Lightbridge Corporation — Q2 2016 Form 10-Q
Reporting period: Three and six months ended June 30, 2016. Unaudited results. Lightbridge develops nuclear-fuel technology and provides nuclear-industry consulting; all reported revenue came from consulting. Share figures and per-share amounts reflect the July 20, 2016 one-for-five reverse stock split.
Financial performance
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Revenue | $122,377 | $298,162 | $288,923 | $422,057 |
| Gross margin | $60,240 (49%) | $22,500 (8%) | $158,561 (55%) | $89,003 (21%) |
| Operating expenses | $1,532,080 | $1,503,522 | $3,214,442 | $2,646,645 |
| Operating loss | $(1,471,840) | $(1,481,022) | $(3,055,881) | $(2,557,642) |
| Net loss | $(1,297,205) | $(1,021,356) | $(1,631,911) | $(902,342) |
| Basic and diluted loss per share | $(0.30) | $(0.28) | $(0.40) | $(0.25) |
Revenue fell 59% in Q2 and 32% in the first half, primarily because less work was performed under the FANR consulting project. Gross margin improved, which management attributed to better margins on consulting work and lower stock-based compensation allocated to service costs. First-half R&D expense rose 66% to $1.01 million; G&A increased 8% to $2.21 million.
Other income included noncash warrant revaluation income of $312,000 in Q2 and $1.57 million in the first half. These gains reduced reported net losses; they are not operating cash inflows. Q2 also included $129,000 of warrant-modification expense. The warrant liability was valued using Level 3 inputs and fell from $2.33 million at year-end to $199,000 at June 30, partly following a warrant amendment and reclassification to equity.
Cash, liquidity and capital
- At June 30, cash and cash equivalents were $1.48 million and restricted cash was $35,021. Working capital was approximately $0.4 million. Total liabilities were $1.72 million; stockholders’ equity was $1.10 million, versus a $1.50 million deficiency at December 31, 2015.
- First-half operating cash use was $2.39 million; investing cash use was $97,924, chiefly patent costs; financing provided $3.35 million. Cash increased by $860,915 to $1.48 million.
- A vendor-financed note issued for $135,000 had a $68,036 balance at June 30 and was expected to be repaid by November 2016. The filing says it had no debt or debt credit lines apart from this short-term note.
- During the first half, common-stock issuance provided approximately $2.99 million net. Management estimated monthly cash shortfall of $400,000–$500,000 through the remainder of 2016 and expected to seek further equity funding. It stated anticipated raises should support 12 months of operations, but funding availability was not assured.
- After quarter-end, on August 2, the company closed a $2.8 million Series A preferred-stock offering. The preferred shares are convertible initially one-for-one and accrue 7% annual dividends payable in kind. On August 10, it granted Aspire Capital an option to enter up to two equity purchase agreements for up to $20 million in aggregate through December 31, 2019; the company issued warrants for 500,000 shares at $0.01 as consideration. These arrangements can dilute existing shareholders.
Outlook, developments and risks
- Management expected to spend approximately $3 million to $3.5 million on fuel R&D over the next 12–15 months. It described a long development path: semi-scale fuel samples for irradiation testing targeted for 2017, commercial-reactor lead test assemblies as soon as 2020–2021, and potential initial reload orders in 2023–2024. These are estimates, not assured milestones.
- Lightbridge entered a joint development agreement with AREVA in March to assess feasibility and potential terms for a joint venture; it also engaged BWXT to evaluate fuel-sample fabrication. Neither agreement establishes a completed commercialization partnership. The FANR consulting contract was extended through December 31, 2016; future work and revenue depend on agreed work plans.
- On July 27, Nasdaq granted continued listing subject to conditions. The $1 minimum bid-price condition was met August 2; a further condition required the company to demonstrate equity above $2.5 million and provide updated projections by August 15. The filing warns failure to satisfy listing requirements could result in delisting.
- Key risks include recurring losses, dependence on additional capital, early-stage fuel development and commercialization, reliance on international consulting revenue, customer concentration, nuclear-industry regulation and public acceptance, and execution of research and partnership milestones. Two customers represented 99% of receivables at June 30.
- A former CFO’s defamation claim was dismissed and is now time-barred; a separate OSHA retaliation complaint remained unresolved. The company said it considered the OSHA complaint without merit and intended to defend itself.
Important facts for investors to verify
- Whether the post-quarter preferred-stock proceeds and Aspire financing options provide adequate runway, and on what terms further capital may be raised.
- Whether Nasdaq’s remaining listing conditions were satisfied by the stated deadline and whether continued listing was maintained.
- Progress, funding requirements and partner commitments for AREVA/BWXT work and the fuel-testing schedule; no technology revenue had been recorded.
- The sustainability of consulting revenue and margins, including FANR work after its December 2016 contract extension.
- Potential dilution from preferred conversion, outstanding warrants and options, and the new Aspire commitment warrants.