium from contaminated water. The agreement between Nuclear Solutions and The Institute for Industrial Mathematics stipulates a 12 to 15 month development timeframe whereby optimal parameters and system design for high volume industrial processing of nuclear wastewater through GHR are to be determined. 14 Management estimates that the cost to bring GHR technology to commercial readiness will be approximately $550,000. The company intends to fund the GHR program as a matter of priority over the next twelve months, financing is intended through the use of debt and/or equity financing. During the optimization phase for GHR, the company will actively seek out an operating partner for the commercialization phase and investigate business opportunities for the implementation of GHR worldwide. Upon completion of the commercial optimization phase, management intends to manufacture GHR wastewater processing equipment and begin treatment of contaminated water with an experienced operator in the field of nuclear waste remediation. Photodeactivation of Nuclear Waste Over the course of the next year the company will continue development of a photonuclear waste transmutation system, which is referred to as photodeactivation, or the Hypercon(TM) ADS Transmutation System. The development effort will focus on two different aspects of this technology: A.) Photonuclear waste transmutation without heat recovery is being developed for use as a nuclear waste treatment system that can process materials contaminated with certain levels and types of radioisotopes. The system could reduce the levels of radioisotope contamination present in many expendable items that are used in the handling and processing of nuclear materials. The company is currently preparing a joint venture partnership to develop specific solutions based on this technology for the nuclear industry. The joint venture partnership intends to generate revenues by initially being paid to develop specific photonuclear transmutation solutions via contract with an end-user. Over the course of the next twelve months the company will market this service to the nuclear industry. Upon the execution of a development contract, the company will require up-front and ongoing payments to function as a project developer for the customer. Upon completion of the development contract, the company will then collect revenues based on predetermined negotiations that are calculated upon percentage of cost savings or percentage of revenue formulas. B.) Photonuclear waste transmutation with heat recovery is being developed for use as an accelerator driven reactor system that could perform photonuclear transmutation of nuclear waste as well as reproduce usable energy in the form of electricity. This system is referred to as the HyperconTM ADS system. Hypercon ADS {trademark}, is a patented and patent-pending technique that uses photons to yield gamma-neutron and gamma-fission reactions which result in a change to the atomic structure of the target radioisotope. The process is referred to as photo-transmutation (atomic transmutation via photon induced gamma-neutron and gamma-fission reactions). The Company has a Three-phased strategy to bring the Hypercon(TM) ADS (accelerator driven system) Photodeactivation technology to the marketplace. The phases involve completion of the computer simulation process, design engineering of a pilot plant, and the construction of the pilot plant demonstration facility. 15 Phase 1 Computer Simulation The HyperconTM ADS Photodeactivation process is a Photon-induced nuclear waste transmutation process. Key performance data such as rates of transmutation, thermal heat liberated and overall efficacy with various mixed waste streams and reactor configurations needs to be determined before the design of a demonstration reactor system can begin. In order to benchmark the key data that is required in the least amount of time and with the most efficient use of capital. The company is employing specific nuclear modeling software called Monte Carlo N-Particle Transport Code (MCNPX) that is developed by Los Alamos National Labs. MCNPX was developed as a scientific research tool by the U.S. government to supplant the need for extensive empirical nuclear research experiments, in order to reduce the time and cost of generating preliminary data for nuclear research projects, reactor and weapons designs. MCNPX is regarded as the most comprehensive nuclear modeling tool in the industry. During the next twelve months the company will work with Los Alamos National Laboratories to upgrade and include several key functions into MCNPX code to accommodate the demands of modeling an exothermic, photonuclear transmutation process. When the code augmentation is completed further transmutation performance data can be generated. The completed MCNPX model will demonstrate the end results and key performance parameters of the HyperconTM ADS in a manner acceptable to the nuclear industry and the scientific community. The data obtained from this modeling effort will them be employed in the design and engineering for a planned 20 Megawatt Demonstration reactor. Management does anticipate that phase 1 will require at least twelve months to complete Phase 2-- Design Engineering of the Pilot Plant This phase involves design engineering for the construction of a prototype facility pilot plant to be used for demonstrations of the waste elimination and power generation capabilities of the Hypercon ADS processes. Upon completion of Phase 1, the company will then contract a professional nuclear engineering firm of the stature of General Electric to perform the design engineering of the pilot plant facility. Estimates for construction and engineering costs for the initial 20 Megawatt pilot plant are approximately US$50M to US$55M. This estimate is based on construction of a plant with an annual transmutation capacity of ten tons using construction/materials costs from existing, contemporary nuclear facilities. 16 Here is a brief breakdown of estimated costs: Engineering - US$4M to US$7M, based on contemporary experience. Linear Accelerator - US$5M based on contemporary data. Reaction Vessel - US$10M based on Canadian "slowpoke Reactor". Heat Recovery System - US$20M based on $1 per watt at 20 megawatts heat. Building - US$5M based on contemporary power industry estimates. Materials Handling - US$8M based on logistics tools in use at the Hanford, Washington nuclear facility. Phase 3-Licensing At the completion of Phase 2, the pilot plant facility design will be ready for licensing. The Nuclear Regulatory Commission (NRC) regulates licensing for this type of plant construction and operation. The primary business of the Company will be the licensing of its proprietary HyperconTM ADS photodeactivation process and plant design specifications to private industry and agencies of governments. In addition, professional services such as consulting, design, testing and validation will be offered to future Company clients. The Company also anticipates providing a broader and deeper selection of professional services including: Construction Engineering Support Construction Project Management Support On-going Operational Support Testing Training On-going Research and Development The Company may also enter into agreements with the US Department of Energy (and their foreign counterparts) for the neutralization of radioactive waste within the scope of their responsibility. The licensing phase is dependent upon several key factors that are outside of the twelve-month scope of this plan. During the next twelve months, the Company will need to raise sufficient funds in order to implement the HyperconTM ADS Phase I development plan. During the period of the plan, we do not anticipate any significant changes in the numbers of employees employed by us. However, the strategic acquisition of an operating company may unexpectedly increase the number of employees significantly in the next 12 months. We may incur substantial expenses associated with the development of our technologies. The amount and type of expenses incurred will vary depending on the technology being developed. We estimate requiring five million dollars of operating capital to sustain operations over the next twelve months. We have not generated any revenue from operations since our inception and we have not been profitable since our inception. Although we believe that we may recognize revenues during the next twelve months based on expressions of interest from third parties to purchase our design services, there can be no assurances as to when and whether we will be able to commercialize our products and technologies and realize any revenues. Our technologies have never been utilized on a large-scale commercial basis. 17 We expect that we will continue to generate losses until at least such time as we can commercialize our technologies, if ever. No assurance can be given that we can complete the development of any technology or that, if any technology is fully developed, it can be manufactured and marketed on a commercially viable basis. Furthermore, no assurance can be given that any technology will receive market acceptance. Being a development stage company, we are subject to all risks inherent in the establishment of a developing or new business. The implementation of Company's business development phases outlined above will be dependent on successful financing. Financing options may include a combination of debt and equity financing. Equity financing may result in a substantial equity dilution to existing shareholders. No assurance can be given that the Company's nuclear remediation technologies will be commercially successful. Forward-Looking Statements This Form 10-KSB includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated by reference in this Form 10-KSB which address activities, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), expansion and growth of the Company's business and operations, and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. However, whether actual results or developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, general economic market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control of the Company. This Form 10-KSB contains statements that constitute "forward-looking statements." These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as "intends", "believes," "anticipates," "expects," "estimates," "plans," "may," "will," or similar terms. These statements appear in a number of places in this report and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations for its limited history; (ii) the Company's business and growth strategies; (iii) the Internet and Internet commerce; and, (iv) the Company's financing plans. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those 18 projected in the forward- looking statements as a result of various factors. Factors that could adversely affect actual results and performance include, among others, the Company's limited operating history, dependence on key management, financing requirements, technical difficulties building a commercially feasible nuclear waste remediating device, government regulation, technological change and competition. Consequently, all of the forward-looking statements made in this Form 10-KSB are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements. 19 PART II-OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. The Company is not a party to any pending or threatened legal proceedings. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Recent Sales of Unregistered Securities During the first quarter of 2002, the Company offered and sold the following securities pursuant to a securities transaction exemption from the registration requirements of the Securities Act of 1933, as amended. On January 1, 2002, the Company issued 100,000 common shares to Gregory M. Wilson, Attorney at Law as a legal services retainer fee. The transaction was valued at $25,000. The shares issued above were issued in a private transactions pursuant to Section 4(2) of the Securities Act of 1933, as amended, (the "Securities Act"). These shares are considered restricted securities and may not be publicly resold unless registered for resale with appropriate governmental agencies or unless exempt from any applicable registration requirements. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted to a vote of the security holders, through the solicitation of proxies or otherwise, during the first quarter of the fiscal year covered by this report. ITEM 5. OTHER INFORMATION Change of Principal Executive Offices: The Company has moved its principal corporate offices from 1530 E. Commercial St., Meridian, Idaho to 1050 Connecticut Ave., Ste. 1000, Washington, D.C. 20036. Our new telephone number is (202) 772-3133. Our new fax number is (202)772-3101. 20 Appointment of Officers: The Company recently appointed the following individuals to the following Vice President offices. John Dempsey, Executive Vice President -------------------------------------- John Dempsey, 60, is responsible for general operations involving the Company's continuing development of the its proprietary HYPERCON(TM) ADS technology, the GHR technology and any other future applications of new or derivative technologies. Before joining Nuclear Solutions, Dempsey was the vice president of METALAST International, Inc., the world's leading supplier of proprietary computer- controlled anodizing technologies. Earlier, he served as president & CEO of U.S. Environmental Group, Inc., which provided hazardous waste remediation equipment and services to major oil companies, governmental, and other industrial concerns. Prior to that, Dempsey spent 21 years with Bechtel Power Corp., primarily managing construction and start up of major nuclear and fossil-fueled power projects worldwide. Dempsey graduated with a B.S. from the U.S. Naval Academy and was selected by Admiral Rickover to serve as a commissioned officer on nuclear submarines. He subsequently received certification from the U.S.N. Nuclear Power School, and then served aboard the U.S.S. Sargo and the U.S.S. Seadragon. Later, he earned certificates in Nuclear Engineering from the MIT and Georgia Tech. Dempsey is also registered with the State of California as a professional nuclear engineer and a professional mechanical engineer. Adrian Joseph,Ph.D., Vice President, Special Projects ----------------------------------------------------- Dr. Joseph, 49, is a Nuclear Physicist and the inventor of numerous patented nuclear and chemical technologies. He is highly regarded in the field of nuclear radiation shielding and encapsulation, and he was a consultant on the Chernobyl investigation team. Dr. Joseph has considerable experience advancing new technologies from concept to commercialization in both the private as well as public business sectors. He is a frequent contributor at various national and international forums. From May 1998 to April 2001 He was the President and Ceo of Nurecsell, Inc. a company founded on a proprietary high performance polymer based radiation shielding material invented by Dr. Joseph. From April 1997 to Present Dr. Joseph has served as the Chairman of Tresis International, which specializes in titanium ore refining technologies. Dr. Joseph was educated at the Israel Institute of Technology (Technion) and received a Ph.D. in Nuclear Physics in 1974. 21 Contracts and Agreements ------------------------ (a) On March 4, 2002 the company entered into a research and license agreement with the Institute of Industrial Mathematics in Israel for the licensing and commercial optimization of GHR technology. (b) On Feb 28, 2002 the company` entered into a support contract with Los Alamos National Laboratory to support the company's development of photonuclear transmutation technologies. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: None (b) Reports on Form 8-K. On April 11, 2002, the Company filed a Current Report on Form 8-K, Item 5 titled, "Other Events and Regulation FD Disclosure". 22 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: May 20, 2001 NUCLEAR SOLUTIONS, INC. /s/ John Dempsey /s/ Jackie Brown --------------------- ------------------ By: John Dempsey By: Jackie Brown Title: Chief Operating Officer Title: Secretary 23