Lightbridge Corporation — FY2018 Form 10-K
Reporting period: Year ended December 31, 2018; filed March 29, 2019. This is an annual report, not a standalone fourth-quarter report.
Business context
Lightbridge is a pre-commercial nuclear-fuel technology developer. Its principal effort is developing metallic uranium-zirconium fuel rods intended to improve reactor output, fuel-cycle economics and safety. In January 2018, it formed Enfission, a 50/50 joint venture with Framatome, as the primary vehicle for developing, licensing and commercializing the fuel. Lightbridge discontinued its consulting business segment in 2018.
Financial results and liquidity
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $0 | $175,446 |
| Operating expenses | $10.17 million | $6.67 million |
| Operating loss | $14.95 million | $6.60 million |
| Net loss | $15.68 million | $7.10 million |
| Net loss attributable to common shareholders | $18.95 million | $7.38 million |
| Basic and diluted loss per share | $0.71 | $0.71 |
| Cash used in operating activities | $7.42 million | $5.00 million |
| Cash used in investing activities | $5.83 million | $0.21 million |
| Cash provided by financing activities | $33.37 million | $6.14 million |
- Cash and cash equivalents were $24.64 million at year-end, versus $4.52 million a year earlier; management reported approximately $23 million as of the filing date. Year-end cash included $10 million in U.S. Treasury bills.
- Current assets were $24.77 million and current liabilities $0.48 million. The company reported no debt or credit lines.
- Lightbridge raised approximately $29.5 million net from common-stock sales and $3.9 million from preferred stock in 2018. Common shares outstanding rose from 12.7 million to 32.9 million during the year.
- Research and development expense increased 51% to $3.46 million; general and administrative expense increased 53% to $6.72 million. Stock-based compensation totaled $2.38 million.
- Lightbridge recorded $5.84 million of equity-method losses from Enfission, partially offset by $1.06 million of service income billed to the joint venture. Enfission reported a $7.7 million net loss and $0.7 million cash at year-end.
- There was no income-tax provision; a full valuation allowance offset deferred tax assets. No revenue-based margin comparison is meaningful because 2018 revenue was zero.
Material changes and developments
- Consulting revenue ended as the company shifted resources to fuel development; revenue fell from $175,446 in 2017 to zero in 2018.
- Operating expenses increased by $3.51 million, while the new Enfission investment and its losses materially affected the 2018 results.
- The 2018 financing substantially increased cash, but relied on equity issuance and caused significant share-count growth. Series A and B preferred stock also carry 7% annual dividends in kind and conversion rights.
- The Halden research reactor shut down in 2018, prompting Lightbridge to pursue U.S. testing alternatives; the company warned this change could delay development.
- The company terminated its at-the-market sales agreement effective March 29, 2019. It reported approximately $1.9 million in net ATM proceeds from January through March 29, 2019.
Outlook, risks and contingencies
- Management estimated a next-12-month cash budget of approximately $20 million: about $9.3 million for corporate and research costs and $10.7 million for Enfission and third-party development and equipment. It said available resources were sufficient for the current 12-month budget, but expected to need additional capital for 2020 and beyond.
- Lightbridge expected to invest $15 million to $20 million in fuel development over the following 12 to 15 months and was seeking DOE funding, utility contributions and other financing. Future funding availability and terms were uncertain.
- Indicative milestones included surrogate full-length rod fabrication and arrangements for irradiation testing in 2019; lead test rod activity in a U.S. commercial reactor in 2022–2024; lead test assembly operation in 2024–2026; initial reload-batch orders as soon as 2028–2030; and first commercial deployment as soon as 2030–2032. These are projections, not commitments.
- Key risks include unproven fuel performance, regulatory approval and commercial customer acceptance; access to irradiation facilities; fabrication of full-length rods; infrastructure and licensing requirements for uranium enrichment up to 19.75%; limited HALEU supply; dependence on Enfission and its 50/50 governance; and substantial future financing needs and possible dilution.
- Nasdaq notified Lightbridge in November 2018 that its share price was below the $1 minimum bid requirement. The stated initial compliance deadline was May 6, 2019; delisting could impair liquidity and access to capital.
- A former CFO’s OSHA complaint had been dismissed in January 2018; an appeal was filed in March 2018. The company said it would defend the appeal and expected insurance to cover the approximately $4,000 in legal fees incurred at year-end.
- The independent auditor gave an unqualified opinion on the financial statements. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an ICFR attestation.
Important facts for investors to verify
- Current cash, cash burn and funding needs against the stated $20 million operating budget, including subsequent Enfission contributions and funding sources after termination of the ATM.
- Progress and actual costs for U.S. irradiation testing, full-length rod fabrication, NRC engagement and utility lead-test agreements, compared with the projected schedule.
- Enfission’s funding, losses, governance and commercial arrangements, including Lightbridge’s share of future contributions and any distributions or licensing revenue.
- Potential dilution and preferred-stock rights, including outstanding common equivalents, accrued dividends, conversion terms and any future equity financing.
- Nasdaq bid-price compliance status and the outcome of the former CFO’s appeal.