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Item 1A. Risk Factors

2021-03-25 compared with 2020-03-18 · 123 added, 75 removed, 178 unchanged (53% of the section changed)

Our business faces significant risks.

You should carefully consider all of the information set forth in this annual report and in our other filings with the SEC, including the following risk factors, which we face, and which are faced by our industry.

You should carefully consider all the information set forth in this annual report and in our other filings with the SEC, including the following risk factors which we face, and which are faced by our industry.

Our business, financial condition, and results of operations could be materially and adversely affected by any of these risks.

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See also “Forward-Looking Statements”.

Risks Related to the Company

Risks Related to Our Business

Substantial doubt exists as to our ability to continue as a going concern.

As described in Note 1 of our accompanying consolidated financial statements, our auditors have issued a going concern opinion regarding the Company.

This means there is substantial doubt we can continue as an ongoing business for the next twelve months.

As described in Note 1 of our accompanying consolidated financial statements, we have concluded that substantial doubt exists as to the Company’s ability to continue as a going concern.

This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months.

Our financial statements have been prepared assuming we will continue as a going concern.

We have experienced substantial and recurring losses from operations, which losses have caused an accumulated deficit of $114.1 million as of December 31, 2019.

We have experienced substantial and recurring losses from operations, which has created an accumulated retained earnings deficit of $129.1 million as of December 31, 2020.

At December 31, 2020, the Company had approximately $21.5 million in cash and had a working capital surplus of approximately $17.1 million.

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Net losses incurred for the years ended December 31, 2020 and 2019 amounted to approximately $(14.4) million, $(10.7) million, respectively.

Our ability to successfully raise sufficient funds, primarily through the sale of equity securities, is uncertain and subject to market conditions generally, the market for our common stock and other risks.

There can be no assurances as to the availability or terms upon which capital might be available.

These factors, among others, raise substantial doubt about our ability to continue as a going concern.

If we are unable to meet our financial obligations, we could be forced to delay, reduce, or cease our operations, including substantially decrease our research and development activities, or otherwise impede our ongoing business efforts, which could have a material adverse effect on our business, operating results, financial condition, and long-term prospects, and, investors may lose their entire investment in the Company.

Our ability to successfully raise sufficient funds, primarily through the sale of equity securities, is uncertain and subject to general market conditions, the market for our common stock and other risks.

There can be no assurances as to the availability or terms upon which needed capital might be available to the Company.

These factors, among others, raise substantial doubt about our ability to continue as a going concern for the next twelve months.

If we are unable to meet our financial obligations, we could be forced to delay, reduce, or cease our operations, including substantially decrease or suspend our R&D activities, or otherwise impede our ongoing business efforts, which could have a material adverse effect on our business, operating results, financial condition, and long-term prospects, and, investors may lose their entire investment in the Company.

Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We will need to raise significant additional capital in the future to expand our operations and continue our research and development activities and we may be unable to raise such funds when needed or on acceptable terms, and any capital raises may cause significant dilution to our shareholders.

As of December 31, 2019, we had $18.0 million in cash and equivalents, and as of the date of this filing, we had approximately $16.5 million in cash and equivalents.

We will need to raise significant additional capital in order to continue our research and development activities and fund our operations through commercialization of our nuclear fuel technology.

Our current plan is to maximize external funding from third party sources to support the remaining development, testing and demonstration activities relating to our metallic nuclear fuel technology.

We will need to raise significant additional capital in the future to expand our operations and continue our R&D activities and we may be unable to raise such funds when needed on acceptable terms.

Any capital raises may cause significant dilution to our shareholders.

As of December 31, 2020, we had $21.5 million in cash and equivalents.

We will need to raise significant additional capital (up to several hundred million dollars) in order to continue our R&D activities and fund our operations through commercialization of our nuclear fuel technology.

Our current plan is to maximize external funding from third party sources, including the DOE, to support the remaining development, testing and demonstration activities relating to our metallic nuclear fuel technology.

When we elect to raise additional funds or additional funds are required, we may raise such funds from time to time through public or private equity offerings, debt financings or other financing alternatives.

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In addition, if we are unable to demonstrate meaningful progress to further the development of our fuel products, it may be difficult for us to raise additional capital on terms acceptable to us or at all.

If we raise additional funds by issuing equity securities, our stockholders will experience dilution.

When we raise additional funds by issuing equity securities, our stockholders will experience dilution.

Sales of substantial amounts of our common stock may cause the trading price of our common stock to decline in the future.

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In particular, we may be required to delay, reduce the scope of or terminate one or more of our research projects, sell rights to our nuclear fuel technology or license the rights to such technologies on terms that are less favorable to us than might otherwise be available.

If we raise additional funds by issuing equity or securities convertible into equity, further dilution to stockholders may result and new investors could have rights superior to existing stockholders.

We will have virtually no common shares available for issuance to raise capital to fund our general corporate overhead or cover our outside R&D costs associated with our R&D activities or pursuing other opportunities , unless the number of authorized shares of common stock is increased.

Currently, we have approximately 8.3 million authorized shares of common stock.

As of March 24, 2021, we had approximately 6.6 million shares of common stock outstanding.

After taking into account the 0.6 million shares reserved for issuance upon the exercise of outstanding options and warrants, 0.2 million reserved for RSU issuances and 0.4 million reserved for the conversion of preferred stock and payment of preferred stock accrued dividends, we have approximately 0.5 million shares available for future issuance.

For all practical purposes, the 8.3 million authorized shares of our common stock have been fully utilized, restricting our ability to issue any more shares.

In May 2021 at the annual shareholder meeting, we will solicit the approval of our shareholders to amend our articles of incorporation to increase the number of authorized shares of common stock to 13,500,000;

however, we might not receive the requisite shareholder approval.

If the number of authorized shares of common stock is not increased, we will have virtually no shares available for issuance to raise capital to fund our general corporate overhead or cover our outside R&D activities associated with developing our fuel.

Any delays in securing this approval, or the failure to secure shareholder approval to amend our articles of incorporation to increase the number of authorized shares of common, may prevent us from executing a capital raising transaction, which may force us to cease our operations and liquidate the Company.

We are dependent upon significant U.S.

government funding and political support for nuclear power in order to complete our fuel development efforts and commercialize our nuclear fuel technology.

Our recently extended projected fuel development timeline (15-20 years) is dependent upon significant funding from the U.S.

government to not only support our ongoing R&D efforts, but to provide confidence to our investors and reduce the need to raise funds through the issuance of additional dilutive equity securities.

Government funding of R&D is subject to the political process, which is inherently unpredictable and highly competitive.

The funding of government programs is dependent on budgetary limitations, congressional appropriations and administrative allotment of funds, all of which are uncertain and may be affected by changes in U.S.

government policies resulting from various political developments.

If political support for the prioritization of the development of nuclear energy decreases, including by reason of the new presidential administration, it may affect our ability to secure government funding which would adversely affect our business, fuel development timeline, financial condition, and results of operations.

The amount of time and funding needed to bring our nuclear fuel to market may greatly exceed our projections.

The development of our nuclear fuel will take a significant amount of time and funding, and any delay in procuring equipment or in achieving development milestones, or uncertainty in regulatory licensing timelines could result in significant delays and cost overruns.

We have come to the point where certain manufacturing equipment and a manufacturing facility are necessary for further development of our fuel;

however, we cannot at this stage accurately predict the amount of funding or the time required to successfully manufacture and sell our fuel in the future.

The development of our nuclear fuel will take a significant amount of time and funding, and any shortfall in R&D funding levels or a delay in achieving fuel development milestones, or uncertainty in regulatory licensing timelines could result in significant delays and cost overruns.

We cannot at this stage accurately predict the amount of funding or the time required to successfully manufacture and sell our fuel in the future.

However, our best estimate at this time is that our metallic fuel development program is expected to take 15-20 years and cost several hundred million U.S.

dollars before we can secure our initial commercial order for a batch reload.

The actual cost and time required to commercialize our fuel technology may vary significantly depending on, among other things, the results of our research and product development efforts;

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fuel manufacturing process;

availability of metallic high assay low enriched uranium, and marketing and other costs associated with commercialization of these technologies.

Because of this uncertainty, even if financing is available to us, we may need significantly more capital than anticipated, which may not be available on terms acceptable to us or at all, and the expected revenues and other benefits from our nuclear fuel technology may be delayed or never realized.

Our current economic model for selling our fuel may prove to be inaccurate and our nuclear fuel technology products may not be cost effective.

Although our economic model concludes that our fuel technology can provide a significant payback to utilities, it is based upon a number of assumptions that may not prove accurate.

If such model is inaccurate, our nuclear fuel product may not provide nuclear utility customers with sufficient economic incentive to switch from existing nuclear fuels, and we would lose or fail to develop customers.

availability of metallic high assay low enriched uranium (HALEU), and marketing and other costs associated with commercialization of these technologies.

Because of this uncertainty, even if financing is available to us, we may need significantly more capital than anticipated, which may not be available on terms acceptable to us or at all, and the expected revenues and other expected benefits from our nuclear fuel technology may be delayed or never realized.

Our current economic model for selling our fuel may prove to be inaccurate and subject to competition and our nuclear fuel technology products may not be cost effective.

Although our preliminary economic model concludes that our fuel technology may provide a significant payback to utilities, it is based upon a number of assumptions that may not prove to be accurate.

If our model is inaccurate, our nuclear fuel product may not provide nuclear utility customers with sufficient economic incentive to switch from existing nuclear fuels, and we could lose or fail to develop customers.

For example, if ATF fuel is successful in extending the cycle length from 18 to 24 months in existing PWRs, it could severely weaken or undermine the anticipated economic value of our fuel for large PWRs.

Separately, our economic model for SMRs is in the development stage and its viability is subject to favorable wholesale power prices in the markets in which our fuel may be used, the necessary upfront capital investment to enable a 30% power uprate in future SMRs using our fuel and the future costs of uranium metallization and fabrication of our fuel rods and fuel assemblies at commercial scale, all of which are inherently unpredictable.

A failure of our current and future economic models, or a failure to find a strategic alternative, such as a potential business combination partner, would adversely affect our business, financial condition, and results of operations and may result in the failure of the Company.

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 research, development, and demonstration will be required in test facilities.

We had intended to conduct further testing of our fuel designs at the Halden research reactor located in Halden, Norway.

However, the Halden research reactor, which became operational in 1958, was shut down in June 2018 and will not reopen, so it will not be available for further testing of our fuel designs.

The Company has identified alternative options to generate the irradiation data we need to support regulatory licensing of our LTA operation in a commercial reactor but pursuing such alternatives to the Halden research reactor may significantly delay further testing of our fuel designs.

We may not be able to contractually secure another reactor in which to test our fuel designs.

As a result, commercialization of our nuclear fuel technology may be significantly delayed, perhaps indefinitely, which would adversely affect our business, financial condition, and results of operations.

Our current R&D plan includes the use of research reactors made available by the U.S.

government and the DOE, including but not limited to the ATR at INL.

These reactors are limited in terms of technical capabilities, operating cycles, and prior reservations for similar research and development services.

While the ATR has enough space for four loops where fuel rods can be irradiated, the reactor currently has only one such loop, limiting how much fuel rod material that can be inserted into the reactor as well as its duration in the reactor.

If new loops are not added to the ATR, loop irradiation testing in the ATR may not provide sufficient data to justify regulatory approval for LTA testing in a large commercial PWR in a commercially feasible timeframe.

This would likely necessitate an extra fuel development step of LTR testing in a large commercial PWR in addition to the ATR loop testing before LTA testing could commence.

Funding for any improvement of capabilities or continued operations of these reactors is subject to the priorities of the US government, as well as the appropriation of funding by the US Congress, and cannot be predicted or assured.

Changes in these factors are outside of the Company’s control and could cause significant delays and/or cost increases in our R&D programs.

Our fuel designs have never been tested in an existing commercial reactor and actual fuel performance, as well as the willingness of commercial reactor operators and fuel fabricators to adopt a new design, is uncertain.

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New designs must undergo extensive development and testing necessary for regulatory approval.

Our fuel designs are still in the research and development stage and, while certain testing on our fuel technologies has been completed, further testing and experiments will be required in test facilities.

For example, our proposed metallic fuel uses a helical cruciform form to increase its surface area and shorten the distance for heat generated in the fuel rod to reach water and improve the coolability of the fuel.

For example, our proposed metallic fuel uses a helical cruciform form to increase its surface area and shorten the distance for heat generated in the fuel rod to reach water, resulting in an improved ability to cool the fuel.

However, this proposed shape may also result in non-uniform distribution of heat flux that may have an adverse impact on the critical heat flux and limit power uprate capabilities of our metallic fuel.

Additional testing and development may result in changes to the design of our proposed metallic fuel, which could decrease its realizable benefits and impair the ability of nuclear utilities to utilize nuclear fuel incorporating our technology.

Furthermore, the fuel technology has yet to be demonstrated in operating conditions equivalent to those found in an existing commercial reactor.

Furthermore, the fuel technology has yet to be sufficiently demonstrated in operating conditions equivalent to those found in an existing commercial reactor.

Until we are able to successfully demonstrate operation of our fuel designs in commercial reactor conditions, we cannot confirm the ability of our fuel to perform as expected, including its ability to enable a power uprate, a longer operating cycle, or other anticipated performance and safety benefits.

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If our fuel designs do not perform as anticipated in commercial reactor conditions, we will not realize revenues from licensing or other use of our fuel designs.

Existing commercial nuclear infrastructure in many countries is limited to uranium material in dioxide form with enrichments up to 5%.

Our fuel is in metallic form and is enriched to higher levels which would require modifications to existing commercial nuclear infrastructure and could impede commercialization of our technology.

Existing commercial nuclear infrastructure, including conversion facilities, enrichment facilities, fabrication facilities, fuel storage facilities, fuel handling procedures, fuel operation at reactor sites, used fuel storage facilities and shipping containers, were designed and are currently licensed to handle uranium in oxide form with enrichment up to 5%.

Existing commercial nuclear infrastructure in many countries is limited to uranium material in dioxide form with enrichments limited to 5%.

Our fuel will be in a metallic form and will be enriched to higher levels, which will require modifications to existing commercial nuclear infrastructure and could impede commercialization of our technology.

Our fuel designs are expected to use uranium metal with uranium enrichment levels up to 19.75% and would therefore require certain modifications to existing commercial nuclear infrastructure to enable commercial nuclear facilities to handle our fuels.

Those nuclear facilities will need to go through a regulatory licensing process and obtain regulatory approvals to be able to process, handle, or ship uranium metal with enrichment levels up to 19.75% and operate commercial reactors using our metallic fuel.

There is a risk that some relevant entities within the nuclear power industry may be slow in making any required facility infrastructure modifications or obtaining required licenses or approvals to enable enrichment to 19.75%, conversion to metallic uranium, fabrication of metallic fuel rods and assemblies, shipment of fresh and irradiated metallic fuel assemblies, interim storage of fresh and irradiated fuel assemblies in spent fuel pools or dry cask storage facilities at reactor sites, and permanent disposal of spent metallic fuel at a high-level repository.

Those nuclear facilities will need to complete a regulatory licensing process and obtain regulatory approvals to be able to process, handle, or ship uranium metal with enrichment levels up to 19.75% and operate commercial reactors using our metallic fuel.

There is significant risk that some relevant entities within the nuclear power industry may be slow in making any required facility infrastructure modifications or obtaining required licenses or approvals to enable enrichment to 19.75%, de-conversion to metallic uranium, fabrication of metallic fuel rods and assemblies, shipment of fresh and irradiated metallic fuel assemblies, interim storage of fresh and irradiated fuel assemblies in spent fuel pools or dry cask storage facilities at reactor sites, or permanent disposal of spent metallic fuel at a high-level repository, or may not make the necessary modifications at all.

There is also a risk associated with possible negative perception of uranium enrichment greater than 5% that could potentially delay or hinder regulatory approval of our nuclear fuel designs.

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Presently, most commercial nuclear fuel is produced using a pellet fabrication technology, whereby uranium dioxide is formed into small pellets which are stacked and sealed inside metallic tubes.

Our co-extrusion fabrication technology involves extrusion of a composite solid fuel rod from a metallic matrix containing uranium and zirconium alloy.

Fabrication of full-length (approximately 3.5 to 4.5 meters) PWR metallic fuel rods has yet to be demonstrated with our uranium-zirconium metal.

There is a risk that the fuel fabrication process utilized to produce one meter long metallic fuel rods may not be adaptable to the fabrication of full-length metallic fuel rods used in commercial reactors.

Our co-extrusion fabrication technology involves co-extrusion of a composite solid fuel rod from a metallic matrix containing uranium and zirconium alloy.

Fabrication of full-length (approximately 3.5 to 4.5 meters) PWR metallic fuel rods for large reactors and shorter length for SMRs has yet to be sufficiently demonstrated for our uranium-zirconium fuel.

There is a risk that the fuel fabrication process utilized to date to our metallic fuel rods may not be feasibly adapted to the fabrication of full-length metallic fuel rods usable in commercial reactors.

The cost of production of our fuel could be prohibitively expensive.

In order for our metallic fuel to succeed, we will need to be able to produce our fuel at a price that is economically viable.

We have received estimates that production of our fuel could be achieved at a commercial scale for approximately $5,000 to $10,000 per kilogram using known metallization/de-conversion technologies.

To bring the cost of production further down, we estimate that it would require a new government-funded research and development program that could take 15-20 years and cost several billion dollars.

There can be no assurance that we will be able to produce our fuel at a price that is economically feasible or that future research efforts will lower the cost of production.

If we are unable to produce our fuel at a price that is economically viable, the market for our fuel may never develop and our current business model will fail.

We serve the nuclear power industry, which is highly regulated.

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The nuclear power industry is a highly regulated industry.

All entities that operate nuclear facilities and transport nuclear materials are subject to the jurisdiction of the US Nuclear Regulatory Commission, or its counterparts around the world.

All entities that operate nuclear facilities and transport nuclear materials are subject to the jurisdiction of the US-NRC, or its counterparts around the world.

Our fuel designs differ significantly in some aspects from the fuel used today by commercial nuclear power plants.

These differences will likely result in more prolonged and extensive review by the US Nuclear Regulatory Commission or its counterparts around the world that could cause development program schedule delays.

These differences will likely result in more prolonged and extensive review by the US-NRC and its counterparts around the world that could cause fuel development program delays and delays in commercialization.

Entities within the nuclear industry may be hesitant to be the first to use our fuel, which has little or no history of successful commercial use.

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There is a risk that regulators may require additional information regarding the fuel’s behavior or performance which necessitates additional, unplanned analytical and/or experimental work which could cause program schedule delays and require more research and development funding.

Events related to our Enfission joint venture could adversely affect our future operations.

The Enfission joint venture is currently inactive and we intend to dissolve this joint venture as soon as practical.

Under the Joint Venture Operating Agreement, neither we nor Framatome are in a position to unilaterally control or dissolve the joint venture, and our ability to engage in research activities within the scope of operations of the joint venture may be impaired until such time as the joint venture is dissolved.

Our inability to dissolve the joint venture or resolve the continuing deadlock could adversely impact the operations and future profitability of Lightbridge, including the Company’s ability to conduct research and development activities within the scope of operations of Enfission in the near term or at all, as well as delaying the commercialization of the nuclear fuel incorporating our technology for certain markets.

See “Certain Challenges – The ability to unwind our partnership with Framatome in an expeditious manner while minimizing the cost and risk to our intellectual property represents a significant challenge.” under Part I.

On February 7, 2020, we filed an Arbitration Request in the International Court of Arbitration of the International Chamber of Commerce against Framatome SAS to resolve issues arising out of our assertion that there are material breaches on the part of Framatome under the RSDA.

This arbitration may increase our expenses and prevent our officers and directors from focusing their time and effort entirely on our business, which could have a material adverse effect on our financial statements.

Additionally, a ruling by the arbitrator adverse to our position could have a material negative impact on our future business and financial statements.

Successful execution of our business model is dependent upon public support for nuclear power and overcoming public opposition to nuclear energy.

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Nuclear power faces strong opposition from certain competitive energy sources, individuals, and organizations.

The major nuclear accident that occurred at the Fukushima nuclear power plant in Japan beginning on March 11, 2011 increased public opposition to nuclear power in some countries, resulting in a slowdown in, or, in some cases, a complete halt to, new construction of nuclear power plants, an early shut down of existing power plants, or a dampening of the favorable regulatory climate needed to introduce new nuclear technologies.

The accident that occurred at the Fukushima nuclear power plant in Japan beginning on March 11, 2011 increased public opposition to nuclear power in some countries, resulting in a slowdown in, or, in some cases, a complete halt to new construction of nuclear power plants, an early shut down of existing power plants, or a dampening of the favorable regulatory climate needed to introduce new nuclear technologies.

In addition, the Fukushima accident appears to have shrunk the projected size of the global nuclear power market in 2025-2030 as reflected in the most recent reference case projections published by the World Nuclear Association.

As a result of the Fukushima accident, some countries that were considering launching new domestic nuclear power programs have delayed or cancelled preparatory activities they were planning to undertake as part of such programs.

This has diminished the number of consulting opportunities that we could compete on globally, at least in the near-term.

Furthermore, nuclear fuel fabrication and the use of new nuclear fuels in reactors must be licensed by the US Nuclear Regulatory Commission and equivalent governmental authorities around the world.

Furthermore, nuclear fuel fabrication and the use of new nuclear fuels in reactors must be licensed by the US-NRC and equivalent governmental authorities around the world.

In many countries, the licensing process includes public hearings in which opponents of the use of nuclear power might be able to cause the issuance of required licenses to be delayed or denied.

Our nuclear fuel fabrication process is dependent on outside suppliers of nuclear and other materials and any difficulty by a fuel fabricator in obtaining these materials could be detrimental to our ability to eventually market our fuel through a fuel fabricator.

Production of fuel assemblies using our nuclear fuel designs is dependent on the ability of fuel fabricators to obtain supplies of nuclear material utilized in our fuel assembly design.

Our proposed fuel products require HALEU in metallic form, enriched between 5% and 19.75% in the isotope uranium-235 (U-235), with presently no commercial supply of HALEU available in the U.S.

Currently HALEU can only be sourced in limited quantities from the DOE.

Fabricators will also need to obtain metal for components, particularly zirconium or its alloys.

These materials are regulated and can be difficult to obtain or may have unfavorable pricing terms.

Any difficulties in obtaining these materials by fuel fabricators could have a material adverse effect on their ability to market fuel based on our technology.

If the price of non-nuclear energy sources falls, whether as the result of government policy or otherwise, there could be an adverse impact on nuclear energy, which would have a material adverse effect on our operations.

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If prices of non-nuclear energy sources fall, it could limit the deployment of new build nuclear power plants in such markets.

This could reduce the size of the potential markets for both our fuel technology and our consulting services.

In addition, many states and the federal government have adopted a variety of government subsidies and utility incentives to allow renewable energy sources, such as biofuels, wind and solar energy, to compete with conventional sources of energy that have historically been less expensive, such as fossil fuels and nuclear power.

This could reduce the size of the potential markets for our fuel technology.

In addition, the U.S.

federal government and many states have adopted a variety of government subsidies and utility incentives to allow renewable energy sources, such as biofuels, wind and solar energy, to compete with conventional sources of energy that have historically been less expensive, such as fossil fuels and nuclear power.

We may face additional indirect competition from providers of renewable energy sources, particularly in wind and solar energy, if government subsidies and utility incentives for those sources of energy remain or increase or if such sources of energy are mandated.

Additionally, the availability of subsidies and other incentives from utilities or government agencies to install alternative renewable energy sources may negatively impact our potential customers’ desire to purchase our products and services, or may be utilized by our existing or new competitors to develop a competing business model or products or services that may be potentially more attractive to customers than ours, any of which could have a material adverse effect on our results of operations or financial condition.

We may be adversely affected by uncertainty in the global financial markets and worldwide economic downturn.

We may be adversely affected by uncertainty in the global financial markets and by a potential worldwide economic downturn caused by the COVID-19 outbreak or future pandemics.

Our future results may be adversely affected by the worldwide economic downturn, continued volatility or further deterioration in the debt and equity capital markets, inflation, deflation, or other adverse economic conditions that may negatively affect us.

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Due to the above listed factors, we cannot be certain that additional funding will be available on terms that are acceptable to us, or at all.

The recent outbreak of Covid-19 in the United States and globally has resulted in the United States and other countries halting or sharply curtailing the movement of people, goods and services.

All of this has caused extended shutdowns of businesses and the prolonged economic impact remains uncertain.

At this point, we have experienced and may continue to experience a reduction of our research and development expenses and an increase in our general and administrative expenses.

Other than such changes, we believe the conditions will have not a material adverse effect on our business, but given the rapidly changing developments we cannot accurately predict what effects these conditions will have on our financial position, results of operations and liquidity, including our research and development activities, which will depend on, among other factors, the ultimate geographic spread of the virus, the duration of the outbreak and travel restrictions and business closures imposed by the United States and various other governments.

Covid-19 may have a material adverse effect on our ability to obtain financing, which is needed to generate sufficient cash flows to conduct our businesses activities in the future.

We rely upon certain members of our senior management, including Seth Grae, Andrey Mushakov, and Larry Goldman and the loss of any of Mr.

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Goldman could have a material adverse effect on our business, results of operations or financial condition.

Also, we rely heavily on other members of our management team and our inability to hire, retain, and motivate adequate numbers of consultants and managers could adversely affect our ability to meet client needs and to continue the development of our fuel designs.

Also, we rely heavily on other members of our management team and our inability to hire, retain, and motivate adequate numbers of consultants and managers could adversely affect our ability to meet customer needs and to continue the development of our fuel designs.

Competition for highly qualified technical personnel is intense in our industry.

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In addition, a loss of the service of any of our existing skilled employees or contractors could have a significant negative effect on our ability to operate.

We may not be able to receive or retain authorizations that may be required for us to sell our services or license our technology internationally.

The sales and marketing of our services and technology internationally may be subject to US and France export control regulations and the export control laws of other countries.

Governmental authorizations may be required before we can export our services or technology.

We may not be able to receive or retain authorizations that may be required for us to sell or license our technology internationally.

The sales and marketing of our technology internationally may be subject to U.S.

export control regulations and the export control laws of other countries.

Governmental authorizations may be required before we can export our technology.

If authorizations are required and not granted, our international business could be materially affected.

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Violation of export control regulations could subject us to fines and other penalties, such as losing the ability to export for a period of years, which would limit our revenue growth opportunities and significantly hinder our attempts to expand our business internationally.

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 research, development, and demonstration will be required in test facilities.

We intended to conduct further 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 has identified alternative options to generate the irradiation data we need to support regulatory licensing of our lead test assembly operation in a commercial reactor but pursuing such alternatives to the Halden research reactor may delay further testing of our fuel designs.

We may not be able to contractually secure 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.

Potential competitors could limit opportunities to license our technology.

Other companies may develop new nuclear fuel designs that can be used in the same types of reactors as those that we target.

These nuclear fuel designs include, but are not limited to, the ATF currently being developed and tested by several U.S.

and international nuclear fuel suppliers, with the support of the DOE, which could undermine our fuel’s economic value proposition if ATF is proven to extend the operating cycle length from 18 to 24 months.

Some of these companies have existing long-term commercial contracts with nuclear power utilities that we do not have.

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These larger companies may be better able to handle the corresponding long-term financial requirements to successfully develop new nuclear fuel and bring it to market.

If the US Department of Energy (“DOE”) were to successfully assert that an invention claimed within our 2007 or 2008 Patent Cooperation Treaty, or PCT, patent applications was first conceived or actually reduced to practice under a contract with the DOE, then our intellectual property rights in that invention could become compromised and our business model could become significantly impeded.

If the DOE were to successfully assert that an invention claimed within our 2007 or 2008 Patent Cooperation Treaty, or PCT, patent applications was first conceived or actually reduced to practice under a contract with the DOE, then our intellectual property rights in that invention could become compromised and our business model could become significantly impeded.

Work on finite aspects and/or testing of some subject matter disclosed in our 2007 and 2008 Russian PCT patent applications was done under a government contract with the DOE.

If the DOE asserted that an invention claimed in the 2007 and/or 2008 Russian PCT applications was first conceived or actually reduced to practice under such a contract, and a US court agreed, the DOE could gain an ownership interest in such an invention outside of the Russian Federation and our intellectual property rights in that claimed invention could become compromised and our business model may then be significantly impeded.

If the DOE asserted that an invention claimed in the 2007 and/or 2008 Russian PCT applications was first conceived or actually reduced to practice under such a contract, and a U.S.

court agreed, the DOE could gain an ownership interest in such an invention outside of the Russian Federation and our intellectual property rights in that claimed invention could become compromised and our business model may then be significantly impeded.

If we are unable to obtain or maintain intellectual property rights and trade secrets relating to our technology, the commercial value of our technology may be adversely affected, which could in turn adversely affect our business, financial condition, and results of operations.

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Enforcement of claims that a third party has illegally obtained and is using trade secrets is expensive, time consuming and uncertain.

In addition, non-US courts are sometimes less willing than US courts to protect trade secrets.

In addition, non-U.S.

courts are sometimes less willing than U.S.

courts to protect trade secrets.

If our competitors independently develop equivalent knowledge, methods, and know-how, we would not be able to assert our trade secrets against them and our business could be harmed.

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Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

Production of fuel assemblies using our nuclear fuel designs is dependent on the ability of fuel fabricators to obtain supplies of nuclear material utilized in our fuel assembly design.

Our proposed fuel products require high-assay low enriched uranium (HALEU) in metallic form, enriched between 5% and 19.75%, with presently no commercial supply of HALEU available in the US.

Currently HALEU can only be sourced in limited quantities from the DOE.

Recently, major commercial enrichment companies, such as Urenco have expressed interest in supplying HALEU.

Several Urenco enrichment facilities are already licensed to produce uranium at enrichments above 5% U235, in line with today’s nuclear industry market requirements.

Urenco is now exploring the construction of a dedicated HALEU unit at the Urenco USA facility.

Urenco is progressing the design engineering and related licensing activities to support this project.

Fabricators will also need to obtain metal for components, particularly zirconium or its alloys.

These materials are regulated and can be difficult to obtain or may have unfavorable pricing terms.

Any difficulties in obtaining these materials by fuel fabricators could have a material adverse effect on their ability to market fuel based on our technology.

We are exposed to risks related to cybersecurity and protection of confidential information.

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In addition, our ability to raise additional capital, including through future at-the-market offerings and other offerings utilizing short-form registration statements on Form S-3, would be substantially impaired.

Shareholder activism could cause us to incur significant expense, hinder execution of our business strategy and impact our stock price.

Shareholder activism, which can take many forms and arise in a variety of situations, could result in substantial costs and divert management and our board’s attention and resources from our business.

Additionally, such shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with our employees or service providers and make it more difficult to attract and retain qualified personnel.

Also, we may be required to incur significant fees and other expenses related to activist shareholder matters, including for third-party advisors.

Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any shareholder activism.

We have identified a material weakness in our internal control over financial reporting.

Management, including our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2020 and concluded that we did not maintain effective internal control over financial reporting.

Specifically, management identified a material weakness relating to the amortization of patent costs—see Part II.

Item 9A, Controls and Procedures , below.

While certain actions have been taken to implement a remediation plan to address this material weakness and to enhance our internal control over financial reporting, if this material weakness is not remediated, it could adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which could negatively affect investor confidence in our Company, and, as a result, the value of our common stock could be adversely affected.

UNRESOLVED STAFF COMMENTS

Not applicable.

Our office space is located at 11710 Plaza America Drive, Suite 2000 Reston, VA 20190 USA.

The term of the lease extends through December 31, 2021.

We are obligated to pay approximately $10,000 per month for office rent.

This space is used by our executives, employees, and contractors for administrative purposes, consulting work, and research and development activities.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors