What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-07-28 compared with 2022-05-12 · 65 added, 33 removed, 112 unchanged (47% of the section changed)

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Lightbridge’s principal executive offices are located at 11710 Plaza America Drive, Suite 2000, Reston, Virginia 20190 USA.

At Lightbridge we are developing the next generation of nuclear fuel to impact, in a meaningful way, the world’s climate and energy problems.

At Lightbridge we are developing the next generation of nuclear fuel to impact, in a meaningful way, the world’s climate and energy security problems.

Our nuclear fuel could significantly improve the economics, safety, and proliferation resistance of nuclear fuel in existing and new nuclear reactors, large and small, with a meaningful impact on addressing climate change, and air pollution, all while benefiting national security.

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In particular, we are focusing on the potential of small modular reactors (SMRs) that we believe can benefit from our fuel with improved economics and load following when included on an electric grid with renewables.

According to the World Nuclear Association (WNA), there are 437 operable power reactors worldwide and an additional 57 reactors under construction.

We expect slow net growth in this number as old reactors close and fewer new large reactors are built, due to the inherent challenges facing new build large reactors, including regulatory and political challenges, financing difficulties, and the inability for large reactors to be profitable without running constantly.

We believe our metallic fuel will offer significant economic and safety benefits over traditional nuclear fuel, primarily because of the superior heat transfer properties of all-metal fuel and the resulting lower operating temperature of the fuel.

We also believe that uprating a reactor with Lightbridge Fuel™ will add incremental electricity at a lower levelized cost than any other means of generating baseload electric power, including any renewable, fossil, or hydroelectric energy source, or any traditional nuclear fuel.

Emerging nuclear technologies that many in the industry believe have the potential to generate significant amounts of power include SMRs, which are now in the development and licensing phases.

Emerging nuclear technologies that many in the nuclear power industry believe have the potential to generate significant amounts of power include SMRs, which are now in the development and licensing phases.

We expect that Lightbridge Fuel™ can provide SMRs with all the benefits our technology brings to large reactors, with the benefits being more meaningful to the economic case for deployment of SMRs.

Lightbridge Fuel™ is expected to generate more power in SMRs than traditional nuclear fuels, which will help decarbonize sectors that are now powered by fossil fuels.

We expect Lightbridge Fuel™ to generate more power in SMRs than traditional nuclear fuels, which will help decarbonize sectors that are now powered by fossil fuels.

We expect that our ongoing research and development (R&D) initiatives will be compatible with Lightbridge Fuel™ powering SMRs for multiple purposes.

The first SMRs that could use our fuel are expected to begin operations as early as 2028.

We have built a significant portfolio of patents reflecting years of R&D, and we anticipate testing our nuclear fuel through third party vendors and others, including the United States Department of Energy (DOE) national laboratories.

Currently, we are performing the majority of our R&D activities with DOE national laboratories and are working on additional contracts with them for future scopes of R&D work.

Currently, we are performing the majority of our R&D activities with DOE’s national laboratories and are working on additional contracts with them for future scopes of R&D work.

Development of Lightbridge Fuel™

Recent Developments

The DOE awarded us a second voucher from the Gateway for Accelerated Innovation in Nuclear (GAIN) program to support development of Lightbridge Fuel™ in collaboration with Pacific Northwest National Laboratory (PNNL).

In June 2022, Lightbridge Fuel™ was selected to participate in a study led by the Massachusetts Institute of Technology (MIT) to investigate the performance and economics of accident tolerant fuels for light water cooled SMRs.

Among other objectives, the project will simulate the fuel and safety performance of Lightbridge Fuel™ in an SMR designed by industry leader NuScale Power and provide a scoping analysis of longer term advanced fuel forms to improve the safety and economics of SMRs.

The DOE’s Nuclear Energy University Program awarded approximately $800,000 to MIT with the goal of bringing collaborative teams together to solve complex problems to advance nuclear technology and understanding.

DOE awarded us a second voucher from the Gateway for Accelerated Innovation in Nuclear (GAIN) program to support development of Lightbridge Fuel™ in collaboration with Pacific Northwest National Laboratory (PNNL).

The scope of the project is to demonstrate Lightbridge’s nuclear fuel casting process using depleted uranium, a key step in the manufacture of Lightbridge Fuel™.

On July 14, 2021, the Company executed a CRADA with the Battelle Memorial Institute, Pacific Northwest Division, the operating contractor of the PNNL, in collaboration with the DOE.

The project commenced in the third quarter of 2021 and is expected to be completed by the third quarter of 2022.

The project commenced in the third quarter of 2021 and is expected to be completed in 2022.

The total project value is approximately $0.7 million, with three-quarters of this amount provided by DOE for the scope performed by PNNL.

Growing Importance of Energy Security

Russia’s invasion of Ukraine has made clear the need for countries to wean off dependency on fossil fuels from countries that can threaten their national security.

Oil and natural gas prices have increased significantly since Russia commenced its invasion in early 2022 and other countries-imposed sanctions upon Russia in response.

We believe that Russia’s invasion of Ukraine has made clear the need for countries to wean off dependency on fossil fuels from countries that can threaten their national security.

Oil and natural gas prices have increased significantly since Russia commenced its invasion in early 2022 and many countries have imposed sanctions upon Russia in response.

European countries are responding by rethinking their plans for nuclear energy by either keeping existing nuclear power plants running or moving ahead with plans for new plants or both.

British Prime Minister Boris Johnson has challenged a committee of members of parliament to redouble efforts to expand nuclear energy in Britain.

The United Kingdom is deploying new nuclear power plants.

Belgium has decided to reverse its decision to close all of its nuclear plants in the wake of Russia’s invasion of Ukraine.

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Impact of COVID-19 to our Business

The recent COVID-19 pandemic has continued to impact our business operations for the three months ended March 31, 2022 and 2021.

The recent COVID-19 pandemic has continued to impact our business operations for the six months ended June 30, 2022 and 2021.

The future impacts of the COVID-19 pandemic on our financial position, results of operations and future liquidity and capital resources availability is unknown and uncertain.

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In the ordinary course of business, we engage in periodic reviews of opportunities to invest in or acquire companies or units within companies to leverage operational synergies and establish new streams of revenue.

We will be opportunistic in this regard and may also partner or contract with entities that could be synergistic to our fuel business or present an attractive stable business and/or growth opportunity in the nuclear space.

While no such investments or acquisitions are currently contemplated, we will be opportunistic in this regard and may also partner or contract with entities that could be synergistic to our fuel business or present an attractive stable business and/or growth opportunity in the nuclear space.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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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 Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022.

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2022.

There have been no significant changes in our critical accounting policies and estimates during the three and six months ended June 30, 2022.

Our management expects to make judgments and estimates about the effect of matters that are inherently uncertain.

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Financial information is included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Condensed Consolidated Results of Operations – Three Months Ended March 31, 2022 and 2021

Condensed Consolidated Results of Operations – Three Months Ended June 30, 2022 and 2021

The following table presents our historical operating results and the increase (decrease) in amounts for the periods indicated (dollars in millions):

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Other Operating Income

Distribution from joint venture

Contributed services – research and development

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Professional services are principally comprised of legal, audit, strategic advisory services, and outsourcing services.

Total general and administrative expenses increased by approximately $0.1 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

This increase was primarily due to an increase in employee compensation and employee benefits of approximately $0.1 million, an increase in directors’ fees of approximately $0.1 million due to the addition of new board members, an increase in sponsorship fees and promotion fees of approximately $0.1 million due to increased promotion activities, and an increase in stock-based compensation of approximately $0.2 million due to the issuance of restricted stock awards in 2021.

These increases were offset by a decrease in professional fees of approximately $0.4 million relating to fees incurred in connection with the arbitration matter that was settled in 2021 that were not repeated during the three months ended March 31, 2022.

Total general and administrative expenses decreased by approximately $0.1 million for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021.

This decrease was primarily due to a decrease in consulting fees of approximately $0.1 million and a decrease in professional fees of approximately $0.1 million relating to fees incurred in connection with the arbitration matter that was settled in 2021 that were not repeated during the three months ended June 30, 2022.

These decreases were offset by the increases in directors’ fees and stock-based compensation expenses of approximately $0.1 million.

Research and Development

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We are working with the U.S.

National Laboratories for research and development activities and are negotiating new contracts for additional future scopes of work in 2022.

Total R&D expenses decreased by approximately $0.1 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

This decrease was primarily due to a decrease in employee compensation and employee benefits of approximately $0.1 million.

National Laboratories for research and development activities and are negotiating new contracts for additional future scopes of work in 2022 and beyond.

Total R&D expenses decreased by approximately $0.1 million for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021.

This decrease was primarily due to a decrease in consulting and outside R&D expenses of approximately $0.1 million.

Due to the nature of our R&D expenditures, cost and schedule, estimates are inherently uncertain and can vary significantly as new information and the outcome of these R&D activities become available.

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Other Operating Income

There was contributed services – research and development of approximately $0.1 million for the three months ended March 31, 2022 and March 31, 2021, with a charge to R&D expenses and a corresponding amount recorded to contributed services – research and development.

There was a decrease of $0.1 million in the distribution from joint venture due to the final cash distribution from the dissolved Enfission joint venture that occurred in 2021.

There was contributed services - research and development from the GAIN program of approximately $0.1 million, for the three months ended June 30, 2022 and June 30, 2021, with a charge to R&D expenses and a corresponding amount recorded to contributed services - research and development.

Condensed Consolidated Results of Operations – Six Months Ended June 30, 2022 and 2021

The following table presents our historical operating results and the increase (decrease) in amounts for the periods indicated (dollars in millions):

Six months Ended

Operating Expenses

General and administrative

Research and development

Total Operating Expenses

Other Operating Income

Distribution from joint venture

Contributed services – research and development

Total Other Operating Income

Total Operating Loss

Net loss before Income Taxes

Operating Expenses

General and Administrative Expenses

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 legal, audit, strategic advisory services, and outsourcing services.

Total general and administrative expenses increased by approximately $0.1 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

This increase was primarily due to an increase in stock-based compensation of approximately $0.2 million due to the amortization of restricted stock awards issued in 2021, an increase in employee compensation and employee benefits of approximately $0.1 million, an increase in directors’ fees of approximately $0.1 million due to the increase of the number of board members, an increase in dues and subscriptions of approximately $0.1 million and an increase in sponsorship fees and promotion fees of approximately $0.1 million due to increased promotion activities.

These increases were offset by a decrease in professional fees of approximately $0.5 million relating to fees incurred in connection with the arbitration matter that was settled in 2021 that were not repeated during the six months ended June 30, 2022.

Research and Development

Research and development expenses consist primarily of compensation and related fringe benefits including stock-based compensation and related allocable overhead costs for the research and development of our fuel and contributed services - research and development for the R&D work performed under the GAIN vouchers.

Total R&D expenses decreased by approximately $0.2 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

This decrease was primarily due to a decrease in consulting and outside R&D expenses and patents expenses of approximately $0.1 million and a decrease in employee compensation and employee benefits of approximately $0.1 million.

We may have budgetary constraints due primarily to the uncertainty of future liquidity and capital resources available to us to conduct our future R&D activities.

Other Operating Income

There was a decrease of $0.1 million in the distribution from joint venture due to the final cash distribution from the dissolved Enfission joint venture that occurred in 2021.

There was contributed services - research and development from the GAIN program of approximately $0.2 million for the six months ended June 30, 2022 and June 30, 2021, with a charge to R&D expenses and a corresponding amount recorded to contributed services - research and development.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION

Our cash requirements for future planned operations to develop and commercialize our nuclear fuel, including any additional expenditures that may result from unexpected developments, requires us to raise significant additional capital and receive government support.

Our cash requirements are approximately $10 million of outside R&D expenditures per year over the next 10-15 years.

At March 31, 2022, we had cash and cash equivalents of approximately $28.2 million, as compared to approximately $24.7 million at December 31, 2021, an increase of approximately $3.5 million.

The Company raised approximately $5.4 million from the sale of approximately 0.8 million shares of common stock during the three months ended March 31, 2022.

The Company’s net cash used in operating activities for the three months ended March 31, 2022 was approximately $1.9 million and current projections indicate that we will have continued negative cash flows for the foreseeable future.

Our cash requirements for future planned operations to develop and commercialize our nuclear fuel, including any additional expenditures that may result from unexpected developments, will require us to raise significant additional capital and receive government support.

Our cash requirements are currently projected to be an average of $10 million of outside R&D expenditures per year over the next 10-15 years.

At June 30, 2022, we had cash and cash equivalents of approximately $29.3 million, as compared to approximately $24.7 million at December 31, 2021, an increase of approximately $4.6 million.

The Company raised approximately $7.6 million from the sale of approximately 1.2 million shares of common stock during the six months ended June 30, 2022.

The Company’s net cash used in operating activities for the six months ended June 30, 2022 was approximately $3.1 million and our cash flow projections indicate that we will have continued negative cash flows for the foreseeable future.

We are not profitable, and we cannot provide any assurance that we will become profitable in the future.

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We currently project a negative cash flow from our current operations averaging approximately $1.0 to $1.2 million per month for our general and administrative and R&D expenses, for total expected expenditures of approximately $12 million to $18 million for the next 12 to 15 months.

Our cash balance at March 31, 2022 and as of the date of this filing exceeds our anticipated cash requirements for the next 12 months or through the first quarter of 2023.

We believe, however, that our actual expenditures may exceed our current available working capital through the first quarter of 2023.

Our cash balance at June 30, 2022 and as of the date of this filing exceeds our anticipated cash requirements for the next 12 months or through the second quarter of 2023.

We believe, however, that our actual expenditures may exceed our current available working capital through the second quarter of 2023.

There are inherent uncertainties in forecasting future required R&D or other expenditures, as we are currently negotiating fuel development agreements with the DOE’s national laboratories and other agreements in the future.

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There can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all.

Considering the above-mentioned uncertainties and lack of financial resources to fund our long-term fuel development costs, corporate overhead expenses, and future potential collaborations and other opportunities, substantial doubt exists about the Company’s ability to continue as a going concern for the 12 months following the date of this filing.

While our available working capital at June 30, 2022 and as of the date of this filing, exceeds our currently anticipated expenditures through the second quarter of 2023, considering the above-mentioned uncertainties and lack of financial resources to fund our long-term fuel development costs, corporate overhead expenses, and future potential collaborations and other opportunities, substantial doubt exists about the Company’s ability to continue as a going concern for the 12 months following the date of this filing.

We have the ability to delay or reduce certain operating expenses, including R&D expenses in the next 12 to 15 months, which could reduce our cash flow shortfall.

However, this delay would also extend our projected fuel development timeline discussed above.

The primary source of cash available to us for the next 12 months is the potential funding from equity issuances from our at-the-market (ATM) equity offering sales agreement, as amended, with Stifel, Nicolaus & Company, Incorporated.

The primary source of cash available to us for the next 12 months, in addition to cash on hand, is the potential funding from equity issuances from our at-the-market (ATM) equity offering sales agreement, as amended, with Stifel, Nicolaus & Company, Incorporated.

The Company has an effective shelf registration statement on Form S-3 that was filed with the Securities and Exchange Commission, or SEC, on March 25, 2021, registering the sale of up to $75 million of the Company’s securities and declared effective on April 5, 2021.

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Short-Term and Long-Term Liquidity Sources

As discussed above, we will seek new financing bringing us additional sources of capital, depending on the capital market conditions of our common stock.

As discussed above, we will seek new financing to bring us additional sources of capital, depending on the capital market conditions of our common stock.

There can be no assurance that these additional sources of capital will be made available on terms that are acceptable to us, or at all.

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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-Q

Item 2. Management’s Discussion and Analysis