LIGHTBRIDGE Corporation — Q3 2012 Form 10-Q
Reporting period: Three and nine months ended September 30, 2012; filed November 9, 2012. Lightbridge develops nuclear fuel technology and provides nuclear consulting. All reported revenue came from consulting; fuel technology remained in development.
Financial performance and position
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Revenue | $591,355 | $1,652,538 | $2,829,893 | $5,523,181 |
| Gross margin | $220,940; 37% | $804,473; 49% | $1,082,013; 38% | $2,006,473; 36% |
| Operating loss | $(1,404,368) | $(1,225,276) | $(3,749,959) | $(4,269,728) |
| Net loss | $(1,247,648) | $(1,168,785) | $(3,359,117) | $(3,969,456) |
| Basic and diluted loss per share | $(0.10) | $(0.09) | $(0.27) | $(0.32) |
- For the nine months, operating cash used was $3.7 million, versus $3.6 million in 2011. Investing activities provided $0.7 million, compared with $10.5 million, primarily reflecting lower proceeds from marketable-security sales. Cash and cash equivalents fell by $3.0 million to $569,460.
- At September 30, cash, restricted cash and marketable securities totaled approximately $5.7 million ($569,460, $553,268 and $4,532,864, respectively). Current liabilities were $1.1 million; current assets were $6.7 million. The company reported no material borrowings or long-term debt.
- Total assets were $7.4 million and stockholders’ equity was $6.3 million. No income tax provision was recorded; a full valuation allowance covered deferred tax assets, including approximately $33.6 million of net operating loss carryforwards.
Changes versus prior comparable periods
- Revenue declined 64% in Q3 and 49% for the nine-month period. Management attributed the decline to lower ENEC/FANR work and the absence of prior-year revenue recognized on completed GCC contractual milestones.
- Q3 gross margin decreased to 37% from 49%, while nine-month gross margin increased to 38% from 36%. Consulting costs declined with lower activity.
- Nine-month general and administrative expense declined to $3.3 million from $4.6 million, reflecting lower consulting, legal and professional fees, stock compensation and other costs. R&D expense was $1.6 million, modestly below $1.7 million.
- Despite a smaller nine-month net loss, Q3 net loss widened to $1.25 million from $1.17 million as sharply lower revenue outweighed lower operating expenses.
Outlook, commentary and risks
- Management said available liquidity was expected to fund anticipated requirements for the next 12 months at then-current operating levels. It also said additional capital would be needed in 2013 to support the fuel-development plan, potentially sooner if consulting became non-sustaining; financing availability and terms were not assured.
- The company expected approximately $3–4 million of outside R&D expense over the next 12–15 months, contingent on collaborative agreements with Rosatom subsidiaries and a U.S. fuel fabricator. It anticipated rising R&D activity over the following two to three years.
- Technology milestones remained prospective: fuel fabrication demonstration was anticipated in 2013–2014, commercial-reactor lead test assembly operation in 2017–2018, and final qualification for certain power uprates in 2021–2022. These plans depend on partners, testing, regulatory approvals and funding.
- Management reported DOE notice that Rosatom had provided non-proliferation assurances, described as the final key step before DOE approval of the Part 810 export authorization. Contract negotiations with Russian entities and a U.S. fabrication partner were ongoing; authorization and agreements were not yet complete.
- FANR’s agreement was extended to December 31, 2014. Consulting revenue remains dependent on agreed work plans and is concentrated among a small number of government clients; substantially all revenue was from Middle East customers, principally ENEC and FANR.
- Key risks include customer concentration and variable project demand, limited cash runway and financing needs, technical and commercial uncertainty in fuel development, dependence on fabrication and utility partners, testing and regulatory delays, export approvals, Russia-related political and intellectual-property risks, and public or market opposition to nuclear power.
- The filing disclosed no material legal proceedings known to the company, no material off-balance-sheet arrangements, and effective disclosure controls and internal control over financial reporting.
Important facts for investors to verify
- Whether cash burn, consulting receipts and working-capital needs remain consistent with management’s stated 12-month liquidity expectation.
- Progress and terms of planned financing and the contingent $3–4 million R&D program.
- DOE export authorization status and execution of Rosatom and U.S. fabrication agreements.
- Whether ENEC/FANR work levels recover and whether new consulting contracts diversify customer concentration.
- Whether irradiation, full-length fuel fabrication, regulatory and commercial-reactor milestones remain achievable on the stated schedule.
- Potential dilution: 1,639,842 options and 1,034,996 warrants were outstanding at September 30, 2012; reported common shares outstanding were 12,523,872.