Lightbridge Corporation — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2019; filed November 5, 2019. Lightbridge is a development-stage nuclear-fuel technology company focused on developing and commercializing metallic fuel. It reported no revenue in the quarter or first nine months of 2019.
Financial performance and position
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $2.22 million | $2.75 million | $6.27 million | $7.88 million |
| Net loss | $2.44 million | $4.21 million | $8.86 million | $12.45 million |
| Net loss per common share | $0.81 | $1.78 | $3.07 | $7.51 |
For the nine months, equity-method losses from Enfission were $3.81 million, versus $4.55 million a year earlier. Interest income was $316,000; the 2018 comparison included $982,000 of financing costs. Net loss attributable to common stockholders was $9.38 million for the nine months, including preferred-stock dividends and deemed dividends. Margins are not meaningful because the company had no revenue.
- Cash and liquidity: Cash and cash equivalents were $20.58 million at September 30, down from $24.64 million at December 31, 2018. Working capital was approximately $19.6 million; total assets were $23.04 million and current liabilities $1.69 million.
- Cash flow, nine months: Operating cash use was $4.12 million; investing cash use was $3.69 million, including $3.54 million invested in Enfission; financing provided $3.75 million, principally from common-stock sales. Cash declined $4.06 million.
- Debt: The company reported no debt or debt credit lines.
- Equity and dilution: ATM common-stock sales provided $3.8 million net in the first nine months of 2019, versus $27.6 million in the 2018 period. Common shares outstanding were 3,249,353 at September 30, after retroactive presentation of the later reverse split. A one-for-twelve reverse split took effect October 21; 3,252,359 shares were outstanding November 5.
Changes and outlook
- Year-to-date net loss narrowed by $3.59 million, reflecting lower operating expenses, a smaller Enfission loss, and the absence of the prior-year financing-cost write-off and Series B beneficial-conversion deemed dividend.
- Management estimated operating cash use of about $0.8 million monthly, or $9.6 million over the next 12 months, plus anticipated $6–8 million of Enfission and third-party research and development outlays over 12–15 months. Management said available resources were sufficient for its current 12-month operating budget, while noting ongoing negative cash flows and possible need for additional financing. Financing availability and terms are not assured.
- Lightbridge and Framatome had not agreed on Enfission’s 2019/2020 budgets or future project direction; negotiations and questions about compliance with existing agreements remained unresolved. The filing warns that work could be reduced or delayed. Lightbridge said it expected to continue equity contributions; its Enfission investment had reached a $0.49 million deficit carrying balance as its share of losses exceeded contributions.
- Management planned to pursue a lead-test-rod agreement with a U.S. utility in the coming months and an agreement to manufacture test-reactor irradiation samples within 12 months. These are plans, not assured milestones. Commercialization timing and costs remain uncertain.
- Following the reverse split, Nasdaq notified the company on November 4 that it had regained compliance with the minimum bid-price requirement.
Risks, contingencies, and controls
- The business depends on successful fuel development, testing, regulatory approvals, commercialization, intellectual-property protection, and continued collaboration and funding. Additional capital may be required, and market conditions could limit equity financing.
- Management identified a material weakness in internal control over financial reporting: controls did not adequately review the allocation of Lightbridge’s share of Enfission’s equity-method losses. The weakness caused a material error correction in the September 2019 financial statements. Management reported no prior-period restatement or change to previously released results and expected remediation by year-end 2019.
- A former CFO’s OSHA complaint was dismissed in January 2018 without findings against the company, but an appeal was filed. Lightbridge filed a motion for summary decision in September 2019 and said it would defend the appeal. Approximately $81,000 of legal fees were owed at September 30 and expected to be paid by insurers. The company reported no material legal proceedings.
- Preferred Series A and B shares accrue 7% annual dividends in kind and carry liquidation preferences; outstanding options, warrants, preferred shares, and accrued preferred dividends create potential dilution.
Important facts for investors to verify
- Whether Lightbridge can fund planned operations and Enfission development without substantial additional capital, and on what terms.
- Whether Lightbridge and Framatome resolve governance, compliance, project-direction, and budget issues, and what that means for Enfission’s development schedule.
- Progress toward lead-test-rod and irradiation-sample agreements, regulatory and technical milestones, and the evidence supporting projected fuel benefits.
- Whether the disclosed equity-method accounting weakness was remediated by year-end 2019 and whether subsequent filings report any further corrections.
- Potential dilution from ATM sales, preferred-stock dividends and conversion, options, and warrants; also verify subsequent share counts and Nasdaq listing status.