Lightbridge Corporation — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed March 25, 2021. Lightbridge is a pre-revenue nuclear-fuel technology developer focused on proprietary metallic fuel, with near-term development efforts shifting toward small modular reactors (SMRs).
Financial performance and position
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $14.57 million | $8.46 million |
| Operating loss | $14.50 million | $11.07 million |
| Net loss | $14.42 million | $10.68 million |
| Net loss per common share | $3.59 | $3.66 |
| Cash used in operations | $8.57 million | $6.67 million |
| Cash and cash equivalents at year-end | $21.53 million | $17.96 million |
- Gross margin and operating margin are not meaningful because the company reported no revenue.
- At December 31, 2020, total assets were $21.79 million, current liabilities were $4.58 million, and working capital was approximately $17.1 million. The company reported no debt or credit lines.
- Financing activities provided $12.35 million, principally from selling approximately 3.3 million common shares. Common shares outstanding rose from 3.25 million to 6.57 million during 2020.
- Cash was held in part in U.S. Treasury bills: approximately $13.0 million, with the remainder largely on deposit at a financial institution.
Changes and unusual items
- Net loss increased 35% year over year. General and administrative expense increased 44% to $8.31 million, including higher legal costs related to Framatome proceedings. R&D expense fell 67% to $0.89 million as work transitioned away from the Enfission joint venture and spending was constrained.
- FY2020 expenses included a $4.2 million Framatome settlement charge and $1.17 million of patent write-off and impairment expense. Management valued the patent costs at zero following delays to development and commercialization; year-end patents and trademarks, net, were $85,562.
- The company revised its 2019 comparative financial statements for an immaterial patent-amortization error. The revision increased 2019 net loss by $89,623 and reduced year-end 2019 patents and trademarks and equity by $653,596, including a cumulative adjustment.
- Operating cash use increased from 2019. The 2020 year-end cash balance was supported by equity proceeds; management estimated average operating cash outflow of about $0.8 million per month and expected $9–10 million of expenditures over the next 12–15 months.
Outlook, risks and contingencies
- Management and the auditor disclosed substantial doubt about the company’s ability to continue as a going concern. The company expects continuing losses and negative operating cash flows and says it needs substantial additional capital, potentially several hundred million dollars through commercialization. Funding depends on equity financing, strategic partners and significant U.S. government support; none is assured.
- Management said available working capital exceeded its then-current budget through the first quarter of 2022, but that forecast excludes substantial uncertainty around future R&D costs. Delaying or reducing spending could conserve cash but extend development timelines. The company planned to seek shareholder approval to increase authorized common shares because its existing authorization was largely committed.
- Lightbridge’s fuel remains in development and has not been demonstrated in a commercial reactor. Management’s estimates include potential power increases of up to 30% in suitably designed new reactors and lower potential increases in existing reactors; these are projections, not established commercial results. The company estimated initial commercial reload orders could be 15–20 years away, assuming adequate funding. It anticipated SMRs that might use its fuel could begin operating in 2029 and projected an LTA could be ready for a commercial reactor in the early 2030s.
- Key development risks include test-reactor access and capacity, the need for experimental data and regulatory approvals, unproven commercial-scale fabrication, the availability and infrastructure for higher-enrichment metallic uranium, securing fuel-vendor and utility partners, and competition from accident-tolerant fuels and other energy sources. The INL project schedule was delayed by COVID-19 restrictions and export-control matters.
- COVID-19 reduced R&D spending and contributed to severance-related G&A costs; its future effects on operations, funding access and liquidity were uncertain. The company received a DOE GAIN voucher for INL work and, after year-end, a second voucher for PNNL work; each voucher covered approximately three-quarters of its stated project value.
- In February 2021, Lightbridge settled its disputes with Framatome, agreed to pay approximately $4.2 million, and ended the Enfission joint venture. The payment was made March 15, 2021, and Enfission was dissolved March 23. The agreement resolved the dispute and preserved each party’s pre-existing intellectual-property rights.
- Management identified a material weakness in internal control over financial reporting related to accounting for patent amortization; disclosure controls were deemed ineffective. Management described a remediation plan but gave no assurance it would be successful. The auditor gave an unmodified opinion on the financial statements and separately highlighted the patent-impairment assessment as a critical audit matter.
Important facts for investors to verify
- Actual cash burn, committed R&D costs, and liquidity after the March 2021 settlement; confirm whether new financing or government support was secured.
- Whether shareholders approved the proposed increase in authorized common shares and the resulting potential dilution, including preferred-stock conversion rights and accrued dividends.
- Progress, funding and schedule for DOE laboratory work, irradiation testing, fuel fabrication, and partnerships with SMR developers, fuel vendors and utilities.
- Whether the company remediated the patent-accounting material weakness and improved its financial-reporting controls.
- Whether projected fuel economics and performance withstand testing, regulatory review, commercial-scale manufacturing costs, and competition from alternative fuels.