Lightbridge Corporation — Q2 2014 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2014; financial statements are unaudited. Lightbridge develops nuclear fuel technology and provides nuclear consulting. During the period, all revenue came from consulting; the fuel-technology business generated no revenue.
Financial performance
| Metric | Q2 2014 | Q2 2013 | Six months 2014 | Six months 2013 |
|---|---|---|---|---|
| Revenue | $349,131 | $658,859 | $603,238 | $1,174,809 |
| Gross profit | $118,157 | $293,155 | $247,252 | $524,768 |
| Gross margin | 33.8% | 44.5% | 41.0% | 44.7% |
| Operating expenses | $1,773,868 | $1,287,365 | $3,337,273 | $2,812,416 |
| Net loss | $1,655,108 | $1,023,844 | $3,089,030 | $2,302,766 |
| Basic and diluted loss per share | $0.11 | $0.08 | $0.21 | $0.18 |
- Revenue declined about 47% in Q2 and 49% for the first half, primarily because of reduced work on the UAE’s FANR project. FANR and ENEC together supplied about 77% of first-half revenue in 2014, versus 100% in 2013.
- Q2 operating expenses rose about 38%; first-half expenses rose about 19%. First-half general and administrative expense increased to $2.28 million from $1.55 million, mainly reflecting higher payroll, benefits and professional fees. R&D expense decreased to $1.06 million from $1.26 million.
- Cash used in operations was $2.62 million for the first half, compared with $2.00 million in 2013. Cash and cash equivalents fell to $988,000 from $3.67 million at year-end 2013.
- At June 30, cash, restricted cash and marketable securities totaled about $1.56 million; working capital was about $1.45 million. Restricted cash was $556,000. Accounts payable and accrued liabilities were $855,000, up from $477,000 at year-end.
- The company reported no debt or credit lines. Total assets were $3.07 million and stockholders’ equity was $2.22 million, compared with $5.66 million and $5.18 million, respectively, at December 31, 2013.
Changes, outlook and risks
- Management estimated a current operating cash shortfall of approximately $300,000 per month and said additional capital would be needed in 2014. Potential sources included equity or debt offerings, bank financing, strategic alliances and new consulting contracts. The filing warns that funding may not be available on acceptable terms or at all.
- Management expected to spend $3–4 million on fuel-technology R&D over the next 12–15 months. The filing provides no formal earnings or revenue guidance.
- Fuel designs remained in development and had not been tested in an operating commercial reactor. Planned fabrication, irradiation testing, regulatory approvals and commercial partnerships remained important execution milestones. Management was seeking non-Russian sites for demonstration work amid U.S.-Russia tensions.
- ENEC’s consulting contract was extended through 2015 and FANR’s through December 31, 2014; work and revenue depend on agreed work plans. On July 24, after quarter-end, a consortium including Lightbridge was awarded a multi-year technical-support contract; scope was expected to be determined in Q4 2014.
- In Q2, Australia issued a patent covering the company’s multi-lobed metallic fuel rod design and fuel assemblies. Management cited preliminary modeling of improved fuel safety performance, but commercial performance remains unproven.
- Other material risks include reliance on a small number of clients and international operations, nuclear-industry regulation and public acceptance, competition, intellectual-property and export-control matters, and dependence on key personnel. Management reported effective disclosure controls, no material control changes, and no known legal proceedings expected to materially affect the company.
Investor verification priorities
- Verify the timing, amount and terms of new financing, and whether liquidity is sufficient given the stated monthly cash shortfall and planned R&D spending.
- Track consulting revenue, contract work plans and collections, especially the FANR and ENEC engagements and the post-quarter KHNP-related award.
- Confirm progress, funding partners, fabrication and test-site arrangements, and regulatory milestones for metallic-fuel development.
- Assess the concentration of revenue and receivables in UAE customers, including the ability to sustain operations if contract work declines.
- Review potential dilution: 15.07 million common shares were outstanding at June 30, with 2.28 million warrants and 2.14 million options also outstanding.