Lightbridge Corporation — Q1 2013 Form 10-Q
Business context and period. This unaudited report covers the three months ended March 31, 2013, compared with Q1 2012. Lightbridge develops nuclear fuel technology and provides nuclear consulting. All reported revenue came from consulting, primarily for UAE entities ENEC and FANR; the fuel technology business had no revenue.
Financial performance and position
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Revenue | $516,000 | $1.258 million |
| Gross margin | $232,000; 44.9% of revenue | $488,000; 38.8% of revenue |
| Operating expenses | $1.525 million | $1.442 million |
| Operating loss | $1.293 million | $954,000 |
| Investment and other income | $15,000 | $158,000 |
| Net loss | $1.279 million; $0.10 per share | $797,000; $0.06 per share |
| Cash used in operating activities | $1.062 million | $1.512 million |
At March 31, 2013, cash and cash equivalents were $1.083 million, marketable securities $1.613 million, and restricted cash $554,000. Current assets were $4.374 million and current liabilities $394,000, for working capital of approximately $3.981 million. Total assets were $5.020 million; stockholders’ equity was $4.627 million. The balance sheet reports no debt, and the company reported no interest expense. Cash and marketable securities are not all unrestricted: restricted cash supports credit cards and letters of credit.
Material changes versus Q1 2012
- Revenue fell about 59%, primarily because less work was performed under the ENEC and FANR consulting projects.
- Gross margin percentage improved, which management attributed in part to reduced use of outside consultants; gross profit nevertheless declined with lower revenue.
- Research and development expense increased to $643,000 from $497,000, while general and administrative expense decreased to $882,000 from $945,000. The lower stock-based compensation expense contributed to the G&A decline.
- Net loss increased about 61%. Lower investment income, associated with reduced cash and investment balances, also weighed on results.
- Operating cash outflow decreased from $1.512 million to $1.062 million. Cash and cash equivalents declined from $2.198 million at year-end 2012 to $1.083 million at quarter-end.
Outlook, commentary and risks
- Management estimated a current operating cash shortfall of approximately $200,000–$250,000 per month and said existing working capital should support operations at the current level for the next 12 months. A note to the financial statements separately says working capital is expected to sustain current operations until 2014.
- The company said it would seek new financing or other capital sources within six months, including equity, debt, bank financing, strategic alliances, or new consulting work. Proposals to prospective clients were pending; management could not determine whether or when contracts would be awarded.
- Management anticipated $3–$4 million in fuel-technology R&D spending over the next 12–15 months, contingent on new agreements with outside contractors. It also expected R&D activity to increase over the following two to three years, with a focus on testing and demonstrating metallic fuel technology.
- ENEC’s contract was extended through December 31, 2013, and FANR’s through December 31, 2014. Revenue depends on agreed work plans and may vary; substantially all consulting revenue was from these UAE relationships.
- Key risks include reliance on a small number of consulting clients and international operations; the need for additional capital; unproven fuel designs requiring testing, fabrication, and regulatory approval; and political, licensing, intellectual-property, and collaboration risks related to Russia. The DOE was still reviewing an export authorization request needed for a proposed Rosatom collaboration.
- The filing reported no known legal proceedings believed likely to have a material adverse effect, no material off-balance-sheet arrangements, and effective disclosure controls and internal control over financial reporting.
Most important facts for investors to verify
- Whether new consulting contracts or financing were secured, and how actual cash burn compares with the stated runway estimates.
- Whether the planned $3–$4 million R&D program was funded and undertaken as described.
- Subsequent ENEC and FANR work levels, contract renewals, and the company’s progress diversifying consulting revenue.
- Status of DOE export authorization and any Rosatom collaboration, as well as fuel testing, fabrication, and licensing milestones.
- Availability and restrictions on liquidity: quarter-end cash, marketable securities, and restricted cash should be assessed separately.