Lightbridge Corporation — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2011. Lightbridge develops nuclear-fuel technology and provides nuclear consulting and strategic advisory services. All reported revenue in 2011 came from consulting; the fuel technology business remained in development.
Financial performance
| Metric | Three months 2011 | Three months 2010 | Nine months 2011 | Nine months 2010 |
|---|---|---|---|---|
| Revenue | $1.65 million | $2.05 million | $5.52 million | $6.41 million |
| Gross profit / margin | $0.80 million / 48.7% | $0.79 million / 38.7% | $2.01 million / 36.3% | $2.39 million / 37.2% |
| Operating loss | $(1.23) million | $(1.71) million | $(4.27) million | $(5.40) million |
| Net loss | $(1.17) million | $(1.67) million | $(3.97) million | $(5.36) million |
| Basic and diluted loss per share | $(0.09) | $(0.14) | $(0.32) | $(0.50) |
Quarterly revenue fell about 19% year over year; nine-month revenue fell about 14%. Losses narrowed in both comparisons, aided by lower general and administrative expense. Nine-month R&D expense increased to $1.72 million from $1.14 million. Management attributed the quarterly gross-margin improvement to higher-margin contract milestones and cautioned that future quarterly margins could be lower.
Balance sheet and liquidity: At September 30, cash and cash equivalents were $9.28 million; restricted cash was $0.55 million; marketable securities were zero, compared with $10.46 million at year-end 2010. Total assets were $11.73 million, current liabilities and total liabilities were $1.35 million, and stockholders’ equity was $10.37 million. The filing reports no debt. Working capital was approximately $9.72 million.
Cash flow: For the first nine months, operating cash use was $3.55 million, investing cash inflow was $10.46 million, and financing cash use was $0.001 million; cash increased $6.91 million. The investing inflow primarily reflects selling marketable securities and moving the proceeds into cash, not operating cash generation. Operating cash use was higher than the $1.75 million used in the comparable 2010 period.
Outlook, risks and notable items
- Management said existing working capital was expected to support operations at the then-current level until later in 2012, absent new agreements. It stated that additional capital would be needed to support the fuel-development plan and that funding might be required sooner if consulting became non-sustaining.
- Lightbridge expected approximately $5 million in R&D expense over the next 12–15 months, in addition to average operating expenses of approximately $1 million per month, excluding that outside R&D spending.
- Management anticipated possible new consulting and technology agreements in 2012 and beyond, but provided no quantified revenue or earnings guidance. Consulting revenue depended on client work plans and milestone acceptance.
- Revenue was highly concentrated in international consulting clients, particularly UAE entities; substantially all revenue came from customers outside the United States. The GCC and Kuwait engagements were completed by September 30, 2011.
- Fuel designs had not been tested in a commercial reactor. Commercialization depended on further testing, regulatory approvals, fuel-fabrication partners, intellectual-property rights, and financing. The filing describes additional risks from reliance on Russian research, nuclear-industry regulation and public acceptance (including fallout from Fukushima), competition for skilled personnel, and global economic and political conditions.
- The company reported a $28.6 million tax-loss carryforward but recorded a full valuation allowance against deferred tax assets and no income-tax provision. All marketable securities were sold during the quarter, realizing a gain of approximately $0.1 million. No material recognizable subsequent events were reported.
- Operating lease commitments totaled approximately $1.76 million through 2013. The company reported no material legal proceedings, no defaults on senior securities, and effective disclosure controls and internal control over financial reporting.
Most important facts for investors to verify
- Cash runway under actual spending, particularly given planned R&D investment, operating cash outflows, and management’s stated potential need for additional capital.
- Whether consulting contracts will be renewed or replaced, and the extent of client concentration and revenue variability.
- Progress, cost, and timing of irradiation testing, regulatory qualification, and the anticipated fuel-fabricator partnership; no commercial fuel revenue had been reported.
- Potential dilution: at September 30, 1.03 million warrants and 1.72 million options were outstanding, in addition to restricted stock awards.
- Reconcile the filing’s segment disclosures: the nine-month segment table reports 2010 technology revenue of $342,550, while the consolidated statements show consulting revenue equal to total revenue and MD&A characterizes revenue as consulting-derived. The filing text does not clearly explain this presentation difference.