Lightbridge Corporation — Q2 2017 Form 10-Q
Business context and period: Unaudited results for the three and six months ended June 30, 2017, compared with the same 2016 periods. Lightbridge is developing proprietary nuclear fuel technology and also provides nuclear consulting; management says it has shifted resources away from consulting toward fuel development.
Financial performance and position
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $14,425 | $122,377 | $149,910 | $288,923 |
| Gross profit | $10,125 | $60,240 | $60,247 | $158,561 |
| Gross margin | 70% | 49% | 40% | 55% |
| Operating loss | $(1,506,809) | $(1,471,840) | $(3,129,332) | $(3,055,881) |
| Net loss | $(1,637,663) | $(1,297,205) | $(3,382,966) | $(1,631,911) |
- Q2 net loss attributable to common stockholders was $1,686,663, including $49,000 of preferred dividends; six-month loss attributable to common stockholders was $3,480,966, including $98,000 of preferred dividends. Basic and diluted loss per share were $(0.17) for Q2 and $(0.37) for the six-month period.
- Six-month operating cash use was $2.50 million; investing cash use was $115,172, principally for patents. Financing provided $3.03 million, primarily from common stock issuance. Cash and cash equivalents increased $407,283 to $3.99 million; restricted cash was $114,059.
- At June 30, cash and restricted cash totaled about $4.11 million, working capital was approximately $3.7 million, total assets were $6.75 million, and total liabilities were $1.00 million. The balance sheet reports no outstanding debt liability; accounts payable and accrued liabilities were $1.00 million.
Changes, outlook, and risks
- Revenue declined 88% in Q2 and 48% for the first half, mainly because of reduced work under consulting contracts, including one contract not renewed. Consulting was the only source of reported revenue; technology revenue was zero.
- Six-month net loss increased by $1.75 million year over year. The comparison was affected by $1.57 million of warrant revaluation income in 2016, absent in 2017, and $254,000 of 2017 financing costs, largely amortization of Aspire option-agreement costs. Operating expenses were nearly flat year over year.
- Management expects to spend $3 million to $5 million on nuclear-fuel R&D over the next 12–15 months, conditional on raising additional equity capital. It projects an average monthly cash-flow shortfall of $0.5 million to $0.6 million over the next 12 months and says expenses could be delayed or reduced if needed.
- Going concern: The company reports recurring losses and substantial doubt about its ability to continue as a going concern. Continued operations and planned development depend on obtaining additional financing; failure to do so could require a significant reduction or cessation of operations.
- Lightbridge continued discussions about a potential AREVA NP joint venture, subject to the pending AREVA NP/EDF transaction and approval by AREVA NP’s new ownership. Management’s development timetable anticipates licensing-plan work in 2018, testing and fabrication steps over 2018–2022, possible lead test assembly operation in 2023–2024, and potential initial reload orders in 2026–2027. These are projections, not commitments.
- After quarter-end, the company registered about $1.6 million of additional ATM capacity and reported approximately $0.7 million of net ATM proceeds from July 1 through the filing date. It also reported a July cashless exercise of 295,267 warrants for 286,584 common shares.
- Other risks include nuclear-fuel commercialization, customer and partner availability, financing limits, regulatory and intellectual-property risks, and competition. The filing describes a former CFO’s OSHA retaliation complaint and says the company intends to defend the claims; it also states that the company was not involved in any material legal proceedings.
Important facts for investors to verify
- Availability, timing, and terms of additional financing, including ATM capacity and Aspire Capital registration and share-issuance limits.
- Whether the AREVA NP transaction and proposed joint venture proceed, and the extent of any partner or utility funding commitments.
- Cash burn, R&D spending, and the company’s ability to maintain liquidity given its disclosed going-concern uncertainty.
- Consulting revenue trends and the assumptions underlying the long-dated fuel-development, licensing, and commercialization schedule.
- Potential dilution: common shares outstanding were 9,911,864 at June 30; the filing reports 10,738,905 outstanding as of July 31, 2017. It also reports Series A preferred stock accruing dividends at 7% annually and outstanding warrants and options.