Lightbridge Corporation — Q2 2011 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2011; filed August 9, 2011. Financial statements are unaudited.
Business context
Lightbridge develops nuclear-fuel technology and provides nuclear consulting and strategic advisory services. In the periods reported, consulting generated all 2011 revenue; the fuel technology business remained in research and development. Consulting revenue was concentrated among international government-related customers, particularly in the UAE and Gulf Cooperation Council.
Financial performance
| Metric | Q2 2011 | Q2 2010 | Six months 2011 | Six months 2010 |
|---|---|---|---|---|
| Revenue | $2.29 million | $1.96 million | $3.87 million | $4.36 million |
| Gross margin | $0.72 million (31%) | $0.70 million (36%) | $1.20 million (31%) | $1.59 million (37%) |
| Operating expenses | $2.02 million | $2.70 million | $4.25 million | $5.28 million |
| Net loss | $1.16 million | $2.00 million | $2.80 million | $3.69 million |
| Basic and diluted loss per share | $0.09 | $0.19 | $0.23 | $0.36 |
| Operating cash flow | Not stated quarterly | $(2.97) million | $(0.32) million |
Q2 revenue rose 17%, while six-month revenue declined 11%. The six-month decrease reflected lower UAE/ENEC work, partly offset by increased GCC revenue. Q2 gross margin fell to 31% from 36%, as consulting costs increased with GCC work. Lower general and administrative expense helped reduce losses, while research and development spending increased.
Financial position and liquidity
At June 30, 2011, cash and cash equivalents were $1.29 million, marketable securities $8.61 million, and restricted cash $0.55 million. Current assets were $12.56 million versus current liabilities of $2.06 million. Total assets were $13.16 million and stockholders’ equity $11.11 million. The balance sheet reports no interest-bearing debt; accounts payable, accrued liabilities and deferred revenue comprise reported liabilities.
Cash and cash equivalents decreased $1.08 million from year-end 2010. Six-month operating cash use was $2.97 million; investing activities provided $1.89 million, primarily from sales of marketable securities. Investment income and other was $0.24 million for the six months, including an $86,000 unrealized gain on marketable securities.
Outlook, risks and notable items
- Management expected approximately $5 million of R&D spending over the next 12–15 months. It said additional capital would be needed to support the fuel-development plan and noted it might need funding sooner if consulting did not sustain overhead.
- The filing gives differing cash-runway descriptions: the notes estimate funding through later in 2012 at current operating levels, while MD&A says cash could meet anticipated working-capital needs until later 2012 or 2013 if no new agreements are signed. These are estimates, not commitments.
- Management expected most of the $578,400 in deferred revenue at June 30 to be recognized in Q3 2011. Recognition depended on future work and contract terms.
- Technology progress included completed mockup testing, preliminary reactor core design work, and a newly granted Eurasian patent. Management reported that Idaho National Laboratory and the Department of Energy were evaluating whether the program could proceed directly to loop irradiation testing.
- Key risks include reliance on a small group of international consulting customers, exposure to political and regulatory conditions abroad, the need for additional funding and commercial partners, and the unproven performance and licensing path of fuel designs not yet tested in a commercial reactor. The filing also cites potential effects of post-Fukushima public opposition to nuclear power and risks tied to Russian research operations.
- Management reported no material subsequent events, no material legal proceedings known to the company, and effective disclosure controls and internal control over financial reporting.
Important facts for investors to verify
- Whether consulting contract milestones, customer acceptance and collections support the expected Q3 recognition of deferred revenue and future revenue levels.
- Whether cash burn and planned R&D spending are consistent with management’s stated runway, and what financing or strategic alliance options are available.
- Progress, cost and timing of irradiation testing, regulatory qualification and a commercial fuel-fabrication partnership.
- Customer and geographic concentration, including continued dependence on international revenue and the UAE/GCC customer base.
- Share-count figures: the balance sheet reports 12,362,929 shares outstanding at June 30, while the cover page reports 12,363,080 as of July 22, 2011.