Lightbridge Corporation — Q3 2013 Form 10-Q
Reporting period: Three and nine months ended September 30, 2013; filed November 7, 2013. Lightbridge develops nuclear fuel technology and provides nuclear consulting. All reported revenue came from consulting, principally UAE contracts with ENEC and FANR; fuel technology remained in research and development.
Financial performance and position
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Revenue | $169,156 | $591,355 | $1,343,964 | $2,829,893 |
| Gross margin | $40,376 (23.9%) | $220,940 (37.4%) | $565,143 (42.0%) | $1,082,013 (38.2%) |
| Operating expenses | $1,362,636 | $1,625,308 | $4,175,053 | $4,831,972 |
| Operating loss | $(1,322,260) | $(1,404,368) | $(3,609,910) | $(3,749,959) |
| Net loss | $(1,319,279) | $(1,247,648) | $(3,622,046) | $(3,359,117) |
| Basic and diluted loss per share | $(0.11) | $(0.10) | $(0.29) | $(0.27) |
- Revenue declined about 71% in Q3 and 53% year to date, primarily because less work was performed under the ENEC and FANR consulting projects. Management said work plans and resulting revenue under those agreements vary with client requests.
- Year-to-date gross margin improved despite lower revenue, reflecting lower consulting costs and less use of outside consultants. Q3 margin declined, in part because the company issued approximately $0.1 million of customer credits for prior consulting work.
- Year-to-date operating loss narrowed by about $0.14 million, as lower general and administrative expense more than offset increased research and development spending. Net loss increased, reflecting the sharp reduction in investment income: $(9,277) for the 2013 nine-month period versus $386,530 in 2012.
- At September 30, cash and cash equivalents were $362,597; marketable securities were $14,984; restricted cash was $554,731; and current assets totaled $2.01 million. Current liabilities were $282,339 and working capital was approximately $1.7 million. Total assets were $2.68 million and stockholders’ equity was $2.40 million. The filing reports no debt or interest expense.
- Cash used in operations was $3.29 million for the first nine months, compared with $3.69 million in 2012. Investing activities provided $1.46 million, mainly from sales of marketable securities; financing activities used $9,049. Cash and cash equivalents fell by $1.83 million to $362,597.
Outlook, developments, and risks
- Management estimated a current operating cash shortfall of approximately $475,000 per month absent new consulting revenue. After the subsequent equity offering, management said working capital should fund operations for the next 12 months; elsewhere it estimated funding through early 2015 based on current working capital, the offering, and projected requirements. Additional capital may be needed, particularly for fuel development.
- On October 25, 2013, after quarter-end, Lightbridge raised approximately $4.4 million gross and $3.9 million net by selling 2.5 million shares and warrants for 1.25 million shares. The warrants are exercisable after six months and one day at $2.30 per share, subject to stated terms.
- Management anticipated $2.5–$3.0 million of nuclear-fuel R&D spending over the following 12–15 months, contingent on new agreements with outside contractors. Its focus is metallic fuel for existing pressurized-water reactors; commercialization requires further testing, fabrication capability, licensing, and industry acceptance.
- On October 7, 2013, Lightbridge was selected as technical advisor on a two-year Lloyd’s Register/KHNP contract. On October 15, it signed an MOU with Babcock & Wilcox Nuclear Energy to explore a pilot-scale metallic-fuel fabrication facility; a definitive fuel-vendor agreement was a management goal, not a completed agreement.
- Principal risks include dependence on a small number of consulting clients and international revenue; uncertain consulting awards; capital needs; unproven fuel performance in commercial reactors; regulatory and fabrication hurdles; reliance on Russian research, permissions, and intellectual property; export approvals; nuclear-industry sentiment and energy-market economics; and dependence on key personnel. Management reported effective disclosure controls and no material legal proceedings known to it.
Important facts for investors to verify
- Whether the post-quarter $3.9 million net offering proceeds, cash burn, and management’s differing runway estimates adequately fund operations and planned R&D.
- Renewal and workload levels under ENEC and FANR agreements, and whether pending proposals or the KHNP subcontract produce meaningful revenue.
- Progress toward definitive fuel-development or fabrication agreements, required testing and licensing, and the associated cost and timing.
- Share-count and dilution details: the balance sheet reports 12,556,400 shares at September 30, while the cover reports 15,057,243 shares outstanding as of October 30; the subsequent offering issued 2.5 million shares plus warrants. The filing text does not explain the apparent share-count discrepancy clearly.