LIGHTBRIDGE Corporation — Q2 2012 Form 10-Q
Reporting period: Three and six months ended June 30, 2012; filed August 3, 2012. Lightbridge develops nuclear fuel technology and provides nuclear consulting. During the period, all revenue came from consulting; fuel technology generated no revenue.
Financial performance and position
| Metric | Q2 2012 | Q2 2011 | Six months 2012 | Six months 2011 |
|---|---|---|---|---|
| Revenue | $0.98 million | $2.29 million | $2.24 million | $3.87 million |
| Gross margin | $0.37 million (38%) | $0.72 million (31%) | $0.86 million (38%) | $1.20 million (31%) |
| Operating loss | $1.39 million | $1.30 million | $2.35 million | $3.04 million |
| Net loss | $1.31 million | $1.16 million | $2.11 million | $2.80 million |
| Net loss per share | $0.11 | $0.09 | $0.17 | $0.23 |
- Q2 revenue fell about 57%; the six-month decline was about 42%. Management attributed the decreases mainly to completion of a GCC contract milestone in 2011 and lower ENEC/FANR work.
- For the six months, lower revenue was partly offset by reduced general and administrative expense ($2.19 million versus $3.12 million). The net loss improved, but Q2 operating and net losses increased year over year.
- Six-month operating cash use was $2.96 million, similar to $2.97 million in 2011. Cash and cash equivalents fell to $0.83 million from $3.57 million at year-end; marketable securities were $4.98 million and restricted cash $0.55 million.
- At June 30, current assets were $7.58 million and current liabilities $0.93 million; stockholders’ equity was $7.36 million. No debt or interest expense was reported. Cash, cash equivalents and restricted cash plus marketable securities totaled about $6.36 million.
Outlook, developments and risks
- Management said available liquidity should cover anticipated cash requirements for the next 12 months at current operating levels, but also said additional capital would be needed in 2012 or 2013 to support the fuel-development plan, or sooner if consulting ceases to sustain operations. The filing gives no assurance that financing will be available on acceptable terms.
- Management estimated $3–4 million of external R&D spending over the next 12–15 months, contingent on agreements with Russian entities and a U.S. fuel fabricator. Average operating expenses were about $1.0 million per month, excluding that external R&D estimate.
- Fuel-development targets were full-scale metallic-fuel fabrication in 2013, experiments and model development during 2012–2016, commercial-reactor lead test assembly operation by end-2017, and expected qualification for uprates in 2021. These plans depend on partners, facilities, regulatory approvals and funding; they are not assured.
- Management reported continued negotiations and planning for irradiation testing, and a Ukrainian patent for its thorium-based VVER-1000 fuel design. The FANR agreement was extended to December 31, 2014. DOE export authorization for proposed Rosatom collaboration was still under review; commercial collaboration agreements remained uncompleted.
- Revenue is highly concentrated: substantially all consulting revenue came from ENEC and FANR in the UAE, and approximately 97% of receivables were due from those entities. Future work and revenue depend on agreed work plans and customer demand.
- Key risks include fuel performance and licensing uncertainty, reliance on Russian research and intellectual property, dependence on fabrication and utility partners, export controls, nuclear-industry sentiment, and the need for additional capital. Minimum operating lease payments totaled about $1.20 million through 2013. The company reported no known material legal proceedings and no material off-balance-sheet arrangements.
Key facts for investors to verify
- Whether ENEC/FANR work and any new consulting contracts can support cash needs as revenue remains concentrated and variable.
- Whether the stated $3–4 million R&D program can be funded and executed, including completion of Rosatom and U.S. fabrication agreements and DOE authorization.
- Whether cash burn, marketable-security values and financing access support the company’s stated 12-month liquidity assessment and 2012–2013 capital plans.
- Progress against irradiation, fabrication, licensing and commercial-reactor milestones, and the assumptions behind the 2021 qualification target.
- Potential dilution: 1,034,996 warrants and 1,668,898 options were outstanding at June 30, 2012, in addition to restricted shares.