UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 20182019
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number: 001-34487
LIGHTBRIDGE CORPORATION |
(Exact name of registrant as specified in its charter) |
Nevada |
| 91-1975651 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Empl. Ident. No.) |
11710 Plaza America Drive, Suite 2000
Reston, VA 20190
(Address of principal executive offices, Zip Code)
(571) 730-1200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Former Name, Former Address and Former Fiscal Year if Changed Since Last Report)
Title of Each Class: | Trading Symbol(s): | Name of Each Exchange on Which Registered: | ||
Common Stock, $0.001 par value | LTBR | The Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | ¨ | Accelerated Filer | ¨ |
Non-Accelerated Filer |
| Smaller reporting company | x |
| Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares outstanding of the issuer’s common stock, as of July 26, 201817, 2019 is as follows:
Class of Securities |
| Shares Outstanding |
Common Stock, $0.001 par value |
|
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Form 10-Q
JUNE 30, 20182019
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Item 1. | Financial Statements (unaudited) |
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| 4 | |||
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| 5 | |||
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| 6 | |||
| Notes to Condensed Consolidated Financial Statements |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2 |
Unaudited Condensed Consolidated Balance Sheets
|
| June 30, |
|
| December 31, |
| ||
|
| 2018 |
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| 2017 |
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|
| (Unaudited) |
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ASSETS | ||||||||
Current Assets |
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| ||
Cash and cash equivalents |
| $ | 25,707,368 |
|
| $ | 4,515,398 |
|
Accounts receivable - project revenue and reimbursable project costs |
|
| - |
|
|
| 10,400 |
|
Other receivable from joint venture |
|
| 414,957 |
|
|
| - |
|
Prepaid expenses and other current assets |
|
| 107,861 |
|
|
| 70,067 |
|
Deferred financing costs, net |
|
| - |
|
|
| 491,168 |
|
Total Current Assets |
|
| 26,230,186 |
|
|
| 5,087,033 |
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Investment in Joint Venture |
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| 2,415,228 |
|
|
| - |
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Other Assets |
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Patent costs |
|
| 1,506,672 |
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|
| 1,367,692 |
|
Deferred financing costs, net |
|
| - |
|
|
| 491,268 |
|
Total Other Assets |
|
| 1,506,672 |
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|
| 1,858,960 |
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Total Assets |
| $ | 30,152,086 |
|
| $ | 6,945,993 |
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LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilities |
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Accounts payable and accrued liabilities |
| $ | 1,405,341 |
|
| $ | 1,151,210 |
|
Total Current Liabilities |
|
| 1,405,341 |
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|
| 1,151,210 |
|
Total Liabilities |
|
| 1,405,341 |
|
|
| 1,151,210 |
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Commitments and Contingencies – Note 5 |
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Stockholders' Equity |
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Preferred stock, $0.001 par value, 10,000,000 authorized shares: |
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Convertible Series A preferred shares, 908,740 shares and 1,020,000 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively (liquidation preference $2,849,000 and $3,088,764 at June 30, 2018 and December 31, 2017, respectively) |
|
| 909 |
|
|
| 1,020 |
|
Convertible Series B preferred shares, 2,666,667 and 0 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively (liquidation preference $4,116,667 at June 30, 2018) |
|
| 2,667 |
|
|
| - |
|
Common stock, $0.001 par value, 100,000,000 authorized, 28,621,758 shares and 12,737,703 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively |
|
| 28,622 |
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|
| 12,738 |
|
Additional paid-in capital |
|
| 124,774,561 |
|
|
| 93,602,539 |
|
Accumulated deficit |
|
| (96,060,014 | ) |
|
| (87,821,514 | ) |
Total Stockholders' Equity |
|
| 28,746,745 |
|
|
| 5,794,783 |
|
Total Liabilities and Stockholders' Equity |
| $ | 30,152,086 |
|
| $ | 6,945,993 |
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|
| June 30, |
|
| December 31, |
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|
| 2019 |
|
| 2018 |
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Current Assets |
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Cash and cash equivalents |
| $ | 20,975,684 |
|
| $ | 24,637,295 |
|
Other receivable from joint venture |
|
| 507,274 |
|
|
| 93,253 |
|
Prepaid expenses and other current assets |
|
| 154,804 |
|
|
| 36,745 |
|
Total Current Assets |
|
| 21,637,762 |
|
|
| 24,767,293 |
|
|
|
|
|
|
|
|
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Investment in Joint Venture |
|
| 64,387 |
|
|
| — |
|
Patent costs |
|
| 1,706,192 |
|
|
| 1,577,421 |
|
Total Assets |
| $ | 23,408,341 |
|
| $ | 26,344,714 |
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Current Liabilities |
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Accounts payable and accrued liabilities |
| $ | 468,706 |
|
| $ | 258,056 |
|
Investee losses in excess of investment |
|
| — |
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|
| 218,263 |
|
Total Current Liabilities |
|
| 468,706 |
|
|
| 476,319 |
|
|
|
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Commitments and contingencies – (Note 5) |
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Stockholders’ Equity |
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Preferred stock, $0.001 par value, 10,000,000 authorized shares: |
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Convertible Series A preferred shares, 785,877 shares and 813,624 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively (liquidation preference $2,641,239 and $2,640,862 at June 30, 2019 and December 31, 2018, respectively) |
|
| 785 |
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|
| 813 |
|
Convertible Series B preferred shares, 2,666,667 shares issued and outstanding at June 30, 2019 and December 31, 2018 (liquidation preference $4,413,361 and $4,262,855 at June 30, 2019 and December 31, 2018, respectively) |
|
| 2,667 |
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|
| 2,667 |
|
Common stock, $0.001 par value, 100,000,000 authorized, 37,605,914 shares and 32,862,090 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively |
|
| 37,606 |
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|
| 32,863 |
|
Additional paid-in capital |
|
| 132,813,643 |
|
|
| 129,329,674 |
|
Accumulated deficit |
|
| (109,915,066 | ) |
|
| (103,497,622 | ) |
Total Stockholders’ Equity |
|
| 22,939,635 |
|
|
| 25,868,395 |
|
Total Liabilities and Stockholders’ Equity |
| $ | 23,408,341 |
|
| $ | 26,344,714 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.
3 |
Table of Contents |
Unaudited Condensed Consolidated Statements of Operations
|
| Three Months Ended |
|
| Six Months Ended |
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|
| June 30, |
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| June 30, |
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| 2018 |
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| 2017 |
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| 2018 |
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| 2017 |
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Revenue |
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Consulting Revenue |
| $ | - |
|
| $ | 14,425 |
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| $ | - |
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| $ | 149,910 |
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Cost of Consulting Services Provided |
|
| - |
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|
| 4,300 |
|
|
| - |
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| 89,663 |
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Gross Margin |
|
| - |
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| 10,125 |
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|
| - |
|
|
| 60,247 |
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Operating Expenses |
|
|
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|
|
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|
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|
|
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General and administrative |
|
| 1,453,030 |
|
|
| 971,290 |
|
|
| 3,676,620 |
|
|
| 2,179,592 |
|
Research and development |
|
| 538,031 |
|
|
| 545,644 |
|
|
| 1,449,065 |
|
|
| 1,009,987 |
|
Total Operating Expenses |
|
| 1,991,061 |
|
|
| 1,516,934 |
|
|
| 5,125,685 |
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| 3,189,579 |
|
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|
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Other Operating Income and (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other income from joint venture |
|
| 187,031 |
|
|
| - |
|
|
| 587,374 |
|
|
| - |
|
Equity in loss from joint venture |
|
| (1,773,445 | ) |
|
| - |
|
|
| (2,801,772 | ) |
|
| - |
|
Total Other Operating Income and (Loss) |
|
| (1,586,414 | ) |
|
| - |
|
|
| (2,214,398 | ) |
|
| - |
|
|
|
|
|
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|
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|
|
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|
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Operating Loss |
|
| (3,577,475 | ) |
|
| (1,506,809 | ) |
|
| (7,340,083 | ) |
|
| (3,129,332 | ) |
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
Other Income and (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 60,462 |
|
|
| - |
|
|
| 84,019 |
|
|
| - |
|
Financing costs |
|
| - |
|
|
| (130,877 | ) |
|
| (982,436 | ) |
|
| (253,681 | ) |
Other income |
|
| - |
|
|
| 23 |
|
|
| - |
|
|
| 47 |
|
Total Other Income and (Expenses) |
|
| 60,462 |
|
|
| (130,854 | ) |
|
| (898,417 | ) |
|
| (253,634 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
| (3,517,013 | ) |
|
| (1,637,663 | ) |
|
| (8,238,500 | ) |
|
| (3,382,966 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (3,517,013 | ) |
| $ | (1,637,663 | ) |
| $ | (8,238,500 | ) |
| $ | (3,382,966 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated preferred stock dividend |
|
| (119,000 | ) |
|
| (49,000 | ) |
|
| (214,667 | ) |
|
| (98,000 | ) |
Deemed additional dividend on preferred stock dividend due the beneficial conversion feature |
|
| (49,373 | ) |
|
| - |
|
|
| (85,680 | ) |
|
| - |
|
Deemed dividend on issuance on Series B convertible preferred stock due to beneficial conversion feature |
|
| - |
|
|
| - |
|
|
| (2,624,836 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
|
| (3,685,386 | ) |
|
| (1,686,663 | ) |
|
| (11,163,683 | ) |
|
| (3,480,966 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Common Share, Basic and Diluted |
| $ | (0.14 | ) |
| $ | (0.17 | ) |
| $ | (0.50 | ) |
| $ | (0.37 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding |
|
| 25,702,352 |
|
|
| 9,911,864 |
|
|
| 22,484,840 |
|
|
| 9,524,939 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Revenue |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| 1,230,154 |
|
|
| 1,453,030 |
|
|
| 2,587,916 |
|
|
| 3,676,620 |
|
Research and development |
|
| 545,118 |
|
|
| 538,031 |
|
|
| 1,467,353 |
|
|
| 1,449,065 |
|
Total Operating Expenses |
|
| 1,775,272 |
|
|
| 1,991,061 |
|
|
| 4,055,269 |
|
|
| 5,125,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Operating Income and (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income from joint venture |
|
| 305,375 |
|
|
| 187,031 |
|
|
| 660,656 |
|
|
| 587,374 |
|
Equity in loss from joint venture |
|
| (1,962,318 | ) |
|
| (1,773,445 | ) |
|
| (3,257,350 | ) |
|
| (2,801,772 | ) |
Total Other Operating Income and (Loss) |
|
| (1,656,943 | ) |
|
| (1,586,414 | ) |
|
| (2,596,694 | ) |
|
| (2,214,398 | ) |
Operating Loss |
|
| (3,432,215 | ) |
|
| (3,577,475 | ) |
|
| (6,651,963 | ) |
|
| (7,340,083 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income and (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 125,298 |
|
|
| 60,462 |
|
|
| 234,519 |
|
|
| 84,019 |
|
Financing costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (982,436 | ) |
Total Other Income and (Expenses) |
|
| 125,298 |
|
|
| 60,462 |
|
|
| 234,519 |
|
|
| (898,417 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
| (3,306,917 | ) |
|
| (3,517,013 | ) |
|
| (6,417,444 | ) |
|
| (8,238,500 | ) |
Income taxes |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net loss |
| $ | (3,306,917 | ) |
| $ | (3,517,013 | ) |
| $ | (6,417,444 | ) |
| $ | (8,238,500 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated preferred stock dividend |
|
| (121,703 | ) |
|
| (119,000 | ) |
|
| (242,518 | ) |
|
| (214,667 | ) |
Deemed additional dividend on preferred stock dividend due the beneficial conversion feature |
|
| (51,814 | ) |
|
| (49,373 | ) |
|
| (103,185 | ) |
|
| (85,680 | ) |
Deemed dividend on issuance on Series B convertible preferred stock due to beneficial conversion feature |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,624,836 | ) |
Net loss attributable to common stockholders |
|
| (3,480,434 | ) |
|
| (3,685,386 | ) |
|
| (6,763,147 | ) |
|
| (11,163,683 | ) |
Net Loss Per Common Share, Basic and Diluted |
| $ | (0.09 | ) |
| $ | (0.14 | ) |
| $ | (0.19 | ) |
| $ | (0.50 | ) |
Weighted Average Number of Common Shares Outstanding |
|
| 36,774,571 |
|
|
| 25,702,352 |
|
|
| 35,708,731 |
|
|
| 22,484,840 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.
4 |
Table of Contents |
Unaudited Condensed Consolidated Statements of Cash Flows
|
| Six Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2018 |
|
| 2017 |
|
| 2019 |
| 2018 |
| |||||
Operating Activities |
|
|
|
|
|
|
|
|
|
| ||||||
Net Loss |
| $ | (8,238,500 | ) |
| $ | (3,382,966 | ) |
| $ | (6,417,444 | ) |
| $ | (8,238,500 | ) |
Adjustments to reconcile net loss from operations to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
| ||||||
Stock-based compensation |
| 1,421,745 |
| 427,880 |
|
| 572,285 |
| 1,421,745 |
| ||||||
Amortization of deferred financing cost |
| 982,436 |
| 245,609 |
| |||||||||||
Write off of deferred financing costs |
| — |
| 982,436 |
| |||||||||||
Equity in loss from joint venture |
| 2,801,772 |
| - |
|
| 3,257,350 |
| 2,801,772 |
| ||||||
Changes in operating working capital items: |
|
|
|
|
|
|
|
|
|
| ||||||
Accounts receivable - fees and reimbursable project costs |
| 10,400 |
| 377,545 |
|
| — |
| 10,400 |
| ||||||
Other receivable from joint venture |
| (414,957 | ) |
| - |
|
| (414,021 | ) |
| (414,957 | ) | ||||
Prepaid expenses and other assets |
| (37,794 | ) |
| (50,384 | ) | ||||||||||
Prepaid expenses and other current assets |
| (118,059 | ) |
| (37,794 | ) | ||||||||||
Accounts payable and accrued liabilities |
| 254,131 |
| (48,540 | ) |
|
| 210,650 |
|
|
| 254,131 |
| |||
Deferred lease abandonment liability |
|
| - |
|
|
| (72,186 | ) | ||||||||
Net Cash Used In Operating Activities |
|
| (3,220,767 | ) |
|
| (2,503,042 | ) | ||||||||
Net Cash Used in Operating Activities |
|
| (2,909,239 | ) |
|
| (3,220,767 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Investing Activities |
|
|
|
|
|
|
|
|
|
| ||||||
Investment in joint venture |
| (5,217,000 | ) |
| - |
|
| (3,540,000 | ) |
| (5,217,000 | ) | ||||
Patent costs |
|
| (138,980 | ) |
|
| (115,172 | ) |
|
| (128,771 | ) |
|
| (138,980 | ) |
Net Cash Used In Investing Activities |
|
| (5,355,980 | ) |
|
| (115,172 | ) | ||||||||
Net Cash Used in Investing Activities |
|
| (3,668,771 | ) |
|
| (5,355,980 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Financing Activities |
|
|
|
|
|
|
|
|
|
| ||||||
Net proceeds from the issuance of common stock |
| 25,868,716 |
| 3,025,544 |
|
| 2,916,399 |
| 25,868,716 |
| ||||||
Net proceeds from the issuance of preferred stock |
| 3,900,001 |
| - |
|
|
| — |
|
|
| 3,900,001 |
| |||
Restricted cash |
|
| - |
|
|
| (47 | ) | ||||||||
Net Cash Provided by Financing Activities |
|
| 29,768,717 |
|
|
| 3,025,497 |
|
|
| 2,916,399 |
|
|
| 29,768,717 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net Increase In Cash and Cash Equivalents |
| 21,191,970 |
| 407,283 |
| |||||||||||
Net (Decrease) Increase in Cash and Cash Equivalents |
| (3,661,611 | ) |
| 21,191,970 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and Cash Equivalents, Beginning of Period |
|
| 4,515,398 |
|
|
| 3,584,877 |
|
|
| 24,637,295 |
|
|
| 4,515,398 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and Cash Equivalents, End of Period |
| $ | 25,707,368 |
|
| $ | 3,992,160 |
|
| $ | 20,975,684 |
|
| $ | 25,707,368 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
|
|
|
| ||||||
Cash paid during the period: |
|
|
|
|
|
|
|
|
|
| ||||||
Interest paid |
| $ | - |
|
| $ | - |
|
| $ | — |
|
| $ | — |
|
Income taxes paid |
| $ | - |
|
| $ | - |
|
| $ | — |
|
| $ | — |
|
Non-Cash Financing Activity: |
|
|
|
|
|
|
|
|
|
| ||||||
Deemed dividend on issuance Series B convertible preferred stock due to beneficial conversion feature |
| $ | 2,624,836 |
|
| $ | - |
|
| $ | — |
|
| $ | 2,624,836 |
|
Accumulated preferred stock dividend |
| $ | 214,667 |
|
| $ | 98,000 |
|
| $ | 345,703 |
|
| $ | 214,667 |
|
Decrease in accrued liabilities - stock-based compensation |
| $ | - |
|
| $ | 121,720 |
| ||||||||
Conversion of Series A convertible preferred stock to common stock and payment of paid-in-kind dividends to Series A preferred stockholder |
| $ | 91,635 |
|
| $ | — |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
5 |
Table of Contents |
Unaudited Condensed Consolidated StatementStatements of Changes in Stockholders’ Equity
|
| Series A |
| Series B |
|
|
| Additional |
|
|
|
|
|
| Series A |
| Series B |
|
|
| Additional |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
|
| Preferred Stock |
| Preferred Stock |
| Common Stock |
| Paid-in |
| Accumulated |
| Total |
|
| Preferred Stock |
| Preferred Stock |
| Common Stock |
| Paid-in |
| Accumulated |
| Total |
| ||||||||||||||||||||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
|
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity |
| ||||||||||||||||||||||||||
Balance - December 31, 2016 |
| 1,020,000 |
| $ | 1,020 |
| - |
| $ | - |
| 7,112,143 |
| $ | 7,112 |
| $ | 86,266,075 |
| $ | (80,716,617 | ) |
| $ | 5,557,590 |
| ||||||||||||||||||||||||||||||||||||||||||||||
Consulting fees paid in stock - non-cash payment of accrued expenses |
| - |
| - |
| - |
| - |
| 102,975 |
| $ | 103 |
| $ | 121,617 |
| $ | - |
| $ | 121,720 |
| |||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued - registered offerings – net of offering costs |
| - |
| - |
| - |
| - |
| 5,236,001 |
| 5,236 |
| 6,021,828 |
| - |
| 6,027,064 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Cashless exercise of stock warrants |
| - |
| - |
| - |
| - |
| 286,584 |
| 287 |
| (287 | ) |
| - |
| - |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation |
| - |
| - |
| - |
| - |
| - |
| - |
| 1,193,306 |
| - |
| 1,193,306 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss -year |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (7,104,897 | ) |
|
| (7,104,897 | ) | ||||||||||||||||||||||||||||||||||||
Balance – December 31, 2017 |
| 1,020,000 |
| $ | 1,020 |
| - |
| $ | - |
| 12,737,703 |
| $ | 12,738 |
| $ | 93,602,539 |
| $ | (87,821,514 | ) |
| $ | 5,794,783 |
| ||||||||||||||||||||||||||||||||||||||||||||||
Balance – January 1, 2018 |
| 1,020,000 |
| $ | 1,020 |
| - |
| $ | - |
| 12,737,703 |
| $ | 12,738 |
| $ | 93,602,539 |
| $ | (87,821,514 | ) |
| $ | 5,794,783 |
| ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Issuance of Preferred Stock |
| - |
| - |
| 2,666,667 |
| 2,667 |
| - |
| - |
| 3,897,334 |
| - |
| 3,900,001 |
|
| — |
| — |
| 2,666,667 |
| 2,667 |
| — |
| — |
| 3,897,334 |
| — |
| 3,900,001 |
| ||||||||||||||||||||||||||||||||||
Shares issued - registered offerings – net of offering costs |
| - |
| - |
| - |
| - |
| 15,262,528 |
| 15,263 |
| 25,853,453 |
| - |
| 25,868,716 |
|
| — |
| — |
| — |
| — |
| 10,693,535 |
| 10,694 |
| 20,711,521 |
| — |
| 20,722,215 |
| ||||||||||||||||||||||||||||||||||
Cashless exercise of stock warrants |
| - |
| - |
| - |
| - |
| 496,644 |
| 496 |
| (496 | ) |
| - |
| - |
|
| — |
| — |
| — |
| — |
| 496,644 |
| 496 |
| (496 | ) |
| — |
| — |
| ||||||||||||||||||||||||||||||||
Stock-based compensation |
| - |
| - |
| - |
| - |
| - |
| - |
| 1,421,745 |
| - |
| 1,421,745 |
|
|
|
|
|
| — |
| — |
| — |
| — |
| 1,273,035 |
| — |
| 1,273,035 |
| ||||||||||||||||||||||||||||||||||
Conversion for payment of dividends, 111,260 preferred stock converted to 124,882 Common |
| (111,260 | ) |
| (111 | ) |
| - |
| - |
| - |
| - |
| 111 |
| - |
| - |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the three months ended March 31, 2018 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,721,487 | ) |
|
| (4,721,487 | ) | ||||||||||||||||||||||||||||||||||||
Balance – March 31, 2018 |
| 1,020,000 |
| $ | 1,020 |
| 2,666,667 |
| $ | 2,667 |
| 23,927,882 |
| $ | 23,928 |
| $ | 119,483,933 |
| $ | (92,543,001 | ) |
| $ | 26,968,547 |
| ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued - registered offerings – net of offering costs |
| — |
| — |
| — |
| — |
| 4,568,993 |
| 4,569 |
| 5,141,932 |
| — |
| 5,146,501 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation |
| — |
| — |
| — |
| — |
| — |
| — |
| 148,710 |
| — |
| 148,710 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion for payment of dividends, 111,260 preferred stock converted to 124,882 Common stock |
| (111,260 | ) |
| (111 | ) |
| — |
| — |
| — |
| — |
| 111 |
| — |
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued in payment of dividend |
| - |
| - |
| - |
| - |
| 124,883 |
| 125 |
| (125 | ) |
| - |
| - |
|
| — |
| — |
| — |
| — |
| 124,883 |
| 125 |
| (125 | ) |
| — |
| — |
| ||||||||||||||||||||||||||||||||
Net loss for the period |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (8,238,500 | ) |
|
| (8,238,500 | ) | ||||||||||||||||||||||||||||||||||||
Balance - June 30, 2018 (unaudited) |
|
| 908,740 |
|
| $ | 909 |
|
|
| 2,666,667 |
|
| $ | 2,667 |
|
|
| 28,621,758 |
|
| $ | 28,622 |
|
| $ | 124,774,561 |
|
| $ | (96,060,014 | ) |
| $ | 28,746,745 |
| ||||||||||||||||||||||||||||||||||||
Net loss for the three months ended June 30, 2018 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,517,013 | ) |
|
| (3,517,013 | ) | ||||||||||||||||||||||||||||||||||||
Balance – June 30, 2018 |
| 908,740 |
| $ | 909 |
| 2,666,667 |
| $ | 2,667 |
| 28,621,758 |
| $ | 28,622 |
| $ | 124,774,561 |
| $ | (96,060,014 | ) |
| $ | 28,746,745 |
| ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued - registered offerings – net of offering costs |
| — |
| — |
| — |
| — |
| 1,767,918 |
| 1,767 |
| 1,730,192 |
| — |
| 1,731,959 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation |
| — |
| — |
| — |
| — |
| — |
| — |
| 529,649 |
| — |
| 529,649 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion 95,116 preferred Shares converted to 110,530 shares of Common Shares |
| (95,116 | ) |
| (95 | ) |
| — |
| — |
| 110,530 |
| 111 |
| (16 | ) |
| — |
| — |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued in payment of dividend |
| — |
| (1 | ) |
| — |
| — |
| 729 |
| 1 |
| — |
| — |
| — |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the three months ended September 30, 2018 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,214,586 | ) |
|
| (4,214,586 | ) | ||||||||||||||||||||||||||||||||||||
Balance – September 30, 2018 |
| 813,624 |
| $ | 813 |
| 2,666,667 |
| $ | 2,667 |
| 30,500,935 |
| $ | 30,501 |
| $ | 127,034,386 |
| $ | (100,274,600 | ) |
| $ | 26,793,767 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements
6 |
Table of Contents |
|
| Series A |
|
| Series B |
|
|
|
|
| Additional |
|
|
|
|
|
|
| ||||||||||||||||||
|
| Preferred Stock |
|
| Preferred Stock |
|
| Common Stock |
|
| Paid-in |
|
| Accumulated |
|
| Total |
| ||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
| |||||||||
Shares issued - registered offerings – net of offering costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,361,155 |
|
|
| 2,362 |
|
|
| 1,866,777 |
|
|
| — |
|
|
| 1,869,139 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 428,511 |
|
|
| — |
|
|
| 428,511 |
|
Net loss for the three months ended December 31, 2018 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,223,022 | ) |
|
| (3,223,022 | ) |
Balance – December 31, 2018 |
|
| 813,624 |
|
| $ | 813 |
|
|
| 2,666,667 |
|
| $ | 2,667 |
|
|
| 32,862,090 |
|
| $ | 32,863 |
|
| $ | 129,329,674 |
|
| $ | (103,497,622 | ) |
| $ | 25,868,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued - registered offerings – net of offering costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,287,235 |
|
|
| 3,286 |
|
|
| 1,983,199 |
|
|
| — |
|
|
| 1,986,485 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 335,013 |
|
|
| — |
|
|
| 335,013 |
|
Net loss for the three months ended March 31, 2019 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,110,527 | ) |
|
| (3,110,527 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – March 31, 2019 |
|
| 813,624 |
|
| $ | 813 |
|
|
| 2,666,667 |
|
| $ | 2,667 |
|
|
| 36,149,325 |
|
| $ | 36,149 |
|
| $ | 131,647,886 |
|
| $ | (106,608,149 | ) |
| $ | 25,079,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion 27,747 Preferred Shares converted to 33,383 shares of Common Shares |
|
| (27,747 | ) |
|
| (28 | ) |
|
| — |
|
|
| — |
|
|
| 33,383 |
|
|
| 34 |
|
|
| (6 | ) |
|
| — |
|
|
| — |
|
Shares issued - registered offerings – net of offering costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,423,206 |
|
|
| 1,423 |
|
|
| 928,491 |
|
|
| — |
|
|
| 929,914 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 237,272 |
|
|
| — |
|
|
| 237,272 |
|
Net loss for the three months ended June 30, 2019 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,306,917 | ) |
|
| (3,306,917 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – June 30, 2019 |
|
| 785,877 |
|
| $ | 785 |
|
|
| 2,666,667 |
|
| $ | 2,667 |
|
|
| 37,605,914 |
|
| $ | 37,606 |
|
| $ | 132,813,643 |
|
| $ | (109,915,066 | ) |
| $ | 22,939,635 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7 |
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. Basis of Presentation, Summary of Significant Accounting Policies, and Nature of Operations
Basis of presentation
The accompanying unaudited condensed consolidated financial statements of Lightbridge Corporation and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America, including a summary of the Company’s significant accounting policies, have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2017,2018, included in our Annual Report on Form 10-K for the year ended December 31, 2017.2018.
In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three and six-month periods have been made. Results for the interim period presented are not necessarily indicative of the results that might be expected for the entire fiscal year. When used in these notes, the terms “Lightbridge”, "Company,“Company,” "we,“we,” "us"“us” or "our"“our” mean Lightbridge Corporation and all entities included in our condensed consolidated financial statements.
The Company was formed on October 6, 2006, when Thorium Power, Ltd., which had been formedwas incorporated in the Statestate of Nevada on February 2, 1999, merged with Thorium Power, Inc., (“TPI”), which had been formedwas incorporated in the Statestate of Delaware on January 8, 1992. On September 29, 2009, wethe Company changed ourits name from Thorium Power, Ltd. to Lightbridge Corporation.Corporation and began its focus on developing and commercializing metallic nuclear fuels. We are engaged in two operating business segments: our Technology Business Segmenta nuclear fuel technology Company developing and our Consulting Business Segment (see Note 8-Business Segment Results).commercializing next generation nuclear fuel technology.
Liquidity
As of June 30, 2018, the Company has an accumulated deficit of approximately $96.1 million, representative of recurring losses since inception. The Company has incurred recurring losses since inception because it isadopted Accounting Standards Codification, (“ASC”), 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a development stage nuclear fuel development company. The Company expectsGoing Concern. This guidance amended the existing requirements for disclosing information about an entity’s ability to continue as a going concern and explicitly requires management to incur losses becauseassess an entity’s ability to continue as a going concern and to provide related disclosure in certain circumstances. The following information reflects the results of costsmanagement’s assessment, plans, and expenses related toconclusion of the Company’s research and development expenses and corporate general and administrative expenses.ability to continue as a going concern.
At June 30, 2018,2019, the Company had $25.7approximately $21.0 million in cash and cash equivalents and had a working capital surplus of approximately $24.8$21.2 million. The Company had expended substantial funds on its research and development activities and expects to increase this spending through its equity contributions to Enfission, LLC. The Company’s net cash used in operating activities during the six months ended June 30, 2018 was approximately $3.2 million, and current projections indicate that the Company will have continued negative cash flows for the foreseeable future. Net losses incurred for the six months ended June 30, 2018 and 2017 amounted to approximately $8.2 million and $3.4 million, respectively.
The amount of cash and cash equivalents on the balance sheet as of the date of the filing is approximately $26 million. The Company also may consider other plans to fund operations including: (1) raising additional capital through debt financings or from other sources; (2) additional funding through new relationships to help fund future research and development costs (e.g., Department of Energy funding); and (3) additional capital raises. The Company may issue securities, including common stock, preferred stock and stock purchase contracts through private placement transactions or registered public offerings, pursuant to its registration statement on Form S-3 filed with the Securities and Exchange Commission (“SEC”) on March 15, 2018 and declared effective on March 23, 2018. There can be no assurance as to the availability or terms upon which financing and capital might be available. The Company’s future liquidity needs, and ability to address those needs, will largely be determined by the success of the development of its nuclear fuel and key nuclear development and regulatory events and its business decisions in the future.
The Company believes that its current financial resources, as of the date of the issuance of these financial statements, are sufficient to fund its current 12 month operating budget, alleviating the substantial doubt raised by our historical operating results and satisfying our estimated liquidity needs 12 months from the issuance of these financial statements.
The Company has expended substantial funds on its research and development activities to date and currently expects to continue this spending through its equity contributions to its joint venture company, Enfission, LLC. The Company’s net cash used in operating activities during the six months ended June 30, 2019 was approximately $2.9 million, and the Company will have continued negative cash flows for the foreseeable future. Net losses incurred for the six months ended June 30, 2019 and 2018 amounted to approximately $6.4 million and $8.2 million, respectively. As of June 30, 2019, the Company has an accumulated deficit of approximately $109.9 million, representative of recurring losses since inception. The Company has incurred recurring losses since inception because it is a development stage nuclear fuel development company. The Company expects to continue to incur losses due to future costs and expenses related to the Company’s research and development expenses and general and administrative expenses.
The amount of cash and cash equivalents on the balance sheet as of the date of this filing is approximately $21 million. The Company also may consider other plans to fund operations including: (1) raising additional capital through equity issuances, debt financings or from other sources; (2) additional funding through new relationships to help fund future research and development costs (e.g., potential future Department of Energy (DOE) funding); and (3) other capital raises. The Company may issue securities, including common stock, preferred stock, and stock purchase contracts through private placement transactions or registered public offerings, pursuant to its registration statement on Form S-3 filed with the SEC on March 15, 2018 and declared effective on March 23, 2018. There can be no assurance as to the availability or terms upon which financing and capital might be available. The Company’s future liquidity needs, and ability to address those needs, will largely be determined by the success of the development of its nuclear fuel, key nuclear development and regulatory events and its business decisions in the future.
Equity Method Investment – Enfission, LLC - Joint Venture with Framatome Inc.
In January 2018, Lightbridge and Framatome Inc., a subsidiary of Framatome SAS (formerly part of AREVA SAS), finalized and launched Enfission, LLC (“Enfission”), a 50-50 joint venture company, to develop, license, and sell nuclear fuel assemblies based on Lightbridge-designed metallic fuel technology and other advanced nuclear fuel intellectual property. Framatome SAS and Framatome Inc. (collectively “Framatome”) is a global leader in designing, building, servicing, and fueling reactor fleet and advancing nuclear energy and is majority owned by Électricité de France, the world’s largest owner and operator of nuclear power plants. Lightbridge and Framatome began joint fuel development and regulatory licensing work under previously signed agreements initiated in March 2016. The joint venture Enfission is a Delaware-based limited liability company that was formed on January 24, 2018.
Management has determined that its investment in Enfission should be accounted for under the equity method of accounting. Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s condensed consolidated balance sheets and condensed consolidated statements of operations; however, the Company’s share of the losses of the investee company is reported in the “Equity in loss from joint venture” line item in the condensed consolidated statements of operations, and the Company’s carrying value in an equity method investee company is reported in the “Investment in joint venture” or “Investee losses in excess of investment” line item in the condensed consolidated balance sheets.
The Company allocates income (loss)or loss utilizing the hypothetical liquidation book value ("HLBV"(“HLBV”) method, in which the Company allocates income or loss based on the change in each JV member’s claim on the net assets of the JV’s operating agreement at period end after adjusting for any distributions or contributions made during such period. The Company uses this method because of the difference between the distribution rights and priorities set forth in the Enfission operating agreement and what is reflected by the underlying percentage ownership interests of the Joint Venture. Additionally, if
We evaluate on a quarterly basis, whether our investment accounted for under the Company'sequity method of accounting, has an other than temporary impairment (“OTTI”). An OTTI occurs when the estimated fair value of an investment is below the carrying value in an equity method investment is zero and the Company hasdifference is determined not guaranteed any obligationslikely to be recoverable. This evaluation requires significant judgment regarding, but not limited to, the severity and duration of the investee, nor is it requiredimpairment; the ability and intent to provide additional funding tohold the investee,security until recovery; financial condition, liquidity, and near-term prospects of the Company will not recognize its share of any reported losses by the investee until future equity contributions or earnings are generated to offset previously unrecognized losses.issuer; specific events; and other factors.
Basis of Consolidation
These condensed consolidated financial statements include the accounts of Lightbridge, a Nevada corporation, and our wholly-owned subsidiaries, TPI, a Delaware corporation and Lightbridge International Holding LLC, a Delaware limited liability company. These wholly-owned subsidiaries are inactive. All significant intercompany transactions and balances have been eliminated in consolidation. Translation gains and losses for the three and six months ended June 30, 2018 and 2017 were not significant.
As of January 24, 2018, the Company owns a 50% interest in Enfission –accounted– accounted for using the equity method of accounting (Note 3)(see Note 3. Investment in Joint Venture / Investee Losses in Excess of Investment). Enfission is deemed to be a variable interest entity ("VIE"(“VIE”) under the VIE model of consolidation because it currently does not have sufficient funds to finance its operations and will require significant additional equity or subordinated debt financing. The Company has determined that it is not the primary beneficiary of the VIE since it does not have the power to direct the activities that most significantly impact the VIE’s performance.
In determining whether we arethe Company is the primary beneficiary and whether we haveit has the right to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE, we evaluatethe Company evaluates all ourits economic interests in the entity, regardless of form. This evaluation considers all relevant factors of the entity’s structure including:including the entity’s capital structure, contractual rights to earnings (losses) as well as other contractual arrangements that have potential to be economically significant. Although we havethe Company has the obligation to absorb the losses as of this reporting period, weit has concluded that we areit is not the primary beneficiary since the major decision making for all significant economic activities require the approval of both the Company and Framatome. The significant economic activities identified were financing activities; research and development activities; licensing activities; manufacturing of fuel assembly product activities; and marketing and sales activities. The evaluation of each of these factors in reaching a conclusion about the potential significance of our economic interests and control is a matter that requires the exercise of professional judgment.
Certain Risks, Uncertainties and Concentrations
The Company is an early stage company and will need additional funding by way of strategic alliances, government grants, further offerings of equity securities, an offering of debt securities, or a financing through a bank in order to support the remaining research and development activities required to further enhance and complete the development of our fuel products to a commercial stage.
The Company participates in a government-regulated industry. Our operating results are affected by a wide variety of factors including decreases in the use or public favor of nuclear power, the need for additional research and development of our metallic fuel, our joint venture operations within Enfission, and our ability to protect our intellectual property. Due to these factors and potentially other factors, we may experience substantial period-to-period fluctuations in our future operating results. Potentially, a loss of a key officer, key management, and other personnel could impair our ability to successfully execute our business strategy, particularly when these individuals have acquired specialized knowledge and skills with respect to nuclear power and our operations.
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Our future operations and earnings may depend on the results of the Company’s operations outside the United States, including some of its research and development activities. There can be no assurance that the Company will be able to successfully continue to conduct such operations, and a failure to do so would have a material adverse effect on the Company’s research and development activities, financial position, results of operations, and cash flows. Also, the success of the Company’s operations will be subject to other numerous contingencies, some of which are beyond management’s control. These contingencies include general and regional economic conditions, competition, changes in government regulations and support for nuclear power, changes in accounting and taxation standards, inability to achieve overall long-term goals, future impairment charges, and global or regional catastrophic events. The Company may be subject to various additional political, economic, and other uncertainties.
Cash and Cash Equivalents
WeThe Company may at times invest ourits excess cash in savings accounts and US Treasury Bills. We classifyIt classifies all highly liquid investments with stated maturities of three months or less from date of purchase as cash equivalents and all highly liquid investments with stated maturities of greater than three months as marketable securities. We holdThe Company holds cash balances in excess of the federally insured limits of $250,000. We deemIt deems this credit risk not to be significant as our cash is held by twothree prominent financial institutions. We buyinstitutions in 2019 and hold2018. The Company buys and holds short-term US Treasury Bills from Treasury Direct to maturity. US Treasury Bills totaled approximately $10.0 million at June 30, 2019 and December 31, 2018. The remaining $11.0 million and $14.6 million at June 30, 2019 and December 31, 2018, respectively, are on deposit with three notable financial institutions with substantially all of the remaining $15.7$11.0 million on depositsand $14.6 million with twoone financial institutions.institution. Total cash and cash equivalents held, as reported on the accompanying condensed consolidated balance sheets, totaled approximately $25.7$21.0 million and $4.5$24.6 million at June 30, 20182019 and December 31, 2017,2018, respectively.
Technology Business Segment
Our primary business segment, based on future revenue potential, is to develop and commercialize innovative, proprietary nuclear fuel designs, which we expect will significantly enhance the nuclear power industry’s economics due to higher power output and improved safety margins.
We are focusing our technology development efforts on the metallic fuel with a potential power uprate of up to 10% and an operating cycle extended from 18 to 24 months in existing Westinghouse-type four-loop pressurized water reactors. Those reactors represent the largest segment of our global target market. Our metallic fuel could also be adapted for use in other types of water-cooled commercial power reactors, such as boiling water reactors, Russian-type VVER reactors, CANDU heavy water reactors, water-cooled small and modular reactors, as well as water-cooled research reactors.
Lightbridge has obtained and will continue to seek patent validation in key countries that either currently operate or are expected to build and operate a large number of suitable nuclear power reactors.
Consulting Business Segment
Our business model expanded with first consulting revenue in 2008. We have provided consulting and strategic advisory services to companies and governments planning to create or expand electricity generation capabilities using nuclear power plants.
Beneficial Conversion Feature of Convertible Preferred Stock
The Company accounts for the beneficial conversion feature on its convertible preferred stock in accordance with ASC 470-20, Debt with Conversion and Other Options. The Beneficial Conversion Feature (“BCF”) of convertible preferred stock is normally characterized as the convertible portion or feature that provides a rate of conversion that is below market value or in-the-money when issued. We recordThe Company records a BCF related to the issuance of convertible preferred stock when issued. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved.
To determine the effective conversion price, wethe Company first allocateallocates the proceeds received to the convertible preferred stock and then useuses those allocated proceeds to determine the effective conversion price. If the convertible instrument is issued in a basket transaction (i.e., issued along with other freestanding financial instruments), the proceeds should first be allocated to the various instruments in the basket. The intrinsic value of the conversion option should be measured using the effective conversion price for the convertible preferred stock on the proceeds allocated to that instrument. The effective conversion price represents proceeds allocable to the convertible preferred stock divided by the number of shares into which it is convertible. The effective conversion price is then compared to the per share fair value of the underlying common shares on the commitment date. The accounting for a BCF requires that the BCF be recognized by allocating the intrinsic value of the conversion option to additional paid-in capital, resulting in a discount on the convertible preferred stock. This discount should be accreted from the date on which the BCF is first recognized through the earliest conversion date for instruments that do not have a stated redemption date. The intrinsic value of the BCF is recognized as a deemed dividend on convertible preferred stock over a period specified in the guidance. In the case of both the Series A and Series B preferred shares, the holders of the shares had the right to convert beginning at the date of issuance with the result that the accretion of the related BCF was recognized immediately at issuance.
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When the Company’s preferred stock has dividends that are paid-in-kind (“PIK”) (i.e., the holder is paid in additional shares or liquidation/dividend rights), and either (1) neither the Company nor the holder has the option for the dividend to be paid in cash, or (2) the PIK amounts do not accrue to the holder if the instrument is converted prior to the PIK amount otherwise being accrued or due, additional BCF is recognized as dividends accrue to the extent that the per share fair value of the underlying common shares at the commitment date exceeds the conversion price.
Recently Adopted Accounting Pronouncements
Compensation – Stock Compensation — In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment AccountingAccounting., which ASU 2018-07 allows companies to account for nonemployee awards in the same manner as employee awards. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods. The Company elected the early adoption of this ASU on July 1, 2018. The adoption of ASU 2018-07 willdid not have a material impact on the condensed consolidated financial statements.
Compensation – Stock Compensation — In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. This new pronouncement has been adopted on January 1, 2018 and did not have a material effect on the Company’s financial position, results of operations or cash flows.
Financial Instruments— In JanuaryFebruary 2016, the FASB issued ASU 2016-01,2016-02, Financial Instruments (Subtopic 825-10) - Overall: RecognitionLeases (Topic 842). ASU 2016-02 amends existing lease accounting guidance and Measurementrequires recognition of Financial Assets and Financial Liabilities ("ASU 2016-01"). Thismost lease arrangements on the balance sheet. The adoption of this standard provides guidance on how entities measure certain equity investments and present changes in the fair value. This standard requires that entities measure certain equity investments that dodid not result in consolidation and are not accountedthe Company recognizing a right-of-use asset representing its rights to use the underlying asset for under the equity method at fair value and recognize any changes in fair value in net income.lease term with an offsetting lease liability. ASU 2016-012016-02 is effective for fiscal years beginning after December 31, 2017. This new pronouncement has been adopted on January 1,15, 2018, and didwith early adoption permitted. The adoption of this standard does not currently have a material effectimpact on the Company’s financial position, results of operations or cash flows.
Statement of Cash FlowsASU 2018-09, Codification Improvements — In 2016,This ASU represents changes in various Subtopics to clarify, correct errors, or make minor improvements. The amendments are not expected to have a significant effect on current accounting practice. Subtopics impacted by this ASU that are relevant to the FASB issuedCompany include Subtopic 220-10 Income Statement — Reporting Comprehensive Income-Overall, Subtopic 718-740 Compensation — Stock Compensation-Income Taxes, Subtopic 805-740 Business Combinations — Income Taxes, and Subtopic 820-10 Fair Value Measurement-Overall. Many of the amendments within this ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receiptsdo not require transition and Cash Payments and ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-15 addresses the presentation and classification of certain cash receipts and payments in the statement of cash flows. ASU 2016-18 is intended to reduce diversity in the presentation of restricted cash and restricted cash equivalents in the cash flows statement. The statement requires that restricted cash and restricted cash equivalents to be included as components of total cash and cash equivalents as presented on the statement of cash flows. These pronouncements go into effect for periodsare effective upon issuance. However, some are not effective until fiscal years beginning after December 15, 2017. This new pronouncement has been adopted on January 1, 2018 and2018. The amendments within this ASU did not have a material effectimpact on the Company’s financial position, results of operations or cash flows.
Revenue Recognition — In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which supersedes most current revenue recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations. ASU 2016-08 clarifies implementation guidance on principal versus agent considerations in ASU 2014-09. ASU 2016-10 was issued to clarify ASC Topic 606 related to (i) identifying performance obligations; and (ii) the licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers - Narrow-Scope Improvements and Practical Expedients, to clarify certain narrow aspects of Topic 606 such as assessing the collectability criterion, presentation of sales taxes and other similar taxes collected from customers, noncash consideration, contract modifications at transition, completed contracts at transition, and technical correction. The guidance is effective for the interim and annual periods beginning on or after December 15, 2017, and this new pronouncement was adopted on January 1, 2018. The guidance permits the use of either a retrospective or cumulative effect transition method. The Company has evaluated its prior various contracts subject to these updates and completed its assessment. The Company has concluded that the adoption of this pronouncement did not have a material effect on its condensed consolidated financial statements andor the related disclosures since we did not enter into any consulting revenue contracts with third parties in 2018.footnote disclosures.
Recent Accounting Pronouncements – To Be Adopted
Intangibles, Goodwill and Other — In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). To simplify the subsequent measurement of goodwill, ASU 2017-04 eliminates Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, ASU 2017-04 requires an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019. The Company will adopt ASU 2017-04 commencing in the first quarter of fiscal 2020. The Company does not believe this standard will have a material impact on its condensed consolidated financial statements or the related footnote disclosures.
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Leases ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework— In February 2016,Changes to the FASB issuedDisclosure Requirements for Fair Value Measurement — This ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which amends existing lease accounting guidancemodifies the disclosure requirements on fair value measurements in Topic 820, including the removal, modification to, and requires recognitionaddition of most lease arrangements on the balance sheet. The adoption of this standard will result in the Company recognizing a right-of-use asset representing its rights to use the underlying asset for the lease term with an offsetting lease liability.certain disclosure requirements. This ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018,2019 with early adoption permitted. The Company is currently evaluating the potential impactmajority of the adoption of this accounting pronouncementdisclosure changes are to its consolidated financial statements.be applied on a prospective basis. This new pronouncement isASU did not expected to have a material effectsignificant impact on the Company’s fair value disclosures and no future impact is expected to the Company’s condensed consolidated financial position, results of operations or cash flows.statements.
The Company does not believe that other standards, which have been issued but are not yet effective, will have a significant impact on its financial statements.
Note 2. Net Loss Per Share
Basic net loss per share is computed using the weighted-average number of common shares outstanding during the period except that it does not include unvested common shares subject to repurchase or cancellation. Diluted net income per share is computed using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options, warrants, restricted shares, and unvested common shares subject to repurchase or cancellation. The dilutive effect of outstanding stock options, restricted shares, restricted stock units, and warrants is not reflected in diluted earnings per share because we incurred net losses for the three months and six months ended June 30, 20182019 and 2017,2018, and the effect of including these potential common shares in the net loss per share calculations would be anti-dilutive and are therefore not included in the calculations.
Note 3. Investment in Joint Venture (Investee Losses in Excess of Investment)
Pursuant to the Enfission operating agreement, both partners agreed that Enfission will serve as an exclusive vehicle to develop, license, and sell nuclear fuel assemblies based on Company-designed metallic fuel technology and other advanced nuclear fuel intellectual property licensed to Enfission by the Company and Framatome or their affiliates. The joint venture builds on the joint fuel development and regulatory licensing work under previously signed agreements initiated in March 2016.
The Enfission operating agreement provided that the Company and Framatome each hold 50% of the total issued Class A voting membership units of the joint venture.
The Company'sCompany’s equity in losses in excess of its investment are accounted for under the equity method consistconsisted of the following as of June 30, 2018 (carrying amounts rounded2019 (rounded in millions of dollars)millions):
Investment Name |
| Ownership Interest |
|
| Carrying Amount |
|
| Ownership Interest |
|
| Carrying Amount |
| ||||
Enfission, LLC |
| 50 | % |
| $ | 2.4 |
|
| 50 | % |
|
|
| |||
Total contributions |
|
|
| $ | 9.1 |
| ||||||||||
Less: Share of the loss in investment in Enfission |
|
|
|
|
|
| (9.0 | ) | ||||||||
Total - Equity Method Investment |
|
|
| $ | 2.4 |
|
|
|
|
|
| $ | 0.1 |
|
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The Company invested approximately $5.2$9.1 million in Enfission and Framatome invested approximately $2.9 million of equity for the period from January 24, 2018 (Date of Inception of Enfission) to June 30, 2018.2019. The cash balance in Enfission at June 30, 20182019 was approximately $4.5$1.5 million. During the six-monthssix months ended June 30, 2018,2019, Enfission incurred a loss of approximately $2.8$4.5 million, and accordingly, the Company recorded its share of the loss in investment in Enfission, in accordance with the provisions in the joint venture operating agreement, of approximately $2.8$3.3 million in the accompanying condensed consolidated statement of operations. The Company’s cash position exceedsoperations for the approximate $10 million to $12 million that it is presently contractually bound to provide to Enfission. six months ended June 30, 2019.
The Company was committed to fund Enfission for its share of Enfission’s liabilities at June 30, 2019. The Company currently expects to continue providing additional equity contributions in 20182019 and for the foreseeable future.
Summarized balance sheet information for the Company’s equity method investee Enfission as of June 30, 2019 and December 31, 2018 is presented in the following table (rounded in millions of dollars)millions):
Current assets |
|
|
| |||||||||
|
| June 30, 2019 |
|
| December 31, 2018 |
| ||||||
Assets |
|
|
|
|
| |||||||
Cash |
| $ | 4.5 |
|
| $ | 1.5 |
| $ | 0.7 |
| |
Other current assets |
|
| 0.1 |
|
|
| 0.8 |
|
|
| 0.7 |
|
Total assets |
| $ | 4.6 |
|
| $ | 2.3 |
|
| $ | 1.4 |
|
Current liabilities |
| $ | 1.3 |
| ||||||||
|
|
|
|
|
| |||||||
Liabilities and equity |
|
|
|
|
| |||||||
Total liabilities |
| $ | 1.3 |
|
| $ | 2.5 |
| $ | 1.9 |
| |
Equity |
|
| (0.2 | ) |
|
| (0.5 | ) | ||||
Total liabilities and equity |
| $ | 2.3 |
|
| $ | 1.4 |
|
Summarized income statement information for the Company’s equity method investee Enfission is presented in the following table for the six months ended June 30, 2019 and for the period endedfrom January 24, 2018 (Date of Inception) to June 30, 2018 (rounded in millions):
|
| For the Six Months Ended June 30, 2019 |
| For the period from January 24, 2018 (Date of Inception) to June 30, 2018 |
| |||||||
Net sales and revenue |
| $ | 0.0 |
|
| $ | 0.0 |
|
| $ | 0.0 |
|
Research and development costs |
| 2.3 |
|
| 3.8 |
| 2.3 |
| ||||
Administrative expenses |
|
| 0.5 |
|
|
| 0.7 |
|
|
| 0.5 |
|
Total Operating Loss |
| $ | 2.8 |
|
| $ | 4.5 |
|
| $ | 2.8 |
|
Loss from operations |
| $ | 2.8 |
|
| $ | 4.5 |
|
| $ | 2.8 |
|
Net loss |
| $ | 2.8 |
|
| $ | 4.5 |
|
| $ | 2.8 |
|
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As of June 30, 2019, and December 31, 2018, the total receivable due from Enfission was approximately $0.4$0.5 million and $0.1 million, respectively, which represents consulting fees Lightbridge charged to Enfission and reimbursable expenses paid by Lightbridge on Enfission’s behalf.behalf (see Note 8. Related Party Transactions). Based on an evaluation of this equity method investment, we determined that no OTTI has occurred as of June 30, 2019.
Note 4. Accounts Payable and Accrued Liabilities
Accounts payable and accrued expenses (rounded in millions) consisted of the following:following (rounded in millions):
|
| June 30, |
|
| December 31, |
| ||
|
| 2018 |
|
| 2017 |
| ||
Trade payables |
| $ | 0.6 |
|
| $ | 0.3 |
|
Accrued expenses and other |
|
| 0.4 |
|
|
| 0.6 |
|
Accrued bonuses |
|
| 0.4 |
|
|
| 0.3 |
|
Total |
| $ | 1.4 |
|
| $ | 1.2 |
|
|
| June 30, |
|
| December 31, |
| ||
|
| 2019 |
|
| 2018 |
| ||
Trade payables |
| $ | 0.1 |
|
| $ | 0.1 |
|
Accrued expenses and other |
|
| 0.2 |
|
|
| 0.2 |
|
Accrued bonuses |
|
| 0.2 |
|
|
| 0.0 |
|
Total |
| $ | 0.5 |
|
| $ | 0.3 |
|
Note 5. Commitments and Contingencies
Commitments
Operating Leases
On December 22, 2015 we entered into a lease for newThe Company leases office space for a 12-month term with a monthly rent payment of approximately $6,500$15,000 per month plus additional charges. Thisfor office rent. The term of the lease was renewed for an additional one-year term inextends through December 2017.31, 2019.
The future minimum lease payments required under the non-cancelablenon-cancellable operating leases are as follows (rounded in millions):
Year ending December 31, |
| Amount |
|
| Amount |
| ||
2018 |
| $ | 0.1 |
| ||||
2019 |
| $ | 0.1 |
| ||||
Total minimum payments required |
| $ | 0.1 |
|
| $ | 0.1 |
|
Contingency
ContingencyLitigation
Litigation
A former Chief Financial Officer of the Company filed a complaint against the Company with the U.S.US Occupational Safety and Health Administration (the “OSHA Complaint”) on March 9, 2015. This complaint was closed and dismissed by OSHA in January 2018 without any findings against the Company. On March 14, 2018 an appeal was filed, and the Company will vigorously defend this appeal and believes that this appeal hearing will not result in any findings against the Company. As of June 30, 2019, and December 31, 2018, legal fees of approximately $16,000 and $4,000 were owed, respectively, and are expected to be paid in full by the Company’s insurance carriers.
Note 6. Research and Development Costs
ResearchLightbridge’s total corporate research and development costs, included in the caption research and development expenses in the accompanying condensed consolidated statement of operations amounted to approximately $0.5 million for each of the three months ended June 30, 2019 and 2018 and 2017, respectively, and approximately $1.4$1.5 million and $1.0$1.4 million for the six months ended June 30, 2019 and 2018, respectively. See Note 8 – Related Party Transactions regarding consulting fees charged to Enfission for research and 2017, respectively.development expenses incurred by Lightbridge on behalf of Enfission.
15 |
Table of Contents |
Note 7. Stockholders’ Equity and Stock-Based Compensation
At June 30, 2018,2019, there were 28,621,75837,605,914 common shares outstanding, and there were also outstanding warrants relating to 1,511,001844,337 shares of common stock, stock options relating to 3,970,7395,224,720 shares of common stock, 908,740785,877 shares of Series A convertible preferred stock convertible into 908,740785,877 shares of common stock (plus accrued dividends of $49,000,$483,708 relating to an additional 17,850176,208 common shares), and 2,666,667 shares of Series B convertible preferred stock convertible into 2,666,667 shares of common stock (plus accrued dividends of $116,667,$413,362, relating to an additional 77,778275,574 common shares), all totaling,37,774,533 47,579,297 shares of common stock and all common stock equivalents, including accrued preferred stock dividends, outstanding at June 30, 2018.
At December 31, 2017,2018, there were 12,737,70332,862,090 common shares outstanding, and there were also outstanding warrants relating to 1,210,905844,337 shares of common stock, stock options relating to 3,976,8845,604,154 shares of common stock, and 1,020,000813,624 shares of Series A convertible preferred stock convertible into 1,020,000813,624 shares of common stock (plus accrued dividends of $276,578,$407,382 relating to an additional 100,753148,403 common shares), and 2,666,667 shares of Series B convertible preferred stock convertible into 2,666,667 shares of common stock (plus accrued dividends of $262,856, relating to an additional 175,237 common shares), all totaling 19,046,24543,114,512 shares of common stock and all common stock equivalents, including accrued preferred stock dividends, outstanding at December 31, 2017.2018.
Common Stock Equity Offerings
Filing of New $75 Million Shelf Registration StatementATM Offerings
On March 15, 2018, the Company filed a new shelf registration statement on Form S-3, registering the sale of up to $75 million of the Company’s securities, which registration statement became effective on March 23, 2018.
Common Stock Equity Offerings
ATM Offering - 2018
On March 30, 2018,May 28, 2019, the Company entered into an at-the-market issuanceequity offering sales agreement (“New2019 ATM”) with B. Riley FBR, Inc. (the “Distribution Agent”Stifel, Nicolaus & Company, Incorporated (“Stifel”), pursuant to which the Company may issue and sell shares of its common stock from time to time through the Distribution AgentStifel as the Company’s sales agent. Sales of the Company’s common stock through the Distribution Agent, if any, will be made by any method that is deemed to be an “at-the-market” equity offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-223674) filed on March 15, 2018 with the Securities and Exchange Commission and declared effective on March 23, 2018,2018. Due to the base prospectus filed as partoffering limitations currently applicable to the Company under General Instruction I.B.6. of such registration statementForm S-3 and the Company’s public float as of May 28, 2019, and in accordance with the terms of the sales agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $13,500,000 through this prospectus supplement datedsupplement.
On March 30, 2018, the Company entered into an at-the-market issuance sales agreement (“2018 ATM”) with B. Riley FBR, Inc. (the “Distribution Agent”), pursuant to which registered the offerCompany could issue and salesell shares of up to $50 million ofits common stock underfrom time to time through the New ATM. Distribution Agent as the Company’s sales agent. Effective March 29, 2019, the Company and the Distribution Agent terminated this 2018 ATM agreement.
Sales under the New2019 ATM and the 2018 ATM that were made during the threesix months ended June 30, 2019 were 4.7 million shares that totaled gross proceeds of approximately $3.1 million. The Company records its ATM sales on a settlement date basis. A total of 37,000 shares sold on June 27, 2019 and June 28, 2019, for total gross proceeds of $24,000, were recorded with settlement dates in the first week in July 2019.
Sales under the 2018 ATM that were made during the six months ended June 30, 2018 was the sale ofwere 4.6 million shares that totaled gross proceeds of $5.4 million. Additionally, under the prior at-the-market agreement with B. Riley FBR, Inc. the Company received approximately $20.4 million andof net proceeds from its ATM during the remaining balance as of June 30,three months ended March 31, 2018, was $44.6 million.
Onwhich were made under prospectus supplements the Company filed on January 24, 2018, January 26, 2018, February 7, 2018, and March 2, 2018, the Company filed prospectus supplements registering an aggregate of approximately $22.6 million under the prior ATM agreement with B. Riley FBR, Inc., of which the Company sold approximately $20.4 million during the six months ended June 30, 2018. No additional sales may be made under the prior ATM agreement.
ATM Offering - 2017
On July 12, 2017, the Company entered into an ATM sales agreement with FBR Capital Markets & Co. and MLV & Co. LLC. The Company registered the sale of approximately $1.6 million under the ATM sales agreement on July 12, 2017 and sold all of such amount in the year ended December 31, 2017, through the issuance of approximately 1.4 million shares.
Table of Contents |
Preferred Stock Equity Offerings
Series B Preferred Stock - Securities Purchase Agreement
On January 30, 2018, the Company issued 2,666,667 shares of newly created Non-Voting Series B Convertible Preferred Stock (the “Series B Preferred Stock”) and associated warrants to purchase up to 666,664 shares of the Company’s common stock to the several purchasers for approximately $4.0 million or approximately $1.50 per share of Series B Preferred Stock and associated 0.25 of a warrant. Dividends accrue on the Series B Preferred Stock at the rate of 7% per year and will be paid in-kind through an increase in the liquidation preference per share. The liquidation preference, initially $1.50 per share of Series B Preferred Stock, is the base that is also used to determine the number of common shares into which the Series B Preferred Stock will convert as well as the calculation of the 7% dividend. Each share of Series B Preferred Stock is convertible at the option of the holder into such number of shares of the Company’s common stock equal to the liquidation preference divided by the conversion price of $1.50 per share subject to adjustments in the case of stock splits and stock dividends.
Holders of the Series B Preferred Stock are also entitled to participating dividends whenever dividends in cash securities (other than shares of the Company’s common stock paid on shares of common stock) or property are paid on common shares or shares of Series A Preferred Stock. The amount of the dividends will equal the amount to which the holder would be entitled if all shares of Series B Preferred Stock had been converted to common stock immediately prior to the record date.
The warrants havehad a per share of common stock exercise price of $1.875, which is subject to adjustment in the event of certain stock dividends and distributions, stock splits, recapitalizations, stock combinations, reclassifications or similar events affecting the Company’s common stock.$1.875. The warrants arewere exercisable upon issuance and will expireexpired six months after issuance.issuance on July 30, 2018. Warrants were also issued to the investment bank who introduced these investors, which were subsequently transferred to the principal of the investment bank, entitling the holder to purchase 133,432 common shares in the Company at an exercise price of $1.50 per share, up to and including January 30, 2021. On February 6, 2017 the Company entered into an agreement with anthis investment bank that introduced the Company to these investors.bank. The agreement calls for monthly retainer payments of $15,000, which are credited against any transaction introductory fee earned by the investment bank. This agreement calls for a 7% transaction introductory fee and warrants equal to 5% of the total transaction amount, at a strike price equal to the offering price for a three-year term.
The holders of the Series B Preferred Stock have no voting rights. In addition, as long as the shares of Series A Preferred Stock are outstanding, the Company may not take certain actions without first having obtained the affirmative vote or waiver of the holders of a majority of the outstanding shares of Series B Preferred Stock. The Company has the option at any time after August 2, 2019 to redeem some or all of the outstanding Series B Preferred Stock for an amount in cash equal to the liquidation preference plus the amount of any accrued but unpaid dividends of the Series B Preferred Stock being redeemed. The holders of the Series B Preferred Stock do not have the ability to require the Company to redeem the Series B Preferred Stock.
The accumulated dividend (unpaid) at June 30, 2019 and December 31, 2018 was approximately $117,000.$0.4 million and $0.3 million, respectively. The liquidation preference of the Series B Preferred Stock at June 30, 2018 is2019 was approximately $4.1 million.$4.4 million, which includes the accumulated dividend.
The Company has the option of forcing the conversion of all or part of the Series B Preferred Stock if at any time the average closing price of the Company’s common stock for a thirty-trading day period is greater than $5.4902 prior to August 2, 2019 or greater than $8.2353 at any time. The Company can only exercise this option only if it also requires the conversion of the Series A Preferred Stock in the same proportion as it is requiring of the Series B Preferred Stock.
Table of Contents |
Of the $4 million proceeds, approximately $0.3 million was allocated to the warrants with the remaining approximate $3.7 million allocated to the Series B Preferred Stock. The Series B Preferred Stock was initially convertible into 2,666,667 shares of common stock. The average of the high and low market prices of the common stock on January 30, 2018, the date of the closing of the sale of the preferred stock, was approximately $2.34 per share. At $2.34 per share the common stock into which the Series B Preferred Stock was initially convertible was valued at approximately $6.2 million. This amount was compared to the $3.6 million of proceeds allocated to the Series B Preferred Stock to indicate that a BCF of approximately $2.6 million existed at the date of issuance, which was immediately accreted as a deemed dividend because the conversion rights were immediately effective. This deemed dividend is included on the statement of operations for the six months ended June 30, 2018.
Additionally, comparison of the $1.50 conversion price of the PIK dividends to the $2.34 commitment date fair value per share indicates that each PIK dividend will accrete $0.84 of BCF as an additional deemed dividend for every $1.50 of PIK dividend accrued. Total cumulative deemed dividenddividends for this PIK dividend atas of June 30, 2019 and December 31, 2018 was $65,334. Total deemed dividend for this PIK dividend for the three months ended June 30, 2018 was $39,200.
Pursuant to the Securities Purchase Agreement for the Series B Preferred Stock, we terminated our stock purchase agreement with Aspire Capitalapproximately $0.1 million and this termination resulted in a write-off of our deferred financing costs asset of approximately $1 million.$0.1 million, respectively.
Series A Preferred Stock - Securities Purchase Agreement
On August 2, 2016, the Company issued 1,020,000 shares of newly created Non-Voting Series A Convertible Preferred Stock (the “Series A Preferred Stock”) to General International Holdings, Inc. (“GIH”) for $2.8 million or approximately $2.75 per share. Dividends accrue on the Series A Preferred Stock at the rate of 7% per year and will be paid in-kind through an increase in the liquidation preference per share. The liquidation preference, initially $2.7451 per share of Series A Preferred Stock, is the base that is also used to determine the number of common shares into which the Series A Preferred Stock will convert as well as the calculation of the 7% dividend. Each share of Series A Preferred Stock is convertible at the option of the holder into such number of shares of the Company’s common stock equal to the liquidation preference divided by the conversion price of $2.7451 per share subject to adjustments in the case of stock splits and stock dividends.
Holders of the Series A Preferred Stock are also entitled to participating dividends whenever dividends in cash securities (other than shares of the Company’s common stock) or property are paid on common shares. The amount of the dividends willis the amount to which the holder would be entitled if all shares of Series A Preferred Stock had been converted to common stock immediately prior to the record date.
The accumulated dividend (unpaid) at JuneOn September 30, 2018 and December 31, 2017 was approximately $0.1 million and $0.3 million dollars, respectively.the holders of the Series A Preferred Shares were issued 729 common shares in payment of the dividend for the month of April 2018. On the same date, the holders of the Series A Preferred Shares converted 95,116 preferred shares into 110,530 common shares. On April 30, 2018, the holders of the Series A Preferred Shares converted 111,260 preferred shares into 124,882 common shares.
On April 16, 2019, an investor converted 27,747 Series A Preferred Shares into the 33,383 common shares inissued as payment of the dividend leaving 785,877 Series A Preferred Shares outstanding with a liquidation preference of $2.6 million at April 30, 2019.
The accumulated dividend (unpaid) at MarchJune 30, 2019 and December 31, 2018 of $342,813, at $2.7451 per share.was approximately $0.5 million and $0.4 million, respectively. The Series A Preferred Shares outstanding atas of June 30, 20182019 was 908,740785,877 shares with a liquidation preference of approximately $2.9 million.$2.6 million, including accumulated dividends, while the Series A Preferred Shares outstanding as of December 31, 2018 was 813,624 shares with a liquidation preference of approximately $2.6 million, including accumulated dividends.
18 |
Table of Contents |
The Company has the option of forcing the conversion of the Series A Preferred Stock if the trading price for the Company’s common stock is more than two times the applicable conversion price (approximately $2.75 per share) before the third anniversary of the issuance of the Series A Preferred Stock, or if the trading price is more than three times the applicable conversion price following the third anniversary of issuance. The Company may also redeem the Series A Preferred Stock following the third anniversary of the issuance.
The Series A Preferred Stock was initially convertible into 1,020,000 shares of common stock. The average of the high and low market prices of the common stock on August 6, 2016, the date of the closing of the sale of the Series A Preferred Stock, was approximately $3.315 per share. At $3.315 per share the common stock into which the Series A Preferred Stock was initially convertible was valued at approximately $3.4 million. This amount was compared to the $2.8 million of proceeds of the Series A Preferred Stock to indicate that a BCF of approximately $0.6 million existed at the date of issuance in 2016, which was immediately accreted as a deemed dividend because the conversion rights were immediately effective.
Additionally, comparison of the $2.7451 conversion price of the PIK dividends to the $3.315 commitment date fair value per share indicates that each PIK dividend will accrete $0.5699 of BCF as an additional deemed dividend for every $2.7451 of PIK dividend accrued. The totalTotal deemed dividends for this PIK dividend for the three months and six months endedas of June 30, 2019 and December 31, 2018 was $10,173approximately $19,000 and $20,346,$41,000 dollars, respectively.
The holders of the Series A Preferred Stock have no voting rights. In addition, as long as 255,000 shares of Series A Preferred Stock are outstanding, the Company may not take certain actions without first having obtained the affirmative vote or waiver of the holders of a majority of the outstanding shares of Series A Preferred Stock. The Company has the option at any time after August 2, 2019 to redeem some or all of the outstanding Series A Preferred Stock for an amount in cash equal to the liquidation preference plus the amount of any accrued but unpaid dividends of the Series A Preferred Stock being redeemed. The holders of the Series A Preferred Stock do not have the ability to require the Company to redeem the Series A Preferred Stock. The liquidation preference of the Series A Preferred Stock at June 30, 2018 and December 31, 2017 was approximately $2.9 million and $3.1 million, respectively.
Warrants
|
| June 30, |
|
| December 31, |
| ||
Outstanding Warrants |
| 2018 |
|
| 2017 |
| ||
Issued to Investors on October 25, 2013, entitling the holders to purchase 250,000 common shares in the Company at an exercise price of $11.50 per common share up to and including April 24, 2021. In 2016, 59,450 of these warrants were exchanged for common stock, and all remaining warrant holders agreed to new warrant terms which excluded any potential net cash settlement provisions in exchange for a reduced exercise price of $6.25 per share. |
|
| 163,986 |
|
|
| 163,986 |
|
|
|
|
|
|
|
|
|
|
Issued to Investors on November 17, 2014, entitling the holders to purchase 546,919 common shares in the Company at an exercise price of $11.55 per common share up to and including May 16, 2022. On June 30, 2016, the warrant holders agreed to new warrant terms which excluded any potential net cash settlement provisions in order to classify them as equity in exchange for a reduced exercise price of $6.25 per share. |
|
| 546,919 |
|
|
| 546,919 |
|
|
|
|
|
|
|
|
|
|
Issued to an investor on August 10, 2016, entitling the holders to purchase 500,000 common shares in the Company at an exercise price of price of $0.01 per share, up to and including December 31, 2019. These warrants were exercised in January 2018. |
|
| - |
|
|
| 500,000 |
|
|
|
|
|
|
|
|
|
|
Issued to Series B Preferred Stock investors on January 30, 2018, entitling the holders to purchase 666,664 common shares in the Company at an exercise price of price of $1.875 per share, up to and including July 30, 2018. |
|
| 666,664 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Issued to an investment bank regarding the Series B Preferred Stock investment on January 30, 2018, entitling the holder to purchase 133,432 common shares in the Company at an exercise price of price of $1.50 per share, up to and including January 30, 2021. |
|
| 133,432 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| 1,511,001 |
|
|
| 1,210,905 |
|
|
| June 30, |
|
| December 31, |
| ||
Outstanding Warrants |
| 2019 |
|
| 2018 |
| ||
Issued to Investors on October 25, 2013, entitling the holders to purchase 250,000 common shares in the Company at an exercise price of $11.50 per common share up to and including April 24, 2021. In 2016, 59,450 of these warrants were exchanged for common stock, and all remaining warrant holders agreed to new warrant terms, which excluded any potential net cash settlement provisions in exchange for a reduced exercise price of $6.25 per share. |
|
| 163,986 |
|
|
| 163,986 |
|
|
|
|
|
|
|
|
|
|
Issued to Investors on November 17, 2014, entitling the holders to purchase 546,919 common shares in the Company at an exercise price of $11.55 per common share up to and including May 16, 2022. On June 30, 2016, the warrant holders agreed to new warrant terms, which excluded any potential net cash settlement provisions in order to classify them as equity in exchange for a reduced exercise price of $6.25 per share. |
|
| 546,919 |
|
|
| 546,919 |
|
|
|
|
|
|
|
|
|
|
Issued to an investment bank and subsequently transferred to a principal of the investment bank regarding the Series B Preferred Stock investment on January 30, 2018, entitling the holder to purchase 133,432 common shares in the Company at an exercise price of $1.50 per share, up to and including January 30, 2021. |
|
| 133,432 |
|
|
| 133,432 |
|
Total |
|
| 844,337 |
|
|
| 844,337 |
|
Table of Contents |
Stock-based Compensation – Stock Options
2015 Equity Incentive Plan
On March 25, 2015, the Compensation Committee and Board of Directors approved the Lightbridge Corporation 2015 Equity Incentive Plan (the “Plan”“2015 Plan”) to authorize grants of (a) Incentive Stock Options, (b) Non-qualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Awards, (e) Performance Share Awards, and (f) Performance Compensation Awards to the employees, consultants, and directors of the Company. The 2015 Plan initially authorized a total of 600,000 shares to be available for grant under the 2015 Plan, of which the amount was increased to 1,400,000 shares in May 2016, and 2,900,000 shares in May 2017. The Company held its 2018 Annual Meeting of Stockholders on2017, and 6,300,000 shares in May 4, 2018. At the Annual Meeting, the Company’s stockholders approved an amendment to the Plan to increase the number of shares authorized for issuance thereunder by 3,400,000 shares, resulting in total shares available under the Plan to 6,300,000 shares.
Total stock options outstanding at June 30, 20182019 and December 31, 2017,2018 under the 2006 Stock Plan and 2015 Equity Incentive Plan were 3,970,7395,224,720 and 3,976,8845,604,154, of which 3,585,0553,555,704 and 2,434,1483,935,138 of these options were vested at June 30, 20182019 and December 31, 2017,2018, respectively. Total
The components of stock-based compensation was approximately $0.1 million and $0.2 millionexpense included in the Company’s condensed consolidated statements of operations for the three months ended June 30, 2018 and 2017, respectively, and $1.4 million and $0.4 million for the six months ended June 30, 2019 and 2018 and 2017, respectively.are as follows:
Short-Term Incentive Stock Options and Non-Qualified Stock Option Grants
On August 30, 2017, the Compensation Committee and Board granted 31,425 non-qualified stock options with a strike price of $1.08 per share, which was the closing price of the Company’s stock on the grant date to a consultant of the Company, under the 2015 Equity Incentive Plan. These options have a 10-year contractual term, with a grant date fair market value of approximately $0.80 per option. These options vest annually in equal amounts over a three-year period.
On October 26, 2017, the Compensation Committee of the Board granted 523,319 short-term incentive stock options and non-qualified stock options under the 2015 Equity Incentive Plan to employees and consultants of the Company. All of these stock options vested immediately, with a strike price of $1.05 per share, which was the closing price of the Company’s stock on October 26, 2017. These options have a 10-year contractual term, with a fair market value of approximately $0.73 per option with an expected term of 5 years.
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Research and development expenses |
| $ | 113,488 |
|
| $ | 63,118 |
|
| $ | 283,622 |
|
| $ | 566,335 |
|
General and administrative expenses |
|
| 123,784 |
|
|
| 85,592 |
|
|
| 288,663 |
|
|
| 855,410 |
|
Total stock-based compensation expense |
| $ | 237,272 |
|
| $ | 148,710 |
|
| $ | 572,285 |
|
| $ | 1,421,745 |
|
Long-Term Non-Qualified Option Grants
On October 26, 2017In August 2018, the Compensation Committee of the Board of Directors granted 1,299,533 long-term non-qualified stock options relating to 1,752,791 shares to employees, consultants, and directors of the Company. These stock options have a strike price of $0.90. Out of this total, approximately 1,120,3221,540,263 stock options were issued to employees and consultants containing both performance-based and market-based vesting provisions.consultants. These performance-based and market-basednon-qualified stock options vest onlycontain service, performance, and market conditions of which one must be achieved in order for the options to vest. The service condition vests one-third annually over a 3-year period with accelerated vesting of these options occurring upon the applicable performance conditions or market conditions being satisfied by certain milestone dates, based on either a graded vesting schedule for each performance-based milestone or an accelerated 100% vesting for one performance-based milestone and one market-based milestone, as discussed below. The graded vesting schedule is based on the achievement of performance-based milestones related to the formation of the joint venture with Framatome and the development milestones for the fuel.dates. Accelerated vesting of all these option grants to employees and consultants would occur upon achievement of one or botheither of the following performance-basedperformance and market-based milestones:
| 1. | The Company’s closing stock price is above $3 per share for 10 consecutive trading days by December 31, |
| 2. | The Company secures at least |
The remaining approximately 212,528 stock options were service based options issued to the directors of the Company that vest over a one-year period on the anniversary date of the grant. All options granted have a 10-year contractual term.
Table of Contents |
Accelerated vesting occurred on January 25, 2018 whenIn accordance with ASC 718, awards with service, market and performance conditions for the Company’s stock price closed above $3employees and consultants were assigned a fair value of $0.69 per share and therefore, met the market-based milestoneawards with service conditions for 100% vesting of these option grants, as set forth in these stock option agreements.
The remaining approximately 179,211 stock options were issued to the directors of the Company and vest overwere assigned a one-yearfair value of $0.70 per share (total value of $1.2 million). The value was determined using a Monte Carlo simulation. The following assumptions were used in the Monte Carlo simulation model:
Expected volatility |
|
| 90 | % |
Risk free interest rate |
|
| 2.84 | % |
Dividend yield rate |
|
| 0 | % |
Weighted average years |
| 9.8 months |
| |
Closing price per share – common stock |
| $ | 0.88 |
|
The weighted average years remaining of expected life was itself calculated based on a Monte Carlo simulation under which it was assumed that the options would be exercised, if vested, when the stock reached a price of $4.50, otherwise they would be exercised at expiration, if in the money. The Company determined that it was not probable that the outcome of the above performance-based milestone (i.e., DOE funding) would be met prior to the annual vesting dates. In accordance with ASC 718-10-55-104 the Company then based the amortization period for the compensation expense on the anniversary dateshorter of the grant. These stock options have a strike price of $1.05 per share, which wasexplicit service periods or the closing price of“derived service period” based solely on the Company’s stock on October 26, 2017. All options granted have a 10-year contractual term.
In May 2018, shareholder approval was received on contingent grants and approximately 0.7 million of such long-term non-qualified stock options were issued under the 2015 Equity Stock Plan.market condition.
Stock option transactions to the employees, directors and consultants are summarized as follows for the six months ended June 30, 2018:2019:
|
| Options Outstanding |
|
| Weighted Average Exercise Price |
|
| Weighted Average Grant Date Fair Value |
|
| Options Outstanding |
|
| Weighted Average Exercise Price |
|
| Weighted Average Grant Date Fair Value |
| ||||||
Beginning of the period |
| 3,976,884 |
| $ | 3.58 |
| $ | 2.49 |
|
| 5,604,154 |
| $ | 2.72 |
| $ | 1.96 |
| ||||||
Granted |
| - |
| - |
| - |
|
| — |
| — |
| — |
| ||||||||||
Exercised |
| - |
| - |
| - |
|
| — |
| — |
| — |
| ||||||||||
Forfeited |
| - |
| - |
| - |
|
| (218,096 | ) |
| 2.86 |
| 2.13 |
| |||||||||
Expired |
|
| (6,145 | ) |
| $ | 46.82 |
|
| $ | 30.85 |
|
|
| (161,338 | ) |
|
| 14.74 |
|
|
| 11.04 |
|
End of the period |
|
| 3,970,739 |
|
| $ | 3.51 |
|
| $ | 2.49 |
|
|
| 5,224,720 |
|
| $ | 2.35 |
|
| $ | 1.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Options exercisable |
|
| 3,585,055 |
|
| $ | 3.60 |
|
| $ | 2.59 |
|
|
| 3,555,704 |
|
| $ | 3.03 |
|
| $ | 2.13 |
|
Stock option transactions toof the employees, directors, and consultants are summarized as follows for the year ended December 31, 2017:2018:
|
| Options Outstanding |
|
| Weighted Average Exercise Price |
|
| Weighted Average Grant Date Fair Value |
|
| Options Outstanding |
|
| Weighted Average Exercise Price |
|
| Weighted Average Grant Date Fair Value |
| ||||||
Beginning of the year |
| 2,172,581 |
| $ | 6.70 |
| $ | 4.83 |
|
| 3,976,884 |
| $ | 3.58 |
| $ | 2.49 |
| ||||||
Granted |
| 1,854,277 |
| 1.05 |
| 0.77 |
|
| 1,784,455 |
| 0.90 |
| 0.70 |
| ||||||||||
Exercised |
| - |
| - |
| - |
|
| — |
| — |
| — |
| ||||||||||
Forfeited |
| - |
| - |
| - |
|
| (143,980 | ) |
| 1.10 |
| 0.83 |
| |||||||||
Expired |
|
| (49,974 | ) |
|
| 45.53 |
|
|
| 38.70 |
|
|
| (13,205 | ) |
|
| 30.60 |
|
|
| 21.13 |
|
End of the year |
|
| 3,976,884 |
|
| $ | 3.58 |
|
| $ | 2.49 |
|
|
| 5,604,154 |
|
| $ | 2.72 |
|
| $ | 1.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Options exercisable |
|
| 2,434,148 |
|
| $ | 4.84 |
|
| $ | 3.36 |
|
|
| 3,935,138 |
|
| $ | 3.50 |
|
| $ | 2.49 |
|
Table of Contents |
A summary of the status of the Company’s non-vested options as of June 30, 20182019 and December 31, 2017,2018, and changes during the year ended December 31, 20172018 and the sixthree months ended June 30, 2018,2019, is presented below:
|
| Shares |
|
| Weighted- Average Fair Value Grant Date |
|
| Weighted Average Exercise Price |
|
| Shares |
|
| Weighted- Average Fair Value Grant Date |
|
| Weighted Average Exercise Price |
| ||||||
Non-vested – December 31, 2016 |
| 450,476 |
| $ | 3.60 |
| $ | 5.40 |
| |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Non-vested – December 31, 2017 |
| 1,542,736 |
| $ | 1.10 |
| $ | 1.58 |
| |||||||||||||||
Granted |
| 1,784,455 |
| 0.70 |
| 0.90 |
| |||||||||||||||||
Vested |
| (1,514,195 | ) |
| 1.27 |
| 1.58 |
| ||||||||||||||||
Forfeited |
|
| (143,980 | ) |
|
| 0.83 |
|
|
| 1.10 |
| ||||||||||||
Non-vested – December 31, 2018 |
| 1,669,016 |
| $ | 0.54 |
| $ | 0.91 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Granted |
| 1,854,277 |
| $ | 0.77 |
| $ | 1.05 |
|
| — |
| — |
| — |
| ||||||||
Vested |
| (762,017 | ) |
| 1.67 |
| 2.54 |
|
| — |
| — |
| — |
| |||||||||
Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
|
| — |
|
|
| — |
|
|
| — |
|
Non-vested – December 31, 2017 |
|
| 1,542,736 |
|
| $ | 1.10 |
|
| $ | 1.58 |
| ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Granted |
| - |
| - |
| - |
| |||||||||||||||||
Vested |
|
| (1,157,052 | ) |
| $ | 1.22 |
|
| $ | 1.13 |
| ||||||||||||
Forfeited |
|
|
|
|
|
|
| |||||||||||||||||
Non-vested – June 30, 2018 |
|
| 385,684 |
|
| $ | 2.69 |
|
| $ | 1.70 |
| ||||||||||||
Non-vested – June 30, 2019 |
|
| 1,669,016 |
|
| $ | 0.54 |
|
| $ | 0.91 |
|
The above tables include options issued and outstanding as of June 30, 2019 as follows:
i) | A total of 64,677 non-qualified 10-year options have been issued, and are outstanding, to advisory board members at exercise prices of $1.05 to $28.05 per share. |
ii) | A total of 4,728,255 incentive stock options and non-qualified 10-year options have been issued, and are outstanding, to the directors, officers, and employees at exercise prices of $0.90 to $43.25 per share. From this total, 1,378,186 options are outstanding to the Chief Executive Officer, who is also a director, with remaining contractual lives of 0.7 years to 9.1 years. All other options issued to directors, officers, and employees have a remaining contractual life ranging from 0.7 years to 9.1 years. |
iii) | A total of 431,788 non-qualified 3-10-year options have been issued, and are outstanding, to consultants at exercise prices of $0.90 to $43.25 per share. |
As of June 30, 2018,2019, there was approximately $0.2$0.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a weighted-average period of 0.50approximately 1.23 years. For stock options outstanding at June 30, 2018,2019, the intrinsic value was approximately $0. For stock options outstanding at December 31, 2017,2018, the intrinsic value was approximately $0.3 million. No stock options have been awarded in 2018.$0.
The above tables include options issued and outstanding as of June 30, 2018 and December 31, 2017, as follows:
|
|
|
|
|
|
Table of Contents |
The following table provides certain information with respect to the above-referenced stock options that arewere outstanding and exercisable at June 30, 2018:2019:
|
| Stock Options Outstanding |
| Stock Options Vested |
|
| Stock Options Outstanding |
| Stock Options Vested |
| ||||||||||||||||||||||||||||||||||||||||
|
| Weighted |
|
|
|
|
| Weighted |
|
|
|
|
|
| Weighted |
|
|
| Weighted |
|
|
| ||||||||||||||||||||||||||||
|
| Average |
|
|
|
|
| Average |
|
|
|
|
|
| Average |
|
|
| Average |
|
|
| ||||||||||||||||||||||||||||
|
| Remaining |
|
|
| Weighted |
| Remaining |
|
|
| Weighted |
|
| Remaining |
|
| Weighted |
| Remaining |
|
| Weighted |
| ||||||||||||||||||||||||||
|
| Contractual |
| Number |
| Average |
| Contractual |
| Number |
| Average |
|
| Contractual |
| Number |
| Average |
| Contractual |
| Number |
| Average |
| ||||||||||||||||||||||||
|
| Life |
| of |
| Exercise |
| Life |
| of |
| Exercise |
|
| Life |
| of |
| Exercise |
| Life |
| of |
| Exercise |
| ||||||||||||||||||||||||
Exercise Prices | Exercise Prices |
| -Years |
|
| Awards |
|
| Price |
|
| -Years |
|
| Awards |
|
| Price |
| Exercise Prices |
| -Years |
|
| Awards |
|
| Price |
|
| -Years |
|
| Awards |
|
| Price |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
$ | 1.05-$2.00 |
| 9.06 |
| 2,528,666 |
| $ | 1.18 |
| 9.04 |
| 2,318,030 |
| $ | 1.19 |
| 0.90-$1.04 |
| 9.10 |
| 1,616,402 |
| $ | 0.90 |
| — |
| — |
| $ | — |
| ||||||||||||||||||
$ | 2.01-$6.00 |
| 7.36 |
| 821,174 |
| $ | 4.59 |
| 7.36 |
| 651,429 |
| $ | 4.58 |
| 1.05-$2.00 |
| 8.07 |
| 2,397,193 |
| $ | 1.18 |
| 8.06 |
| 2,344,579 |
| $ | 1.19 |
| ||||||||||||||||||
$ | 6.01-$20.00 |
| 4.63 |
| 505,694 |
| $ | 7.47 |
| 4.60 |
| 500,391 |
| $ | 7.58 |
| 2.01-$6.00 |
| 6.36 |
| 787,760 |
| $ | 4.59 |
| 6.36 |
| 787,760 |
| $ | 4.59 |
| ||||||||||||||||||
$ | 20.00-$43.25 |
|
| 1.19 |
|
|
| 115,205 |
|
| $ | 29.85 |
|
|
| 1.19 |
|
|
| 115,205 |
|
| $ | 29.54 |
| 6.01-$20.00 |
| 4.84 |
| 359,224 |
| $ | 6.29 |
| 4.84 |
| 359,224 |
| $ | 6.29 |
| |||||||||
$ | 20.01-$43.25 |
| 0.64 |
|
| 64,141 |
|
| $ | 32.83 |
| 0.64 |
|
| 64,141 |
|
| $ | 32.83 |
| ||||||||||||||||||||||||||||||
| Total |
|
| 7.92 |
|
|
| 3,970,739 |
|
| $ | 3.51 |
|
|
| 7.86 |
|
|
| 3,585,055 |
|
| $ | 3.60 |
| Total |
| 7.82 |
| 5,224,720 |
| $ | 2.35 |
| 7.22 |
| 3,555,704 |
| $ | 3.03 |
|
The following table provides certain information with respect to the above-referenced stock options that arewere outstanding and exercisable at December 31, 2017:2018:
|
|
| Stock Options Outstanding |
|
| Stock Options Vested |
| ||||||||||||||||||
|
|
| Weighted |
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
|
|
| ||||||
|
|
| Average |
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
| ||||||
|
|
| Remaining |
|
|
|
|
| Weighted |
|
| Remaining |
|
|
|
|
| Weighted |
| ||||||
|
|
| Contractual |
|
| Number |
|
| Average |
|
| Contractual |
|
| Number |
|
| Average |
| ||||||
|
|
| Life |
|
| of |
|
| Exercise |
|
| Life |
|
| of |
|
| Exercise |
| ||||||
Exercise Prices |
| -Years |
|
| Awards |
|
| Price |
|
| -Years |
|
| Awards |
|
| Price |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
$ | 1.05-$2.00 |
|
| 9.56 |
|
|
| 2,528,666 |
|
| $ | 1.18 |
|
|
| 9.28 |
|
|
| 1,197,708 |
|
| $ | 1.33 |
|
$ | 2.01-$6.00 |
|
| 7.86 |
|
|
| 821,174 |
|
| $ | 4.59 |
|
|
| 7.86 |
|
|
| 651,429 |
|
| $ | 4.58 |
|
$ | 6.01-$20.00 |
|
| 5.12 |
|
|
| 505,694 |
|
| $ | 7.47 |
|
|
| 4.93 |
|
|
| 463,661 |
|
| $ | 7.58 |
|
$ | 20.01-$45.00 |
|
| 1.66 |
|
|
| 118,016 |
|
| $ | 29.85 |
|
|
| 1.66 |
|
|
| 118,016 |
|
| $ | 29.85 |
|
$ | 45.01-$72.00 |
|
| 0.18 |
|
|
| 3,334 |
|
| $ | 50.25 |
|
|
| 0.18 |
|
|
| 3,334 |
|
| $ | 50.25 |
|
| Total |
|
| 8.40 |
|
|
| 3,976,884 |
|
| $ | 3.58 |
|
|
| 7.70 |
|
|
| 2,434,148 |
|
| $ | 4.84 |
|
We use the historical volatility of our stock price over the number of years that matches the expected life of our stock option grants. Prior to January 1, 2015, we estimated the life of our option awards based on the full contractual term of the option grant. To date we have had very few exercises of our option grants, and those stock option exercises had occurred just before the contractual expiration dates of the option awards. Since the strike price of most of our outstanding awards is greater than the price of our stock, generally awards have expired at the end of the contractual term. For options granted after January 1, 2015, we have applied the simplified method to estimate the expected term of our option grants as it is more likely that these options may be exercised prior to the end of the term. We estimate the effect of future forfeitures of our option grants based on an analysis of historical forfeitures of unvested grants, as we have no better objective basis for that estimate. The expense that we have recognized related to our grants includes the estimate for future pre-vest forfeitures. We will adjust the actual expense recognized due to future pre-vest forfeitures as they occur.
Weighted average assumptions used in the Black Scholes option-pricing model for the service-based stock options issued for the years ended December 31, 2017, was as follows:
|
| Year ended |
| |
|
| December 31, |
| |
|
| 2017 |
| |
|
|
|
| |
Average risk-free interest rate |
|
| 2.15 | % |
Average expected life- years |
|
| 5.67 |
|
Expected volatility |
|
| 87.24 | % |
Expected dividends |
| $ | 0.0 |
|
In accordance with ASC 718, the market-based and performance-based long-term non-qualified option grants awards issued in 2017 were assigned a fair value of $0.80 per option share (total value of $0.9 million) on the date of grant using a Monte Carlo simulation. The following assumptions were used in the Monte-Carlo simulation model:
Expected volatility |
| 87.5% to 91 |
| |
Risk free interest rate |
| 2.24% to 2.42 |
| |
Dividend yield rate |
|
| 0 |
|
Weighted average remaining expected life |
| 4.2 years |
| |
Closing price per share – common stock |
| $ | 1.05 |
|
Stock-based compensation expense includes the expense related to (1) grants of stock options, (2) grants of restricted stock, (3) stock issued as consideration for some of the services provided by our directors and strategic advisory council members, and (4) stock issued in lieu of cash to pay bonuses to our employees and contractors. Grants of stock options and restricted stock are awarded to our employees, directors, consultants, and board members and we recognize the fair value of these awards ratably as they are earned. The expense related to payments in stock for services is recognized as the services are provided.
Stock-based compensation expense is recorded under the financial statement captions “Cost of services provided,” “General and administrative expenses” and “Research and development expenses” in the accompanying condensed consolidated statements of operations. Related income tax benefits were not recognized, as we incurred a tax loss for both periods.
Note 8. Business Segment Results
The Company has two principal business segments, (1) the technology business and (2) the consulting services business. These business segments were determined based on the nature of the operations and the services offered. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief decision-makers of the Company, in deciding how to allocate resources and in assessing performance. The Chief Executive Officer and Chief Financial Officer have been identified as the chief operating decision makers. The chief operating decision makers direct the allocation of resources to operating segments based on the profitability, the cash flows, and the business plans of each respective segment.
BUSINESS SEGMENT RESULTS - THREE MONTHS ENDED JUNE 30, 2018 AND 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
| Corporate and |
|
|
|
|
|
|
| |||||||||||
|
| Consulting |
|
| Technology |
|
| Eliminations |
|
| Total |
| ||||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
| ||||||||
Revenue |
| $ | - |
|
| $ | 14,425 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 14,425 |
|
Other income |
| $ | - |
|
| $ | - |
|
| $ | 187,031 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 187,031 |
|
| $ | - |
|
Equity in loss from joint venture |
| $ | - |
|
| $ | - |
|
| $ | (1,773,445 | ) |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | (1,773,445 | ) |
| $ | - |
|
Segment Profit (Loss) - Pre-Tax |
| $ | - |
|
| $ | 13,416 |
|
| $ | (2,124,445 | ) |
| $ | (545,644 | ) |
| $ | (1,392,568 | ) |
| $ | (1,105,435 | ) |
| $ | (3,517,013 | ) |
| $ | (1,637,663 | ) |
Total Assets |
| $ | - |
|
| $ | 10,889 |
|
| $ | 1,506,672 |
|
| $ | 1,275,637 |
|
| $ | 28,645,414 |
|
| $ | 5,465,581 |
|
| $ | 30,152,086 |
|
| $ | 6,752,107 |
|
Investment in joint venture |
| $ | - |
|
| $ | - |
|
| $ | 2,415,228 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 2,415,228 |
|
| $ | - |
|
BUSINESS SEGMENT RESULTS – SIX MONTHS ENDED JUNE 30, 2018 AND 2017
|
|
|
|
|
|
|
|
|
| Corporate and |
|
|
|
|
| |||||||||||||||||
|
| Consulting |
|
| Technology |
|
| Eliminations |
|
| Total |
| ||||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
| ||||||||
Revenue |
| $ | - |
|
| $ | 149,910 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 149,910 |
|
Other income |
| $ | - |
|
| $ | - |
|
| $ | 587,374 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
| 587,374 |
|
|
| - |
|
Equity in loss from joint venture |
| $ | - |
|
| $ | - |
|
| $ | (2,801,772 | ) |
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
| (2,801,772 | ) |
|
| - |
|
Segment (Loss) Profit- Pre-Tax |
| $ | - |
|
| $ | (59,945 | ) |
| $ | (3,663,643 | ) |
| $ | (1,009,987 | ) |
| $ | (4,574,857 | ) |
| $ | (2,318,034 | ) |
| $ | (8,238,500 | ) |
| $ | (3,382,966 | ) |
Total Assets |
| $ | - |
|
| $ | 10,889 |
|
| $ | 1,506,672 |
|
| $ | 1,275,637 |
|
| $ | 28,645,414 |
|
| $ | 5,465,581 |
|
| $ | 30,152,086 |
|
| $ | 6,752,107 |
|
Investment in joint venture |
| $ | - |
|
| $ | - |
|
| $ | 2,415,228 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 2,415,228 |
|
| $ | - |
|
| Stock Options Outstanding |
| Stock Options Vested | ||||||||||||||||||||||
| Weighted |
| Weighted | ||||||||||||||||||||||
| Average |
| Average | ||||||||||||||||||||||
| Remaining |
| Weighted |
| Remaining |
| Weighted | ||||||||||||||||||
| Contractual |
| Number |
| Average |
| Contractual |
| Number |
| Average | ||||||||||||||
| Life |
| of |
| Exercise |
| Life |
| of |
| Exercise |
| |||||||||||||
Exercise Prices |
| -Years |
| Awards |
| Price |
| -Years |
| Awards |
| Price | |||||||||||||
| |||||||||||||||||||||||||
$ | 0.90-$1.04 |
| 9.60 |
| 1,616,402 |
| $ | 0.90 |
| — |
| — |
| $ | — |
| |||||||||
$ | 1.05-$2.00 |
| 8.57 |
| 2,560,330 |
| $ | 1.18 |
| 8.56 |
| 2,507,716 |
| $ | 1.18 |
| |||||||||
$ | 2.01-$6.00 |
| 6.86 |
| 813,583 |
| $ | 4.59 |
| 6.86 |
| 813,583 |
| $ | 4.59 |
| |||||||||
$ | 6.01-$20.00 |
| 4.16 |
| 501,334 |
| $ | 7.48 |
| 4.16 |
| 501,334 |
| $ | 7.48 |
| |||||||||
$ | 20.01-$43.25 |
| 0.72 |
| 112,505 |
| $ | 29.46 |
| 0.72 |
| 112,505 |
| $ | 29.46 | ||||||||||
| Total |
| 8.07 |
| 5,604,154 |
| $ | 2.72 |
| 7.42 |
| 3,935,138 |
| $ | 3.50 |
Note 9.8. Related Party TransactionTransactions
We provideThe Company invested approximately $2.1 million and $3.5 million in Enfission during the three months and six months ended June 30, 2019, respectively. The total administrative consulting services was $200,000 for the six months ended June 30, 2019. This $200,000 amount charged to Enfission was recorded as a $100,000 reduction of general and administrative expenses and a $100,000 reduction of research and development expenses.
The Company also provided research and development consulting services and management services to Enfission. The total consulting services was $0.3 million and $0.2 million for each of the quarters ended June 30, 2019 and 2018, respectively, and $0.7 million and $0.6 million for the three and six months ended June 30, 2019 and 2018, from Enfission’s date of inception on January 25, 2018 to June 30, 2018,respectively, recorded under the caption “Other income from joint venture” in the accompanying condensed consolidated statement of operations.
As of June 30, 2019, and December 31, 2018, the total receivable due from Enfission was approximately $0.5 million and $0.1 million, respectively, which represents consulting fees Lightbridge charged to Enfission and reimbursable expenses paid by Lightbridge on Enfission’s behalf.
Note 10.9. Subsequent Events
On March 30, 2018 the Company filed a prospectus supplement to register the sale of up to $50 million of shares of common stockATM sales
Sales under the New ATM. We have raised an approximate $0.9 million under this prospectus supplement2019 ATM that were made from July 2, 20181, 2019 to the date of this Form 10-Q filing.
On August 8, 2018, the Company entered into employment agreements with each of Messrs. Grae, Mushakov and Goldman. The employment agreements provide for an initial annual base salary of $459,268, $286,443 and $265,000 for each of Messrs. Grae, Mushakov and Goldman, respectively, and establish a target annual bonus of 50% of base salary for each executive with the amount of any such bonus to be determined by the Compensation Committee of the Board based on the achievement of performance goals that are established by the Compensation Committee. In addition, each of Messrs. Grae, Mushakov and Goldman will be eligible to earn an annual long-term incentive award, subject to the Compensation Committee’s discretion to grant such awards, based upon a target award opportunity equal to 50% of base salary, and subject to attainment of such goals, criteria or targets established by the Compensation Committee in respect of each such calendar year. Each employment agreement provides that if the executive’s employment is terminated or not extended by the Company without “cause,” or terminated by the executive for “good reason” (each as defined in the employment agreement), then, subject to the terms and conditions of the employment agreement, the executive will be entitled to certain severance payments and benefits.
Each employment agreement has an initial five-year term and will automatically be extended for one additional year terms upon the expiration of the initial term unless either party provides notice of non-renewal to the other. In the case of Mr. Goldman, the term of his employment agreement as Chief Financial Officer commences September 1, 2018. Ms. Zwobota, the current Chief Financial Officer gave her notice of retirement on August 8, 2018 and her retirement date is September 1, 2018 and will continue working for the company as a part-time consultant. The employment agreements provide standard benefits and contain routine confidentiality, non-competition, non-solicitation and non-disparagement provisions.
Long-Term Non-Qualified Option Grants
On August 6, 2018 the Compensation Committee of the Board of Directors granted performance-based long-term non-qualified stock options relating toJuly 31, 2019 were approximately 1.81.4 million shares to employees, consultants and directorsthat totaled net proceeds of the Company. These stock options have a strike price equal to the closing price of the Company’s stock on August 8, 2018 ($0.90). Out of this total, approximately 1.6 million stock options were issued to employees and consultants as performance-based options. These performance-based stock options vest straight line over a 3-year period with accelerated vesting of these options issued occurring upon applicable performance conditions being satisfied by certain milestone dates. Accelerated vesting of these option grants would occur upon achievement of one or both of the following performance-based milestones:
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The remaining approximate 0.2 million stock options were issued to the directors of the Company and vest over a one-year period on the anniversary date of the grant. All options granted have a 10-year contractual term.$0.9 million.
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In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. We use words such as “believe”, “expect”, “anticipate”, “project”, “target”, “plan”, “optimistic”, “intend”, “aim”, “will”, or similar expressions, which are intended to identify forward-looking statements. Such statements include, among others, (1) those concerning market and business segment growth, demand and acceptance of our nuclear energy consulting services and nuclear fuel technology business, (2) any projections of sales, earnings, revenue, margins or other financial items, (3) any statements of the plans, strategies and objectives of management for future operations and the timing of the development of our nuclear fuel technology, (4) any statements regarding future economic conditions or performance, (5) uncertainties related to conducting business in foreign countries, (6) any statements about future financings and liquidity, as well as (7) all assumptions, expectations, predictions, intentions or beliefs about future events. others:
· | those concerning market and business segment growth, demand, and acceptance of our nuclear fuel technology; | |
· | any projections of sales, earnings, revenue, margins, or other financial items; | |
· | any statements of the plans, strategies, and objectives of management for future operations and the timing of the development of our nuclear fuel technology; | |
· | any statements regarding future economic conditions or performance; | |
· | uncertainties related to conducting business in foreign countries; | |
· | any statements about future financings and liquidity; and | |
· | all assumptions, expectations, predictions, intentions, or beliefs about future events. |
You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, as well as assumptions that if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties, among others, include:
| · | our ability to commercialize our nuclear fuel technology, including risks related to the design and testing of nuclear fuel incorporating our |
| · | the realization of expected benefits from |
| · | our ability to attract new |
| · | our ability to employ and retain qualified employees and consultants that have experience in the nuclear |
| · | competition and competitive factors in the markets in which we |
| · | public perception of nuclear energy |
| · |
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| changes in laws, rules, and regulations governing our | |
| · | development and utilization of, and challenges to, our intellectual |
| · | potential and contingent |
| · | the other risks identified in Part II, Item |
Most of these factors are beyond our ability to predict or control. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. Forward-looking statements speak only as of the date on which they are made. The Company assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is intended to help the reader understand Lightbridge Corporation, our operations, and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes thereto contained in Part I, “Item 1. Financial Statements”Item 1 of this report.
This overview summarizes the MD&A which includesconsists of the following sections:
| · | Overview of Our Business and recent developments — a general overview of our |
| · | Critical Accounting Policies and Estimates — a discussion of accounting policies that require critical judgments and estimates; |
| · | Operations Review — an analysis of our condensed consolidated results of operations for the |
| · | Liquidity, Capital Resources, and Financial Position — an analysis of our cash flows, and an overview of our financial position. |
As discussed in more detail under “Forward-Looking Statements” immediately preceding this MD&A, the following discussion contains forward-looking statements that involve risks, uncertainties, and assumptions such as statements of our plans, objectives, expectations, and intentions. Our actual results may differ materially from those discussed in these forward-looking statements because of the risks and uncertainties inherent in future events.
OVERVIEW OF OUR TWO BUSINESS SEGMENTS
Overview of Our Business
When used in this Quarterly Report on Form 10-Q, the terms “Lightbridge”, the “Company”, “we”, “our”, and “us” refer to Lightbridge Corporation together with its wholly-owned subsidiaries Lightbridge International Holding LLC and Thorium Power Inc.
Company Overview
Lightbridge is a leading nuclear fuel technology company. Our primary focusgoal is to produce the development and commercialization of next generation of nuclear fuel that willcould significantly improve the economics, safety, and safetyproliferation resistance of existing and new reactors, with a meaningful impact on addressing climate change and air pollution challenges.pollution. We project that the world’s energy and climate needs can only be met if nuclear power’s share of the energy-generating mix grows substantially.
Our primary focus is the development and commercialization of metallic fuel rods that will replace the uranium oxide ceramic pellets that have traditionally fueled nuclear reactors. We believe our nuclearmetallic fuel technology hasoffers significant economic and safety benefits over traditional fuel, primarily because of the potential to enhance reactor safetysuperior heat transfer properties of all-metal fuel and the proliferation resistanceresulting lower operating temperature of spent fuel and increase the power output of commercial reactors, reducing the cost of generating electricity and the amount of nuclear waste per unit of electricity generated.reactor. We also believe ourthat uprating a reactor with Lightbridge fuel will facilitate the abilityadd incremental electricity at a lower levelized cost than any other means of reactors to load-follow, pairing nucleargenerating baseload electric power, with renewables in providing baseload electricity.including any renewable, fossil, or hydroelectric energy source.
We now conducthave built a significant portfolio of patents reflecting years of research and development, and we anticipate substantial completion of our research efforts and the testing of our fuel over the next few years.
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From 2008 to 2018, we also had a nuclear consulting business principally through segment, which provided early funding for our metallic nuclear fuel development efforts. We discontinued our consulting business segment in 2018; however, we may opportunistically provide nuclear power consulting and strategic advisory services to commercial and governmental entities worldwide.
Enfission, ourLLC
On January 24, 2018 we formed Enfission, LLC (“Enfission”), a 50/50 joint venture with Framatome which was formed on January 24, 2018, for the development, regulatory licensing, fabrication,Inc., to develop, license, manufacture, and sale ofsell nuclear fuel assemblies based on Lightbridge-designed metallic fuel technology and other advanced nuclear fuel intellectual property. Framatome Inc. is a wholly-owned US subsidiary of Framatome, which we refer to individually or collectively in this report, together with their affiliates, as Framatome. Framatome is a global leader in designing, manufacturing, and installing components and fuel for nuclear power plants, and Framatome offers a full range of reactor services.
We currently conduct our fuel development activities principally through Enfission. Enfission serves as ourthe exclusive vehicle forthrough which the development ofCompany and Framatome are researching, developing, obtaining regulatory approvals, manufacturing and will be using, marketing and selling nuclear fuel assemblies based on the Lightbridge metallic fuel technology comprising uranium-zirconium (U-Zr) multi-lobe, helically twisted fuel rods and associated manufacturing processes and other advanced nuclear fuel assembly designs forintellectual property contributed by both Lightbridge and Framatome within the operating domain. The operating domain of Enfission includes pressurized water reactors (excluding water-cooled water-moderated energetic reactor (Russian VVER) types) and boiling water reactors, which collectively constitute most of the power reactors in the world, as well as water-cooled small modular reactors and water-cooled research reactors. While we expect our focus to be on Enfission for the foreseeable future, Lightbridge maintains the rights to develop fuel for VVER reactors outside Enfission, and Lightbridge also maintains the right to develop fuel for pressurized heavy water reactors (including CANDU reactors) outside Enfission. Lightbridge, as an American-owned and controlled company is also exploring opportunities particularly available to it, such as at US national laboratories.
In addition to distributions from Enfission based on our ownership interest in the joint venture, we anticipate receiving future licensing revenues in connection with sales by Enfission of nuclear fuel incorporating our intellectual property. We also opportunistically provide nuclear power consulting and strategic advisory services to commercial and governmental entities worldwide.
OurLightbridge and Enfission’s principal executive offices are located at 11710 Plaza America Drive, Suite 2000, Reston, Virginia 20190 USA.
Nuclear Power as Clean and Low Carbon Emissions Energy Source
Nuclear power provides clean, reliable baseload electricity. According to the World Nuclear Association (WNA), nuclear power plants produce no greenhouse gas emissions during operation, and over the course of its life-cycle, nuclear produces about the same amount of CO2 equivalent emissions per unit of electricity as wind. The WNA further notes that almost all proposed pathways to achieving significant decarbonization suggest an increased role for nuclear power, including those published by the International Energy Agency, Massachusetts Institute of Technology Energy Initiative, US Energy Information Administration, and World Energy Council.
We believe that deep cuts to CO2 emissions are only possible with electrification of most of the transportation and industrial sectors globally and powering them and the current electricity needs of the world with non-emitting or low-emitting power. We believe this can be done only with a large increase in nuclear power, several times the amount that is generated globally today. We believe that our nuclear fuel technology will be an essential element of reaching this goal.
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Overview of Our Next Generation Nuclear Fuel
Nuclear Fuel Development
Since 2008, we have been engaged in the design and development of proprietary, innovative nuclear fuels to improve the cost competitiveness, safety, proliferation resistance and performance of nuclear power generation. In 2010, we announced the concept of all-metal fuel (i.e., non-oxide fuel) for currently operating as well as new-build reactors. Our focus on metallic fuel is based on listening to the voices of prospective customers, as nuclear utilities have expressed interest in the improved economics and enhanced safety that we believe metallic fuel can provide.
The fuel in a nuclear reactor generates heat energy. That heat is then converted through steam into electricity that is sold. We have designed our innovative, proprietary metallic fuels to be capable of significantly higher burnup and power density compared to conventional oxide nuclear fuels. Burnup is the total amount of electricity generated per unit mass of nuclear fuel and is a function of the power density of a nuclear fuel and the amount of time the fuel operates in the reactor. Power density is the amount of heat power generated per unit volume of nuclear fuel. Conventional oxide fuel used in existing commercial reactors is just about at the limit of its burnup and power density capability. As a result, further optimization to increase power output from the same core size and improve the economics and safety of nuclear power generation using conventional oxide fuel technologies is limited. A new fuel is needed to bring enhanced performance to reactors; we are developing that new fuel.
As the nuclear industry prepares to meet the increasing global demand for electricity production, longer operating cycles and higher reactor power outputs have become a much sought-after solution for the current and future reactor fleet. We believe our proprietary nuclear fuel designs have the potential to improve the nuclear power industry’s economics by:
· | providing an increase in power output of potentially up to 10% while simultaneously extending the operating cycle length from 18 to 24 months in existing pressurized water reactors (PWRs), including in Westinghouse-type four-loop PWR plants which are currently constrained to an 18-month operating cycle by oxide fuel, or increasing the power potentially up to 17% while retaining an 18-month operating cycle; | |
· | enabling increased reactor power output via a power uprate (potentially up to a 30% increase) or a longer operating cycle (instead of a power uprate) without changing the core size in new build PWRs; and | |
· | reducing the volume of spent fuel per unit of electricity generated as well as enhancing proliferation resistance of spent fuel. |
We believe our fuel designs will allow current and new build nuclear reactors to safely increase power production and reduce operations and maintenance costs on a per kilowatt-hour basis. New build nuclear reactors could also benefit from the reduced upfront capital investment per kilowatt of generating capacity in case of implementing a power uprate. In addition to the projected electricity production cost savings, we believe that our technology can result in utilities or countries needing to deploy fewer new reactors to generate the same amount of electricity (in case of a power uprate), resulting in significant capital cost savings. For utilities or countries that already have operating reactors, our technology could be utilized to increase the power output of those reactors as opposed to building new reactors.
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Due to the significantly lower fuel operating temperature, our metallic nuclear fuel rods are also expected to provide major improvements to safety margins during off-normal events. US Nuclear Regulatory Commission licensing processes require engineering analysis of a large break loss-of-coolant accident (LOCA), as well as many other scenarios. The LOCA scenario assumes failure of a large water pipe in the reactor coolant system. Under LOCA conditions, the fuel and cladding temperatures rise due to reduced cooling capacity. Preliminary analytical modeling shows that under a design-basis LOCA scenario, unlike conventional uranium dioxide fuel, the cladding of the Lightbridge-designed metallic fuel rods would stay at least 200 degrees below the 850-900 degrees Celsius temperature at which steam begins to react with the zirconium cladding to generate hydrogen gas. Build-up of hydrogen gas in a nuclear power plant can lead to the hydrogen exploding, which is what happened at the Fukushima Daiichi nuclear power plant in Japan in 2011. Lightbridge fuel is designed to prevent hydrogen gas generation in design-basis LOCA situations, which is a major safety benefit.
The Company plans to conduct the initial testing and demonstration of its advanced metallic nuclear fuel in the United States.
Recent Research and Development Advancements
· | Completed preliminary U-Zr casting studies to support fabrication process specifications | |
· | Completed non-destructive examination (NDE) strategy for fuel rod inspection and quality control | |
· | Completed parametric neutronics studies to optimize Lightbridge Fuel(tm) rod geometry | |
· | Completed ANSYS model for fuel rod geometry optimization studies |
Future Steps Toward the Development and Sale of Nuclear Fuel Assemblies
In the near-term, Enfission will seek to demonstrate the fabrication of full-length metallic rods using surrogate materials, enter into an agreement to manufacture fuel material samples for test reactor irradiation, and enter into a lead test rod agreement with a US electric utility. Based on our current expectations, we anticipate such developments to occur over the next 12 to 18 months. Please see Item 1A, Risk Factors in our Annual Report on Form 10-K filed on March 29, 2019 for a discussion of certain risks that may delay or impair such developments including without limitation the availability of financing, reliance on cooperation from Framatome within Enfission, and the many risks inherent in developing a new type of nuclear fuel. The Company has entered into a phase of the fuel development project that will require both parties of the Enfission joint venture to agree on the future direction of the project and the joint venture, in order for the fuel development project in Enfission to move forward, and discussions between the Company and Framatome are ongoing about such future direction. In particular, the joint venture parties are still negotiating a budget commitment for fiscal years 2019 and 2020 and future development work could be scaled back or delayed until the parties agree on a budget commitment with an associated scope of work.
The long-term milestones towards Enfission's development and sale of nuclear fuel assemblies include, among other things, developing the capacity and know-how to fabricate lead test assemblies incorporating our nuclear fuel technology, irradiating material samples, performing out-of-reactor corrosion experiments, and demonstrating operation of lead test rods and/or lead test assemblies in commercial reactors. Beyond the near-term developments discussed above, there is inherent uncertainty in the cost and outcomes of the many steps needed for successful deployment of our fuel in commercial nuclear reactors, which makes it difficult to predict the timing of the commercialization of our nuclear fuel technology with any accuracy. Going forward, we intend to disclose estimated timing concerning particular developments as we develop greater visibility into such developments.
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Ownership and Management of Enfission
Lightbridge owns 50 percent of Enfission’s Class A voting membership units and Framatome owns the other 50 percent. Any distributions will be made first allocated to cause the capital accounts of the initial members to be equal, then allocated on a 50/50 basis. Lightbridge and Framatome each provided certain licensed intellectual property to Enfission. Certain additional capital contributions made by Lightbridge and Framatome will partly be in the form of exclusive license rights to intellectual property developed pursuant to a research and development service agreement with Enfission.
Seth Grae, our Chief Executive Officer, also serves as Chief Executive Officer of Enfission. Enfission is managed by a board of directors composed of six directors, half of whom are appointed by Lightbridge and the other half are appointed by Framatome. The chairperson of Enfission’s board of directors alternates every year between directors appointed by Lightbridge and directors appointed by Framatome. The Enfission board acts by majority vote, provided that at least one director appointed by each of Lightbridge and Framatome votes in favor of the action. Certain major decisions require the approval of at least two-thirds of the directors, and certain fundamental decisions, including amending the Enfission operating agreement and issuing additional membership units, require the approval of two-thirds of the Class A members.
Agreements with Enfission and Framatome
Enfission has entered into several agreements with Lightbridge and Framatome relating to intellectual property, the provision of personnel and administrative support to Enfission, and research and development efforts.
Lightbridge and Framatome have also directly entered into binding agreements forming the foundation for Enfission, including the following agreements in November 2017, which govern joint research and development activities and the treatment of all related existing and future intellectual property:
| · | R&D Services Agreement (“RDSA”) — The RDSA defines the terms and conditions for joint research and development activities between Framatome and Lightbridge. Enfission is a party to the RDSA. Key terms and conditions of the RDSA include: (i) designating a 17x17 fuel assembly as the first joint project of the |
| · | Co-Ownership Agreement (“COA”) — The COA governs the co-ownership between Framatome and Lightbridge of the foreground information developed by and between Framatome and Lightbridge, with one another and through Enfission. The COA will survive the life of Enfission. The COA is limited to a domain consisting of the metallic fuel developed by Enfission for the following types of commercial light water reactors and research reactors: (i) pressurized water reactors, excluding water-cooled water-moderated energetic reactor (VVER) types, (ii) boiling water reactors, (iii) light water-cooled small and medium size reactors, and (iv) water-cooled research reactors. The domain expressly excludes maritime, naval, and military applications. |
| · | Intellectual Property Annex (“IP Annex”) — The IP Annex is a higher-level reference document attached to the Enfission operating agreement and summarizes the parties’ understanding regarding intellectual property matters. The IP Annex will remain in force only during the life of Enfission. |
In connection with the RDSA, we currently anticipate purchasing via Enfission a minimum amount of research and development services from Framatome of approximately $10 million to $12 million, for the next 12 to 15 months. This amount is likely to increase later in 2019.
Overview of Our Next Generation Nuclear Fuel
Since 2008, we have been engaged in the design and development of proprietary, innovative nuclear fuels to improve the cost competitiveness, safety, proliferation resistance and performance of nuclear power generation. In 2010, we announced the concept of all-metal fuel (i.e., non-oxide fuel) for currently operating as well as new-build reactors. Our focus on metallic fuel is based on listening to the voices of prospective customers, as nuclear utilities have expressed interest in the improved economics and enhanced safety that metallic fuel can provide.
The fuel in a nuclear reactor generates heat energy. That heat is then converted through steam into electricity that is sold. We have designed our innovative, proprietary metallic fuels to be capable of significantly higher burnup and power density compared to conventional oxide fuels. Burnup is the total amount of electricity generated per unit mass of nuclear fuel and is a function of the power density of a nuclear fuel and the amount of time the fuel operates in the reactor. Power density is the amount of heat power generated per unit volume of nuclear fuel. Conventional oxide fuel used in existing commercial reactors is approaching the limits of its burnup and power density capability. As a result, further optimization to increase power output from the same core size and improve the economics and safety of nuclear power generation using conventional oxide fuel technologies is limited.
As the nuclear industry prepares to meet the increasing global demand for electricity production, longer operating cycles and higher reactor power outputs have become a much sought-after solution for the current and future reactor fleet. We believe our proprietary nuclear fuel designs have the potential to significantly enhance the nuclear power industry’s economics by:
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We believe our fuel designs will allow current and new build nuclear reactors to safely increase power production and reduce operations and maintenance costs on a per kilowatt-hour basis. New build nuclear reactors could also benefit from the reduced upfront capital investment per kilowatt of generating capacity in case of implementing a power uprate. In addition to the projected electricity production cost savings, we believe that our technology can result in utilities or countries needing to deploy fewer new reactors to generate the same amount of electricity (in case of a power uprate), resulting in significant capital cost savings. For utilities or countries that already have operating reactors, our technology could be utilized to increase the power output of those reactors as opposed to building new reactors. Further, we believe that the fuel fabrication or manufacturing process for this new fuel design is simpler, which we expect could lower fuel fabrication costs.
Due to the significantly lower fuel operating temperature, our metallic nuclear fuel rods are also expected to provide major improvements to safety margins during off-normal events. US Nuclear Regulatory Commission licensing processes require engineering analysis of a large break loss-of-coolant accident (LOCA), as well as many other scenarios. The LOCA scenario assumes failure of a large water pipe in the reactor coolant system. Under LOCA conditions, the fuel and cladding temperatures rise due to reduced cooling capacity. Preliminary analytical modeling shows that under a design-basis LOCA scenario, unlike conventional uranium dioxide fuel, the cladding of the Lightbridge-designed metallic fuel rods would stay at least 200 degrees below the 850-900 degrees Celsius temperature at which steam begins to react with the zirconium cladding to generate hydrogen gas. Buildup of hydrogen gas in a nuclear power plant can lead to the hydrogen exploding. Lightbridge fuel is designed to prevent hydrogen gas generation in design-basis LOCA situations, which is a major safety benefit.
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Anticipated Schedule for Development and Sale of Nuclear Fuel Assemblies
Set forth below is our anticipated schedule for Enfission’s development and sale of nuclear fuel assemblies. Please see Item 1A, Risk Factors in our Annual Report on Form 10-K filed on March 14, 2018, for a discussion of certain risks that may delay or impair the commercialization of nuclear fuel assemblies incorporating our nuclear fuel technology. Based on our current expectations, we anticipate that, either directly or through Enfission, we will:
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Accordingly, based on our current expected schedule, a purchase order for an initial reload batch placed by a utility is expected as soon as 2026-2027 (after two 18-month cycles of LTA operation), with final qualification (i.e., deployment of fuel in the first reload batch) in a commercial reactor expected as soon as 2028-2029. We intend to seek development funding contributions or other financing arrangements with utilities several years in advance of LTA demonstration.
Our earlier plan was to begin irradiation of metallic fuel samples in the Halden research reactor in 2020-2021. The Halden research reactor is operated by the Institute for Energy Technology (IFE) in Norway. In June 2018, IFE’s board of directors announced its decision not to seek renewal of the Halden reactor operating license beyond 2020.
The Company now plans to conduct the initial testing and demonstration of its advanced metallic nuclear fuel in the United States, in lieu of the Halden Reactor, at sites the Company plans to announce later this year or in early 2019. The Company has begun evaluating alternatives for a back-up reactor facility, including the Advanced Test Reactor at Idaho National Laboratory and/or designing a segmented lead test rod for irradiation in an operating U.S. commercial reactor to allow generation of the irradiation data at the required burn-up level to support a subsequent lead test assembly operation in a commercial U.S. reactor. The Company also reaffirmed plans to commence testing of its fuel in a U.S. research reactor by 2020, as well as deploy a lead test rod in a U.S. commercial reactor by 2021.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make a variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and (ii) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements. For a discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our financial statements, please see “Critical Accounting Policies and Estimates” under Item 7, “Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed on March 14, 2018, incorporated herein by reference.29, 2019. There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2018.2019.
Our management expects to make judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increase, these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable, actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material impact on our results of operations and/or financial condition.
Recent Accounting Standards and Pronouncements
Refer to Note 1 of the Notes to our unaudited condensed consolidated financial statements for a discussion of recent accounting standards and pronouncements.
OPERATIONS REVIEW
Business Segments and Periods Presented
Our business operations can be categorized in two segments:
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Financial information about our business segments is included in Note 8 - Business Segment Results, of the Notes to the Condensed Consolidated Financial Statements, included in Part I, Item 1 Financial Statements of this Quarterly Report on Form 10-Q.
Our goal is to develop and commercialize innovative, proprietary nuclear fuel designs, which we expect will significantly enhance the nuclear power industry’s economics due to higher power output and improved safety margins.
We are focusing our technology development efforts on the metallic fuel with a potential power uprate of up to 10% and an operating cycle extended from 18 to 24 months in existing Westinghouse-type four-loop pressurized water reactors. Those reactors represent the largest segment of our global target market. The metallic fuel could also be adapted for use in other types of water-cooled commercial power reactors, such as boiling water reactors, Russian-type VVER reactors, CANDU heavy water reactors, water-cooled small and modular reactors, as well as water-cooled research reactors.
We have providedobtained and will continue to seek patent validation in key countries that either currently operate or are expected to build and operate a discussionlarge number of suitable nuclear power reactors.
We currently expect to invest a total of $6 million to $8 million in research and development expenses of our results of operations on a condensed consolidated basisnuclear fuel products over the next 12 to 15 months. In addition, we estimate our capital expenditures for research and have also provided certain detailed segment information for each of our business segments below fordevelopment equipment to be approximately $3 million over the three and six months ended June 30, 2018 and 2017, in ordernext 12 to provide a meaningful discussion of our business segments. We have organized our operations into two principal segments: Consulting and Technology Business segments. We present our segment information along the same lines that our chief executives review our operating results in assessing performance and allocating resources.15 months.
BUSINESS SEGMENT RESULTS - THREE MONTHS ENDED JUNE 30 2018 AND 2017
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| Corporate and |
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| Consulting |
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| Technology |
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| Eliminations |
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| Total |
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| 2018 |
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| 2017 |
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| 2018 |
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| 2017 |
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| 2018 |
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| 2017 |
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| 2018 |
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| 2017 |
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Revenue |
| $ | - |
|
| $ | 14,425 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 14,425 |
|
Other income |
| $ | - |
|
| $ | - |
|
| $ | 187,031 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 187,031 |
|
| $ | - |
|
Equity in loss from joint venture |
| $ | - |
|
| $ | - |
|
| $ | (1,773,445 | ) |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | (1,773,445 | ) |
| $ | - |
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Segment Profit (Loss) - Pre-Tax |
| $ | - |
|
| $ | 13,416 |
|
| $ | (2,124,445 | ) |
| $ | (545,644 | ) |
| $ | (1,392,568 | ) |
| $ | (1,105,435 | ) |
| $ | (3,517,013 | ) |
| $ | (1,637,663 | ) |
Total Assets |
| $ | - |
|
| $ | 10,889 |
|
| $ | 1,506,672 |
|
| $ | 1,275,637 |
|
| $ | 28,645,414 |
|
| $ | 5,465,581 |
|
| $ | 30,152,086 |
|
| $ | 6,752,107 |
|
Investment in joint venture |
| $ | - |
|
| $ | - |
|
| $ | 2,415,228 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 2,415,228 |
|
| $ | - |
|
Technology Business
Over the next 12 to 15 months, we expect to incur approximately $10 million to $12 million in research and development expenses related to the development of our proprietary nuclear fuel designs, including funding our joint venture Enfission. We spent approximately $0.5 million for research and development for each of the three- months ended June 30, 2018 and 2017.
Over the next 2-3 years, we expect that our research and development activities will increase and will be primarily focused on testing and demonstration of our metallic fuel technology for Western-type water-cooled reactors. The main objective of this research and development phase is to prepare for full-scale demonstration of our fuel technology in an operating commercial power reactor.
See Note 3 - Investment in Joint Venture of the notes to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for information regarding our equity method investment in Enfission.
Consulting Services Business
All of our revenue from third parties had been from our consulting services business segment. The fee type and structure that we offer for each client engagement is dependent on a number of variables, including the complexity of the services, the level of the opportunity for us to improve the client’s electricity generation capabilities using nuclear power plants, and other factors. We did not have any revenue from our consulting services business segment during the three months ended June 30, 2018, and we currently do not expect to have significant revenue in the future.
Table of Contents |
Condensed Consolidated Results of Operations – Three Months Ended June 30, 20182019 and 20172018
The following table presents our historical operating results and the increase (decrease) in amounts for the periods indicated:
|
| Three Months Ended |
| Increase |
| Increase |
|
| Three Months Ended |
| Increase |
| Increase |
| ||||||||||||||||||
|
| June 30, |
| (Decrease) |
| (Decrease) |
|
| June 30, |
| (Decrease) |
| (Decrease) |
| ||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| Change $ |
|
| Change % |
|
| 2019 |
|
| 2018 |
|
| Change $ |
|
| Change % |
| ||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Consulting Revenues |
| $ | - |
| $ | 14,425 |
| $ | (14,425 | ) |
| (100 | %) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Cost of services provided |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Consulting expenses |
| $ | - |
| $ | 4,300 |
| $ | (4,300 | ) |
| (100 | %) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Gross profit |
| $ | - |
| $ | 10,125 |
| $ | (10,125 | ) |
| (100 | %) | |||||||||||||||||||
Revenues |
| $ | — |
| $ | — |
| $ | — |
| — |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
General and administrative |
| $ | 1,453,030 |
| $ | 971,290 |
| $ | 481,740 |
| 50 | % |
| $ | 1,230,154 |
| $ | 1,453,030 |
| $ | (222,876 | ) |
| -15 | % | |||||||
Research and development expenses |
|
| 538,031 |
|
|
| 545,644 |
|
|
| (7,613 | ) |
|
| (1 | )% |
| $ | 545,118 |
|
| $ | 538,031 |
|
| $ | 7,087 |
|
| 1 | % | |
Total Costs and Expenses |
| $ | 1,991,061 |
|
| $ | 1,516,934 |
|
| $ | 474,127 |
|
|
| 31 | % |
| $ | 1,775,272 |
| $ | 1,991,061 |
| $ | (215,789 | ) |
| -11 | % | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Other Operating Income and (Loss) |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Other Operating Income and (Expenses) |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Other income from joint venture |
| $ | 187,031 |
| $ | - |
| $ | 187,031 |
| - |
|
| $ | 305,375 |
| $ | 187,031 |
| $ | 118,344 |
| 63 | % | ||||||||
Equity in loss from joint venture |
|
| (1,773,445 | ) |
|
| - |
|
|
| (1,773,445 | ) |
|
| - |
|
| $ | (1,962,318 | ) |
| $ | (1,773,445 | ) |
| $ | 188,873 |
|
| 11 | % | |
Total Other Operating Income and (Loss) |
| $ | (1,586,414 | ) |
| $ | - |
|
| $ | (1,586,414 | ) |
|
| - |
| ||||||||||||||||
Total Other Operating (Expenses) |
| $ | (1,656,943 | ) |
| $ | (1,586,414 | ) |
| $ | 70,529 |
| 4 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Total Operating Loss |
| $ | (3,577,475 | ) |
| $ | (1,506,809 | ) |
| $ | 2,070,666 |
|
|
| 137 | % |
| $ | (3,432,215 | ) |
| $ | (3,577,475 | ) |
| $ | (145,260 | ) |
| -4 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Total Other Income and (Expenses) |
| $ | 60,462 |
|
| $ | (130,854 | ) |
| $ | 191,316 |
|
|
| 146 | % | ||||||||||||||||
Other Income and (Expenses) |
| $ | 125,298 |
| $ | 60,462 |
| $ | 64,836 |
| 107 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net loss - before income taxes |
| $ | (3,517,013 | ) |
| $ | (1,637,663 | ) |
| $ | 1,879,350 |
|
|
| 115 | % |
| $ | (3,306,917 | ) |
| $ | (3,517,013 | ) |
| $ | (210,096 | ) |
| -6 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net loss |
| $ | (3,517,013 | ) |
| $ | (1,637,663 | ) |
| $ | 1,879,350 |
|
|
| 115 | % |
| $ | (3,306,917 | ) |
| $ | (3,517,013 | ) |
| $ | (210,096 | ) |
| -6 | % |
Revenue
The market for nuclear industry consulting services is competitive, fragmented, and subject to rapid change. Our main business is developing our nuclear fuel. We may continue to providepursue some consulting services opportunities in the future, but we have further increased the focus and resources of the Company to the fuel division and away from consulting. There was no revenue for the three months ended June 30, 20182019 and currently, we do not expect to have significant revenue in our consulting business segment in the future.
Cost of Services Provided
Because we have shifted the focus and resources of the Company to the fuel division and away from consulting, we have not incurred costs related to consulting in 2018. Cost of services provided in 2017 was comprised of expenses related to the consulting, professional, administrative, and other support costs and stock-based compensation allocated to our consulting projects labor, which were incurred to perform and support the work done for our consulting projects.
General and Administrative Expenses
The following table presents our general and administrative expenses, (rounded in millions):
|
| Three Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
|
|
|
|
|
|
| ||
General and administrative expenses |
| $ | 1.5 |
|
| $ | 1.0 |
|
General and administrative expenses consist mostly of compensation and related costs for personnel and facilities, stock-based compensation, finance, human resources, information technology, and fees for consulting and other professional services. Professional services are principally comprised of outside legal, audit, strategic advisory services, and outsourcing services.
Total general and administrative expenses increaseddecreased by $0.5approximately $0.2 million for the three-monthsthree months ended June 30, 2018,2019, as compared to the three months ended June 30, 2017.2018. There was an increasea decrease in professional fees of approximately $0.3 million, which was due to the increase in legal fees, the hiring of a consulting firm to assist in preparing the application for a grant from the U.S. Department of Energy and an increase in employee compensation expense of approximately $0.1$0.2 million due to an increasea decrease in the number of employeesaccounting and $0.1 million increase in other general and administrative expenses.professional fees. Total stock-based compensation included in general and administrative expenses was approximately $0.1 million for each of the three-monthsthree months ended June 30, 2019 and 2018, and 2017.respectively.
See Note 7 -7. Stockholders’ Equity and Stock-Based Compensation of the notesNotes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information regarding our stock-based compensation.
31 |
Table of Contents |
Research and Development
The following table presents ourCorporate research and development expenses (rounded in millions):
|
| Three Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
|
|
|
|
|
|
| ||
Research and development expenses |
| $ | 0.5 |
|
| $ | 0.5 |
|
Research and development expenses consist mostlyprimarily of compensation and related fringe benefits including stock-based compensation and related allocable overhead costs for personnel responsible for the research and development of our fuel, including work performed forand billed to our Enfission joint venture. Total research and development expenses was approximately $0.5 million for the three-months ended June 30, 2018, as compared toeach of the three months ended June 30, 2017, were substantially the same amounts.2019 and 2018. There was an increase in consulting fees in supporting research and development activities for Enfission of approximately $0.1 million, which was offset by a decrease in employee compensation of approximately $0.1 million. Total stock-based compensation included in research and development expenses was approximately $0.1 million for each of the three-monthsthree months ended June 30, 2019 and 2018, and 2017.respectively.
AllDue to the nature of our reportedthese research and development expenditures, cost and schedule estimates are inherently uncertain and can vary significantly as new information and the outcome of these research and development activities were conducted in the United States and Russia. We expense research and development costs as they are incurred. Research and development expenses will increase in future periods because we expect to invest $10 million to $12 million in the development of our nuclear fuel products over the next 12-15 months.
See Note 6 - Research and Development expense of the Notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report Form on 10-Q for additional information about our research and development costs.become available.
Other Operating Income and (Loss) – Related Party
The following table presents our other operating income, (rounded in millions):
|
| Three Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
|
|
|
|
|
|
| ||
Other income from joint venture |
| $ | 0.2 |
|
| $ | - |
|
Equity in loss from joint venture |
|
| (1.8 | ) |
|
| - |
|
|
| $ | (1.6 | ) |
| $ | - |
|
Reported in other operating income is other income for activities performed by our employees and consultants forbilled to the Enfission joint venture.venture for research and development work. Total other income from these activitiesjoint venture was approximately $0.3 million and $0.2 million for the three months ended June 30, 2018. Approximately 80%2019 and 2018, respectively. As of June 30, 2019, approximately 76% of the total Enfission cash inflow or capital contributions into Enfission arewere funded by Lightbridge (approximately $9.1 million) and the remaining 20% will be24% was funded as capital contributions into Enfission from Framatome.Framatome (approximately $2.9 million). Equity in loss offrom joint venture consists of our share of the allocated loss in Enfission. Equity in loss from joint venture for the three months ended June 30, 2019 and 2018 were approximately $2.0 million and $1.8 million, respectively, which consists of our share of the allocated loss in Enfission. The increase in the share of loss in Enfission (100%), which includes reportedwas due to more research and development expenses of $1.4 million in which was allocated in accordance with the joint venture operating agreement, for the three months and period ended June 30, 2018.incurred by Enfission.
Other Income (Expenses)
There was a net increase in otherOther income of approximately $0.2 million. This increase was due to a decrease infor the amortization of deferred financing costs of approximatelythree months ended June 30, 2019 and 2018 were $0.1 million, due to the write-offwhich consists of the deferred financing costs asset recorded for the Aspire option agreement in the first quarter of 2018 (see Note 7 of the notes to the accompanying condensed consolidated financial statements). This decrease was offset by an increase of $0.1 million in interest income generated from the interest earned from the purchase of treasury bills and from our bank savings account for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017.2019 and 2018.
Provision for Income Taxes
The following table presents our provision for income taxes. Our effective tax rate for the periods presented is 25% and 38% for the three months ended June 30, 2018 and 2017, respectively.
|
| Three Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
|
|
|
|
|
|
| ||
Provision for income taxes |
| $ | - |
|
| $ | - |
|
We incurred a pre-tax net loss for both 20182019 and 2017.2018. We reviewed all sources of income for purposes of recognizing the deferred tax assets and concluded a full valuation allowance for 20182019 and 20172018 was necessary. Therefore, we did not have a provision for income taxes for the three months ended June 30, 20182019 and 2017.2018.
Table of Contents |
BUSINESS SEGMENT RESULTS – SIX MONTHS ENDED JUNE 30, 2018 AND 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
| Corporate and |
|
|
|
|
|
|
| |||||||||||
|
| Consulting |
|
| Technology |
|
| Eliminations |
|
| Total |
| ||||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
| ||||||||
Revenue |
| $ | - |
|
| $ | 149,910 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 149,910 |
|
Other income |
| $ | - |
|
| $ | - |
|
| $ | 587,374 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
| 587,374 |
|
|
| - |
|
Equity in loss from joint venture |
| $ | - |
|
| $ | - |
|
| $ | (2,801,772 | ) |
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
| (2,801,772 | ) |
|
| - |
|
Segment Profit (Loss) - Pre-Tax |
| $ | - |
|
| $ | (59,945 | ) |
| $ | (3,663,463 | ) |
| $ | (1,009,987 | ) |
| $ | (4,574,857 | ) |
| $ | (2,318,034 | ) |
| $ | (8,238,500 | ) |
| $ | (3,382,966 | ) |
Total Assets |
| $ | - |
|
| $ | 10,889 |
|
| $ | 1,506,672 |
|
| $ | 1,275,637 |
|
| $ | 28,645,414 |
|
| $ | 5,465,581 |
|
| $ | 30,152,086 |
|
| $ | 6,752,107 |
|
Investment in joint venture |
| $ | - |
|
| $ | - |
|
| $ | 2,415,228 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 2,415,228 |
|
| $ | - |
|
Condensed Consolidated Results of Operations – Six Months Ended June 30, 20182019 and 20172018
The following table presents our historical operating results and the increase (decrease) in amounts for the periods indicated:
|
| Six Months Ended |
|
| Increase |
|
| Increase |
| |||||||
|
| June 30, |
|
| (Decrease) |
|
| (Decrease) |
| |||||||
|
| 2018 |
|
| 2017 |
|
| Change $ |
|
| Change % |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Consulting Revenues |
| $ | - |
|
| $ | 149,910 |
|
| $ | (149,910 | ) |
| (100 | %) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cost of services provided |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Consulting expenses |
| $ | - |
|
| $ | 89,663 |
|
| $ | (89,663 | ) |
| (100 | %) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross profit |
| $ | - |
|
| $ | 60,247 |
|
| $ | (60,247 | ) |
| (100 | %) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
General and administrative |
| $ | 3,676,620 |
|
| $ | 2,179,592 |
|
| $ | 1,497,028 |
|
|
| 69 | % |
Research and development expenses |
|
| 1,449,065 |
|
|
| 1,009,987 |
|
|
| 439,078 |
|
|
| 43 | % |
Total Costs and Expenses |
| $ | 5,125,685 |
|
| $ | 3,189,579 |
|
| $ | 1,936,106 |
|
|
| 61 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Operating Income and (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income from joint venture |
| $ | 587,374 |
|
| $ | - |
|
| $ | 587,374 |
|
|
| - |
|
Equity in loss from joint venture |
| $ | (2,801,772 | ) |
| $ |
|
|
| (2,801,772 | ) |
|
| - |
| |
Total Other Operating Income and (Loss) |
| $ | (2,214,398 | ) |
| $ | - |
|
| $ | (2,214,398 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Loss |
| $ | (7,340,083 | ) |
| $ | (3,129,332 | ) |
| $ | 4,210,751 |
|
|
| 135 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Income and (Expenses) |
| $ | (898,417 | ) |
| $ | (253,634 | ) |
| $ | 644,783 |
|
|
| 254 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss - before income taxes |
| $ | (8,238,500 | ) |
| $ | (3,382,966 | ) |
| $ | 4,855,534 |
|
|
| 144 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (8,238,500 | ) |
| $ | (3,382,966 | ) |
| $ | 4,855,534 |
|
|
| 144 | % |
|
| Six Months Ended |
|
| Increase |
|
| Increase |
| |||||||
|
| June 30, |
|
| (Decrease) |
|
| (Decrease) |
| |||||||
|
| 2019 |
|
| 2018 |
|
| Change $ |
|
| Change % |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues |
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
| $ | 2,587,916 |
|
| $ | 3,676,620 |
|
| $ | (1,088,704 | ) |
|
| -30 | % |
Research and development expenses |
| $ | 1,467,353 |
|
| $ | 1,449,065 |
|
| $ | 18,288 |
|
|
| 1 | % |
Total Costs and Expenses |
| $ | 4,055,269 |
|
| $ | 5,125,685 |
|
| $ | (1,070,416 | ) |
|
| -21 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Operating Income and (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income from joint venture |
| $ | 660,656 |
|
| $ | 587,374 |
|
| $ | 73,282 |
|
|
| 12 | % |
Equity in loss from joint venture |
| $ | (3,257,350 | ) |
| $ | (2,801,772 | ) |
| $ | 455,578 |
|
|
| 16 | % |
Total Other Operating (Expenses) |
| $ | (2,596,694 | ) |
| $ | (2,214,398 | ) |
| $ | 382,296 |
|
|
| 17 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Loss |
| $ | (6,651,963 | ) |
| $ | (7,340,083 | ) |
| $ | (688,120 | ) |
|
| -9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income and (Expenses) |
| $ | 234,519 |
|
| $ | (898,417 | ) |
| $ | 1,132,936 |
|
|
| -126 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss - before income taxes |
| $ | (6,417,444 | ) |
| $ | (8,238,500 | ) |
| $ | (1,821,056 | ) |
|
| -22 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (6,417,444 | ) |
| $ | (8,238,500 | ) |
| $ | (1,821,056 | ) |
|
| -22 | % |
Revenue
The market for nuclear industry consulting services is competitive, fragmented, and subject to rapid change. Our main business is developing our nuclear fuel. We may continue to providepursue some consulting services opportunities in the future, but we have further increased the focus and resources of the Company to the fuel division and away from consulting. There was no revenue from third parties for the six months ended June 30, 2018 as compared to the $0.1 million for the six months ended June 30, 2017.
Cost of Services Provided
Because we have shifted the focus2019 and resources of the Company to the fuel division and away from consulting, we have not incurred costs related to consulting in 2018. Cost of services provided in 2017 was comprised of expenses related to the consulting, professional, administrative, and other support costs and stock-based compensation allocated to our consulting projects labor, which were incurred to perform and support the work done for our consulting projects.
Total stock-based compensation included in cost of services provided was approximately $25,000 for the six months ended June 30, 2017.
General and Administrative Expenses
The following table presents our general and administrative expenses, (rounded in millions):
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
|
|
|
|
|
|
| ||
General and administrative expenses |
| $ | 3.7 |
|
| $ | 2.2 |
|
General and administrative expenses consist mostly of compensation and related costs for personnel and facilities, stock-based compensation, finance, human resources, information technology, and fees for consulting and other professional services. Professional services are principally comprised of outside legal, audit, strategic advisory services, and outsourcing services.
Total general and administrative expenses increaseddecreased by $1.5approximately $1.1 million for the six-monthssix months ended June 30, 2018,2019, as compared to the six months ended June 30, 2017.2018. There was an increasea decrease in stock-based compensation of approximately $0.6 million due to the immediate vesting of performance-based stock options in 2018, and a decrease in professional fees of approximately $0.6 million due to decrease in legal fees, accounting fees and other professional fees, which was due to the increased legal and professional work in negotiating and forming the Enfission joint venture and an increase in other professional and consulting fees, including engaging a consulting firm to assist in preparing the application for a grant from the U.S. Department of Energy. There was also an increase in corporate promotion expenses of approximately $0.1 million,offset by an increase in employee wagescompensation and employee benefits of approximately $0.6$0.1 million due to an increase in the number of employees and benefits and an increase in stock-based compensation of approximately $0.7 million due to the vesting of performance-based stock options issued in 2017 and a decrease in other general and administrative expenses of approximately $0.5 million.employee compensation. Total stock-based compensation included in general and administrative expenses was approximately $0.9$0.3 million and $0.2$0.9 million for the six months ended June 30, 2019 and 2018, and 2017, respectively.
33 |
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See Note 7 -7. Stockholders’ Equity and Stock-Based Compensation of the notesNotes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information regarding our stock-based compensation.
Research and Development
The following table presents ourCorporate research and development expenses (rounded in millions):
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
|
|
|
|
|
|
| ||
Research and development expenses |
| $ | 1.5 |
|
| $ | 1.0 |
|
Research and development expenses consist mostlyprimarily of compensation and related fringe benefits including stock-based compensation and related allocable overhead costs for personnel responsible for the research and development of our fuel.fuel, including work performed and billed to our Enfission joint venture. Total research and development expenses increased by $0.5was approximately $1.4 million for the six-months ended June 30, 2018, as compared toeach of the six months ended June 30, 2017. 2019 and 2018.
There was an increase in spending with third partyprofessional fees primarily related to our Enfission joint venture of approximately $0.1 million, an increase in fees related to our quality assurance program of approximately $0.1 million, and an increase in consulting fees in supporting research and development vendorsactivities for Enfission of approximately $0.3$0.1 million, due to increased focus on time and resources being spent on forming the Enfission joint venture; and an increasewhich was offset by a decrease in stock-based compensation of approximately $0.2$0.3 million. Total stock-based compensation included in research and development expenses was approximately $0.5$0.3 million and $0.2$0.6 million for the six months ended June 30, 20182019 and 2017,2018, respectively.
AllDue to the nature of our reportedthese research and development expenditures, cost and schedule estimates are inherently uncertain and can vary significantly as new information and the outcome of these research and development activities were conducted in the United States and Russia. We expense research and development costs as they are incurred. Research and development expenses may increase in dollar amount and may increase as a percentage of revenues in future periods because we expect to invest $10 million to $12 million in the development of our nuclear fuel products over the next 12-15 months.
See Note 6 - Research and Development expense of the Notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report Form on 10-Q for additional information about our research and development costs.become available.
Other Operating Income and (Loss) – Related Party
The following table presents our other operating income, (rounded in millions):
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
|
|
|
|
|
|
| ||
Other income from joint venture |
| $ | 0.6 |
|
| $ | - |
|
Equity in loss from joint venture |
|
| (2.8 | ) |
|
| - |
|
|
| $ | (2.2 | ) |
| $ | - |
|
Reported in other operating income is other income for activities performed by our employees and consultants forbilled to the Enfission joint venture.venture for research and development work. Total other income from these activities was approximately $0.6$0.7 million and 0.6 million for the six months ended June 30, 2018. Approximately 80% of the total Enfission cash inflow or capital contributions into Enfission are funded by Lightbridge2019 and the remaining 20% will be funded as capital contributions into Enfission from Framatome.2018, respectively. Equity in loss offrom joint venture consists of our share of the allocated loss in Enfission (100%), which includes reported research and development expenses of $2.3 millionEnfission. Equity in which was allocated in accordance with theloss from joint venture operating agreement, for the six months ended June 30, 2018.
Other Income (Expenses)
There was a net decrease in other incomeexpenses of approximately $0.6$1.1 million. This decreasechange was due to an increasea decrease in amortization of deferred financing costs of approximately $0.7$1.0 million due to the write-off of the deferred financing costs asset in the first quarter of 2018 recorded for the Aspireexpired equity line option agreement, (see Note 7 of the notes to the accompanying condensed consolidated financial statements). This decrease was offset byand an increase of $0.1 million in interest income generated from the interest earned from the purchase of treasury bills and from our bank savings account for the six months ended June 30, 20182019, as compared to the six months ended June 30, 2017.2018.
Provision for Income Taxes
The following table presents our provision for income taxes. Our effective tax rate for the periods presented is 25% and 38% for the six months ended June 30, 2018 and 2017, respectively.
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
|
|
|
|
|
|
| ||
Provision for income taxes |
| $ | - |
|
| $ | - |
|
We incurred a pre-tax net loss for both 20182019 and 2017.2018. We reviewed all sources of income for purposes of recognizing the deferred tax assets and concluded a full valuation allowance for 20182019 and 20172018 was necessary. Therefore, we did not have a provision for taxes for both the six months ended June 30, 20182019 and 2017.2018.
Liquidity, Capital Resources and Financial Position
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LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
At June 30, 2018,2019, we had cash and cash equivalents of approximately $25.7$21.0 million, as compared to approximately $4.5$24.6 million at December 31, 2017. The $21.22018, a $3.6 million increasedecrease in cash and cash equivalentsequivalents. The cash inflow of approximately $2.9 million resulted from net proceeds from the sale of approximately $25.94.7 million shares of common stock and net proceeds of $3.9 million of preferred stock during the six months ended June 30, 2018. See Note 7 - Stockholders’ Equity of the notes to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for information regarding our equity transactions.2019. This amount of cash inflow was partially offset by net cash used in operating activities of approximately $3.2$2.9 million and our capital contributionscash used in investing activities for our capital investment in Enfission and patent filing costs of approximately $5.2$3.7 million. We used cash during the six months ended June 30, 20182019 primarily to fund our research and development expenses and general and administrative expenses. We did not have any consulting revenue for the six months ended June 30, 20182019 and presently do not expect to have significant consulting revenue for the next 12 months.
We currently project a negative cash flow shortfallfrom operations averaging approximately $0.5 million to $0.6$0.8 million per month over the course of the next 12 months to 15 months for our general and administrative and corporate research and development expenses and we anticipate having capital requirementsfor total expected expenditures of approximately $10$9.3 million for the next 12 months. We currently anticipate the amount of cash outlays to $12 million over this same periodEnfission and third parties for research and development expenses throughexpenditures for our joint venture Enfission.nuclear fuel products to be approximately $6 million to $8 million over the next 12 to 15 months. In addition, we estimate our capital expenditures for research and development equipment to be approximately $3 million over the next 12 to 15 months. The Company believes that its current financial resources, as of the date of the issuance of the accompanying financial statements, are sufficient to fund its current 12 month operating budget, alleviating the substantial doubt raised by our historical operating results and satisfying our estimated liquidity needs 12 months from the issuance of the accompanying financial statements.
We can provide no assurances about meeting our budgeted expenditures regarding our future research and development efforts to meet our desired fuel development milestones for the next 12 months and beyond, as well as predicting future market trends in nuclear that can affect the future sale of our nuclear fuel. Furthermore, any negative results from our research and development may require us to increase our research and development spending to achieve our desired milestones in developing our nuclear fuel. Presently, we fund the majoritysubstantially all of the total cash that is required for the research and development activities to be conducted in Enfission. These additional capital needs relate to the development, manufacturemanufacturing, and commercialization of our nuclear fuel assemblies. We have the ability to delay incurring certain operating expenses in the next 12 to 15 months, which could reduce our cash flow shortfall, if needed.
The current primary future potential sources of cash available to us in 2018for the next 12 months are equity investments through our New ATM agreement, potential funding from other equity investors and potential funding from the Department of Energy. We anticipate thatinvestments, including our financing through the New ATM agreement in 2018 and other third parties will help us meet the U.S. Department of Energy’s (“DOE”) minimum cost-sharing requirements that typically range from 20% to 50% of the total project cost (i.e., a 25% to 100% match in Company’s cost-sharing contributions is required for each dollar of DOE funding) or even higher in some cases. This will enable us to apply for DOE funding that can be used toward development and/or regulatory licensing of our nuclear fuel, to offset the current cash requirements for Enfission.2019 ATM. We have no debt or debt credit lines and we have financed our operations to date through our prior years’ consulting revenue margins and the sale of our preferred stock and common stock. Management believes that the funding amount from the New ATM agreementpublic or private equity investments will be available as needed byin the Company and thatfuture, however adverse market conditions in the Company’sour common stock price and trading volume, will notas well as other factors could substantially impair the Company’sour ability to raise capital through the New ATM, if needed in the future.
Short-Term and Long-Term Liquidity Sources
In addition to the New ATM financing and other potential fundingAs discussed above, we maywill seek new financing orbringing us additional sources of capital, depending on the capital market conditions of our common stock, over the next 12 months. There can be no assurance that some of these additional sources of capital will be made available to us. The primary potential sources of cash that may be available to us are as follows:
|
| Equity investment from third party investors in Lightbridge or Enfission; and |
|
| |
· | Strategic investment |
35 |
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In support of our long-term business plan with respect to our fuel technology business, we endeavor to create strategic alliances with other strategic parties during the next three years, to support the remaining research and development activities through Enfission that is required to further enhance and complete the development of our fuel products to a commercial stage. We may be unable to form such strategic alliances on terms acceptable to us or at all.
We will need to raise additional capital in 2019 to fund our research and development, which may involve offerings of equity or debt securities, securing financing through one or more banks, entering into strategic alliances with other parties, and seeking potential funding from the DOE, that we anticipate applying for later this year.
See Note 77. Stockholders’ Equity and Stock-Based Compensation of the Notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our New ATM financing.prior financings and 2019 ATM.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as definedthat have or are reasonably likely to have a current or future effect on our financial condition, changes in Item 303(a)(4)financial condition, revenues or expenses, results of Regulation S-K.operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Required.
ITEM 4. CONTROLS AND PROCEDURES.PROCEDURES
Evaluation of Disclosure Controls and Procedures
OurBased on an evaluation under the supervision and with the participation of the Company’s management, including ourthe Company’s principal executive officer and principal financial officer evaluatedhave concluded that the Company’s disclosure controls and procedures relatedas defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of June 30, 2019 to the recording, processing, summarization and reporting of information in the periodic reports that we file with the SEC. These disclosure controls and procedures have been designed to ensureprovide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (a)(i) recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC rules and forms and (b)(ii) accumulated and communicated to ourthe Company’s management, including ourits principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2018.
Changes in Internal ControlsControl Over Financial Reporting
There were no changes in ourthe Company’s internal control over financial reporting during the period covered by this reportsecond quarter of 2019 that have materially affected, or are reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Table of Contents |
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. The Company is not involved in any material legal proceedings.
The following should be read in conjunction with, and supplements and amends, the risk factors discussed in Part I, Item 1A of the Company’s Form 10-K for the year ended December 31, 2017. Other than as described in this Item 1A, thereThere have been no material changes to our risk factors from the risk factors previously disclosed in the 20172018 Annual Report.
Development of our nuclear fuel technology is dependent upon the availability of a test reactor.
Our fuel designs are still in the research and development stage and further testing and experiments will be required in test facilities. We intended to conduct testing of our fuel designs at the Halden research reactor located in Halden, Norway. However, the Halden research reactor, which became operative in 1958, has closed and will not reopen, so it will not be available for further testing of our fuel designs. The Company is working to find a suitable alternative to generate the irradiation data we need to support regulatory licensing of our lead test assembly operation in a commercial reactor but finding an alternative to the Halden research reactor may delay further testing of our fuel designs, and we may not be able to locate another reactor in which to test our fuel designs. As a result, commercialization of our nuclear fuel technology may be delayed, perhaps indefinitely, which would adversely affect our business, financial condition and results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES OR USE OF PROCEEDS
On April 30, 2018, the holders of the Series A Preferred Shares converted 111,260 preferred shares into 124,882 common shares. The issuance of the common stock was exempt from registration under the Securities Act of 1933, as amended, pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act.None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
Resignation of Current Chief Financial Officer, and Appointment of New Chief Financial Officer
On August 8, 2018, Linda Zwobota, Chief Financial Officer of the Company, notified the Company of her decision to retire, effective September 1, 2018. Ms. Zwobota will continue working for the Company as a part-time consultant.
On August 8, 2018, the Board of Directors appointed Larry Goldman, 61, as Chief Financial Officer of the Company, effective September 1, 2018. Mr. Goldman first began working with the Company in 2006 in a consulting role and became the Chief Accounting Officer of the Company in 2008. From 1985 to 2004, Mr. Goldman was an Audit Assurance Partner for Livingston Wachtell & Co., LLP, a New York City CPA firm with over 20 years of assurance, tax and advisory services. Since September 2004, Mr. Goldman has also provided consulting services to numerous public companies on various financial projects and has government contracting accounting experience.
Employment Agreements
On August 8, 2018, the Company entered into employment agreements with each of Messrs. Grae, Mushakov and Goldman. The employment agreements provide for an initial annual base salary of $459,268, $286,443 and $265,000 for each of Messrs. Grae, Mushakov and Goldman, respectively, and establish a target annual bonus of 50% of base salary for each executive with the amount of any such bonus to be determined by the Compensation Committee of the Board based on the achievement of performance goals that are established by the Compensation Committee. In addition, each of Messrs. Grae, Mushakov and Goldman will be eligible to earn an annual long-term incentive award, subject to the Compensation Committee’s discretion to grant such awards, based upon a target award opportunity equal to 50% of base salary, and subject to attainment of such goals, criteria or targets established by the Compensation Committee in respect of each such calendar year. Each employment agreement provides that if the executive’s employment is terminated or not extended by the Company without “cause,” or terminated by the executive for “good reason” (each as defined in the employment agreement), then, subject to the terms and conditions of the employment agreement, the executive will be entitled to certain severance payments and benefits.
Each employment agreement has an initial five-year term and will automatically be extended for one additional year terms upon the expiration of the initial term unless either party provides notice of non-renewal to the other. In the case of Mr. Goldman, the term of his employment agreement commences September 1, 2018. The employment agreements provide standard benefits and contain routine confidentiality, non-competition, non-solicitation and non-disparagement provisions.
The foregoing description of the employment agreements is qualified in its entirety by the full text of the employment agreements, copies of which are attached as Exhibits 10.2, 10.3 and 10.4 to this Form 10-Q and incorporated herein by reference.
New Indemnification Agreement
On August 8, 2018, the Board of Directors approved a new form of indemnification agreement between the Company and individuals who may serve from time to time as directors or executive officers of the Company. Under the indemnification agreement, the Company agrees to indemnify directors and executive officers against liability arising out of the performance of their duties to the Company and to other entities where they provide services at the request of the Company. The indemnification agreement supplements indemnification provisions already contained in the Company’s Articles of Incorporation and Amended and Restated Bylaws.
The foregoing description of the new form of indemnification agreement is qualified in its entirety by the full text of the form of indemnification agreement, a copy of which is attached as Exhibit 10.5 to this Form 10-Q and incorporated herein by reference.None
Table of Contents |
EXHIBIT INDEX –
Exhibit Number |
| Description |
| ||
| ||
| ||
| ||
| ||
| Rule 13a-14(a)/15d-14(a) Certification - Principal Executive Officer | |
| ||
| Rule 13a-14(a)/15d-14(a) Certification - Principal Financial | |
| ||
| ||
| ||
101.INS |
| XBRL Instance Document |
| ||
101.SCH |
| XBRL Taxonomy Extension Schema Document |
| ||
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
| ||
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
| ||
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
| ||
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
Table of Contents |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 9, 20188, 2019
LIGHTBRIDGE CORPORATION
By: | /s/ Seth Grae | |
Name: | Seth Grae | |
Title: | President, Chief Executive Officer and | |
| Director | |
| (Principal Executive Officer) | |
| ||
By: | /s/ | |
Name: |
| |
Title: | Chief Financial Officer | |
| (Principal Financial Officer and Principal | |
| Accounting Officer) |
39 |