Lightbridge Corporation — Q3 2017 Form 10-Q
Reporting period: Three and nine months ended September 30, 2017; filed November 14, 2017. Lightbridge develops metallic nuclear fuel technology and provides nuclear-energy consulting. Consulting was the only source of revenue in the periods presented.
Financial performance and position
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $15,136 | $83,219 | $165,046 | $372,142 |
| Gross profit | $5,772 | $39,300 | $66,019 | $197,861 |
| Gross margin | 38% | 47% | 40% | 53% |
| Operating loss | $(1.603) million | $(1.509) million | $(4.732) million | $(4.565) million |
| Net loss | $(1.734) million | $(1.504) million | $(5.117) million | $(3.135) million |
| Net loss per common share | $(0.16) | $(0.44) | $(0.53) | $(0.91) |
At September 30, cash and cash equivalents were $4.214 million, restricted cash was $114,077, and working capital was approximately $3.6 million. Total assets were $6.866 million and total liabilities were $1.328 million, all current; the filing reports no outstanding debt. Stockholders’ equity was $5.538 million.
For the first nine months, operating cash use was $3.588 million, investing cash use was $159,253, and financing provided $4.376 million, principally from common-stock issuance. Cash and cash equivalents increased $629,509 from year-end 2016. The company reported approximately $4.4 million of net ATM proceeds for the period.
Changes versus the prior comparable periods
- Nine-month revenue fell 56%, primarily from reduced consulting work, including lower work for ENEC and a consulting project. Management said the company had shifted focus and resources toward fuel development and away from consulting.
- Nine-month net loss increased by approximately $1.981 million. The 2016 comparison included $1.644 million of warrant revaluation income; in 2017, warrants were recorded in equity rather than as derivative liabilities. Financing-cost expense also rose, to $384,509 for the nine months, largely from amortizing deferred financing costs.
- Operating expenses were broadly stable year over year: nine-month G&A was $3.329 million and R&D was $1.469 million. Lower stock-based compensation was offset by higher professional fees, including legal work related to the prospective AREVA venture.
- Common shares outstanding increased from 9.912 million at December 31, 2016 to 11.427 million at September 30, 2017, reflecting equity financing and warrant exercise. The filing gives 11.497 million shares outstanding as of October 26, 2017.
Outlook, risks and notable items
- Going concern and funding: Management stated there is substantial doubt about the company’s ability to continue as a going concern without additional financing. It projected an average cash-flow shortfall of approximately $0.5–$0.6 million per month over the next 12 months and said operations or spending might need to be delayed or curtailed if funding is unavailable. Financing terms and availability are uncertain.
- Spending plans: The company expected to invest $3–$5 million in fuel development over the next 12–15 months, contingent on raising additional equity capital. R&D spending could increase as development, testing and demonstration work advances.
- AREVA arrangements after quarter-end: On November 14, 2017, Lightbridge signed R&D services, co-ownership and intellectual-property agreements with AREVA NP SAS as a foundation for a proposed 50/50 joint venture. Lightbridge committed to purchase approximately $3.3 million minimum of R&D services through December 31, 2018. The JV operating agreement remained to be finalized; the planned venture was also subject to approval by AREVA’s new ownership group following its pending transaction.
- Development timeline: Management’s schedule anticipated regulatory planning and a host-reactor agreement in 2018–2019, lead test assembly operation as soon as 2023–2024, and potential initial reload orders as soon as 2026–2027. These are projections, not assured milestones.
- Other items and risks: A subtenant said it could no longer make future payments; Lightbridge recorded an approximately $110,000 abandonment loss. A former CFO’s OSHA complaint alleges retaliation; the company disputes the claims and intends to defend itself. Risks include commercialization, financing, regulatory and technical development, intellectual property, and the proposed JV.
Investor verification points
- Confirm available financing, actual cash burn and runway, given the stated going-concern doubt and projected monthly shortfall.
- Track completion and funding of the AREVA JV, the $3.3 million R&D commitment, and any approval or ownership-related conditions.
- Monitor whether development, licensing and reactor-testing milestones remain on schedule and within the projected $3–$5 million near-term R&D budget.
- Assess continuing dilution from equity sales, warrant and option instruments, and preferred-stock dividends; verify fully diluted share counts and financing capacity.
- Review consulting revenue trends, the former CFO complaint, and any further costs or liabilities related to the sublease.