Lightbridge Corporation — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2015. Lightbridge develops nuclear fuel technology and provides nuclear-industry consulting. During the reported periods, all revenue came from consulting; the technology segment generated no revenue.
Financial performance
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $298,162 | $349,131 | $422,057 | $603,238 |
| Gross profit (margin) | $22,500 (8%) | $118,157 (34%) | $89,003 (21%) | $247,252 (41%) |
| Operating expenses | $1,503,522 | $1,773,868 | $2,646,645 | $3,337,273 |
| Operating loss | ($1,481,022) | ($1,655,711) | ($2,557,642) | ($3,090,021) |
| Net loss | ($1,481,621) | ($1,655,108) | ($2,560,593) | ($3,089,030) |
| Basic and diluted loss per share | ($0.08) | ($0.11) | ($0.14) | ($0.21) |
Six-month operating cash use was $1.76 million, versus $2.62 million in 2014. Investing cash use was $50,215, primarily for patent costs; financing cash use was $42,421, including ATM setup costs. Cash and cash equivalents were $2.37 million at June 30, 2015, down from $4.22 million at year-end; restricted cash was $326,000. Current assets were $3.15 million and current liabilities $453,000, yielding working capital of about $2.70 million. The company reported no debt or bank credit lines.
Changes and drivers
- Six-month revenue declined 30%, mainly from lower work under ENEC and FANR contracts; increased revenue from another customer partly offset the decline. Q2 revenue fell 15% year over year.
- Six-month gross margin fell to 21% from 41%; management attributed the reduction in part to $0.2 million of stock-based compensation allocated to consulting costs. Q2 margin declined to 8% from 34% for the same reason, alongside higher consulting service costs.
- Six-month R&D expense declined to $608,000 from $1.06 million, while G&A declined to $2.04 million from $2.28 million. Lower labor and other costs were partly offset by higher stock-based compensation.
- Stock-based compensation increased to approximately $782,000 for the first half, compared with $125,000 a year earlier.
Liquidity, outlook and risks
- Management stated that the company’s current working capital and projected cash position were not sufficient to fund operations for the next 12 months. Monthly operating cash shortfall averaged about $300,000. Management was pursuing cost reductions and additional financing and said it expected the ATM and potential financing to provide sufficient working capital; availability was not assured.
- The June 2015 ATM agreement permits sales of up to approximately $0.5 million of common stock. No ATM shares had been sold through the filing date. The company also identified equity financing, strategic alliances, and new consulting contracts as potential funding sources.
- Lightbridge expected to spend approximately $3 million on nuclear-fuel R&D over the next 12–15 months, with development spending expected to increase over the following two to three years. There is no formal earnings or revenue guidance in the filing.
- ENEC’s contract was extended through 2015 and FANR’s through December 31, 2016. Future work and revenue depend on agreed work plans. The company disclosed customer and geographic concentration: substantially all revenue was international, and ENEC/FANR represented about 60% of Q2 2015 revenue.
- The fuel program targets up to a 10% power uprate and a 24-month operating cycle. A July 8, 2015 agreement with Norway’s IFE provides for Halden irradiation testing; initial testing was expected to begin in 2017, with commercial-reactor lead test assemblies targeted around 2021. These are forward-looking plans and depend on technical, regulatory, funding, and partner execution.
- The company was winding down its Moscow office, expected to be completed in 2015. It cited risks including financing needs, fuel commercialization and licensing, competition, nuclear-industry demand and regulation, international operations, and retention of specialized personnel.
- A former CFO filed state-court and OSHA complaints alleging defamation, unpaid leave, and retaliation. The state complaint sought at least $1 million in compensatory damages, $1 million in punitive damages, and other amounts; the OSHA complaint did not specify damages. Lightbridge said it believed the claims were without merit and would defend itself.
Important facts for investors to verify
- Cash burn, working-capital runway, and the availability and adequacy of financing, including the limited $0.5 million ATM capacity and any contemplated additional financing.
- Renewals, work plans, revenue levels, and collections under ENEC, FANR, and other consulting arrangements, given declining revenue and customer concentration.
- Progress, funding, regulatory approvals, and schedule for fuel fabrication and irradiation testing, including the targeted 2021 lead test assembly timeline.
- Potential dilution from outstanding warrants and options, and the impact of elevated stock-based compensation on reported costs and margins.
- Developments and potential financial effects of the former CFO’s litigation and OSHA complaint.