Lightbridge Corporation — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; filed May 9, 2018. Financial statements are unaudited. Lightbridge is a development-stage nuclear-fuel technology company, with a smaller consulting business. Its principal fuel-development effort is conducted through Enfission, a 50/50 joint venture with Framatome formed in January 2018.
Financial highlights
| Metric | Q1 2018 | Q1 2017 / prior date |
|---|---|---|
| Revenue | $0 | $135,485 |
| Operating expenses | $3.13 million | $1.67 million |
| Net loss | $4.72 million | $1.75 million |
| Net loss attributable to common stockholders | $7.49 million; $0.39 per share | $1.79 million; $0.20 per share |
| Net cash used in operating activities | $1.85 million | $1.14 million |
| Cash and cash equivalents | $21.97 million | $4.52 million at December 31, 2017 |
| Total assets | $28.26 million | $6.95 million at December 31, 2017 |
| Total liabilities | $1.29 million | $1.15 million at December 31, 2017 |
No debt or debt credit lines were reported. Working capital was approximately $21.3 million. Gross margin was zero in Q1 2018 because there was no revenue; the prior-year gross margin was $50,122. Income tax expense was zero. No profit margin is meaningful given the absence of revenue and ongoing losses.
Cash increased by $17.46 million: financing provided $24.62 million, primarily from common- and preferred-stock issuances; operations used $1.85 million and investing used $5.31 million, including $5.22 million invested in Enfission. Lightbridge recorded $1.03 million of equity-method losses from Enfission and $0.40 million of income for services provided to the joint venture. A $0.98 million write-off of deferred financing costs related to termination of the Aspire agreement was recorded as financing cost.
Material changes versus the prior comparable period
- Revenue fell from $135,485 to zero as Lightbridge shifted resources toward fuel development and reported no consulting revenue.
- Operating expenses rose 87% to $3.13 million. General and administrative expense increased 84% to $2.22 million, principally from Enfission-related legal work and higher stock-based compensation; research and development expense rose 96% to $0.91 million.
- Net loss increased to $4.72 million, reflecting higher operating costs, the Enfission loss, and the deferred-financing-cost write-off. Common-stockholder loss also includes preferred dividends and a $2.62 million deemed dividend from the Series B beneficial conversion feature.
- Common shares outstanding increased from 12.74 million at year-end to 23.93 million at March 31, following equity offerings and warrant exercises. The company also issued $4.0 million of Series B preferred stock, convertible into common shares, with 7% dividends paid in kind.
Outlook, risks and other notable items
- Management projected $10–$12 million of research and development spending over the next 12–15 months, including funding Enfission. It also estimated a $0.5–$0.6 million monthly cash-flow shortfall for general and administrative costs. Management stated available resources were sufficient for the current 12-month operating budget from the financial-statement issuance date, while also anticipating a need for additional capital. Future funding could include equity, strategic contributions, or Department of Energy funding; availability is not assured.
- Management reported no significant consulting revenue expected in the near term. Commercialization remains years away: the company’s current schedule anticipates possible lead test assembly operation in a commercial reactor in 2023–2024 and initial reload orders as soon as 2026–2027, subject to development, testing, licensing, and financing.
- Testing plans depend in part on Norway’s Halden research reactor. A malfunctioning valve delayed its planned April 2018 restart, and its operating license was due to expire at the end of 2020. Loss of access could delay or impair development; Lightbridge was evaluating alternatives.
- Lightbridge expected to purchase approximately $10–$12 million of research and development services from Framatome through Enfission through December 2018, with spending potentially rising in 2019. Lightbridge said it funds the majority of Enfission’s required cash at present and expects to continue equity contributions.
- A new $75 million shelf registration became effective in March 2018; a new ATM program registered up to $50 million of common stock. No new-ATM sales occurred by quarter-end; the filing reports approximately $1.5 million raised under it after quarter-end through filing.
- An OSHA complaint by a former CFO was dismissed in January 2018 without findings against the company; the former CFO appealed in March, and Lightbridge said it would defend the appeal. The company reported no material legal proceedings. Disclosure controls were judged effective as of March 31, 2018.
Most important facts for investors to verify
- Whether planned financing and any DOE or strategic cost-sharing support materialize, and how much additional equity issuance or dilution is required.
- Actual cash consumption and Enfission contributions relative to the stated $10–$12 million development plan and projected operating shortfall.
- Progress on Halden restart, license renewal, and backup testing arrangements, and any resulting changes to the development and commercialization timetable.
- Enfission’s development, licensing, spending, and loss allocation under the joint-venture agreement, including Lightbridge’s ongoing funding obligations.
- Potential dilution from preferred-stock conversion and dividends, warrants, options, and the subsequent increase in shares authorized for the equity incentive plan.