Lightbridge Corporation — Q3 2018 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2018. Financial statements are unaudited. Lightbridge is a development-stage nuclear-fuel technology company; it also has a consulting segment, but in 2018 it focused resources on fuel development.
Financial results and position
| Metric | Q3 2018 / Sep. 30, 2018 | Comparable period / Dec. 31, 2017 |
|---|---|---|
| Revenue | $0 | Q3 2017: $15,136 |
| Net loss | Q3: $4.21 million; nine months: $12.45 million | Q3 2017: $1.73 million; nine months 2017: $5.12 million |
| Net loss attributable to common stockholders | Nine months: $15.55 million; basic and diluted loss per share: $0.63 | Nine months 2017: $5.26 million; loss per share: $0.53 |
| Operating expenses | Q3: $2.75 million; nine months: $7.88 million | Q3 2017: $1.61 million; nine months 2017: $4.80 million |
| Cash and cash equivalents | $25.33 million, including $10.0 million in U.S. Treasury bills | $4.52 million at Dec. 31, 2017 |
| Working capital | Surplus of approximately $24.6 million | Not stated for the comparable period |
| Debt | No debt or debt credit lines | — |
- Nine-month operating cash use was $5.30 million, versus $3.59 million in 2017. Investing cash use was $5.39 million, including $5.22 million contributed to Enfission. Financing provided $31.50 million, primarily from common and preferred stock issuance.
- No meaningful revenue-based margin can be assessed because 2018 revenue was zero. There was no income-tax provision; the company recorded a full valuation allowance against deferred tax assets.
- At September 30, total assets were $28.18 million and total liabilities were $1.39 million. Stockholders’ equity was $26.79 million.
Material changes and significant items
- Losses increased substantially year over year, reflecting higher general and administrative and R&D spending and Lightbridge’s reported $4.55 million equity-method loss from Enfission. The company reported $0.79 million of income for services and expenses charged to the joint venture.
- Lightbridge and Framatome formed Enfission, a 50/50 joint venture, in January 2018. Lightbridge had invested approximately $5.2 million by September 30; its carrying value was $0.67 million. The filing says the company’s share of Enfission losses is allocated under a hypothetical liquidation book value method; the reported nine-month equity loss was $4.55 million.
- Common-stock proceeds were approximately $27.6 million and preferred-stock proceeds were $3.9 million during the first nine months. The company issued 2.67 million Series B preferred shares for approximately $4.0 million. Common shares outstanding rose to 30.50 million from 12.74 million at year-end; the filing lists 40.83 million common shares and equivalents, including accrued preferred dividends, at September 30.
- A $0.98 million write-off of deferred financing costs related to termination of the Aspire agreement was recorded in 2018. Preferred-stock beneficial conversion features and dividends included $2.62 million of deemed dividends on the Series B issuance; these items increased the loss attributable to common stockholders beyond net loss.
Outlook, risks and contingencies
- Management said available resources were sufficient for its current 12-month operating budget from the financial-statement issuance date, while also projecting continued negative cash flows and stating that additional capital would be needed in 2019. It estimated a general and administrative cash shortfall averaging $0.8–$0.9 million monthly over the next 12–15 months and minimum third-party R&D and equipment outlays of $15–$20 million over that period. Management noted that some spending could be delayed and that future financing availability is not assured.
- The company expects R&D to increase as it advances fuel testing, licensing, and commercialization. Management’s anticipated schedule included U.S. research-reactor testing by 2020, a commercial-reactor lead test rod by 2021, possible lead test assembly operation in 2023–2024, and potential initial reload orders in 2026–2027. These are expectations, not guarantees.
- The planned Halden research-reactor testing route became unavailable following the reactor’s closure. Lightbridge said it was assessing U.S. alternatives, including the Advanced Test Reactor and a segmented test rod; it warned that a suitable alternative may not be found and commercialization could be delayed.
- On November 5, 2018, Nasdaq notified the company that its share price had not met the $1.00 minimum bid requirement for 30 consecutive business days. The initial compliance period ran to May 6, 2019; failure to regain compliance could ultimately put the listing at risk. The company said it would monitor the price and consider options, including a reverse split if needed.
- A former CFO’s OSHA complaint was dismissed in January 2018; an appeal was filed in March. The company said it would defend the appeal and expected insurance to cover approximately $4,000 of legal fees incurred through September 30.
- Management reported disclosure controls were effective at the reasonable-assurance level as of September 30 and no material changes in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether planned R&D and equipment spending, Enfission contributions, and expected financing needs are consistent with the company’s cash balance and stated 12-month liquidity assessment.
- Enfission’s future funding obligations, loss allocation, development progress, and the terms governing Lightbridge’s 50% interest and intellectual property.
- Whether the company secures a viable U.S. testing pathway and meets its stated regulatory and development milestones after Halden’s closure.
- Potential dilution from ATM sales, preferred-stock conversion and dividends, warrants, options, and any further capital raises.
- Progress toward Nasdaq’s minimum-bid-price compliance deadline and any resulting listing or capital-raising consequences.