What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-11 compared with 2022-10-31 · 67 added, 98 removed, 74 unchanged (69% of the section changed)

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This MD&A consists of the following sections:

Overview of Our Business and Recent Developments - a general overview of our business and updates;

Overview of Our Business and Development of Lightbridge Fuel™- a general overview of our business and updates;

Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical judgments and estimates;

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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 BUSINESS

OVERVIEW OF OUR BUSINESS AND DEVELOPMENT OF LIGHTBRIDGE FUEL TM

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.

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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.

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

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 in the coming decades.

We are developing our nuclear fuel to enable that to happen.

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.

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 believe Lightbridge can benefit from a growing nuclear power industry, and we believe our nuclear fuel to help enable that growth to happen.

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

Emerging nuclear technologies that many in the nuclear power industry believe have the potential to help drive growth in nuclear power include small modular reactors (SMRs), which are now in the development and licensing phases.

We expect that Lightbridge Fuel™ can provide SMRs with all the same benefits our technology brings to large reactors, with such benefits being even more meaningful to the economic case for deployment of SMRs, including potential load following capability when included on a low-carbon electric grid with renewable energy sources.

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 expect that our ongoing research and development (R&D) initiatives will lead to Lightbridge Fuel™ powering SMRs for multiple purposes.

The first SMRs are expected to begin operations as early as 2029.

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’s (DOE) national laboratories.

Currently, we are performing the majority of our R&D activities with DOE’s national laboratories.

Currently, we are performing the majority of our R&D activities with the DOE’s national laboratories.

Development of Lightbridge Fuel™

We believe our metallic fuel can be used in different types of water-cooled commercial power reactors, such as pressurized water reactors, boiling-water reactors, Russian-designed water-cooled, water-moderated energetic reactors, Canadian Deuterium Uranium (CANDUs), water-cooled SMRs, and water-cooled research reactors.

We have obtained patent validation in key countries (in our judgement) and will continue to seek patent validation in countries that either currently operate or are expected to build and operate a large number of nuclear power reactors compatible with our fuel technology.

Recent Developments

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 $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 in 2022.

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

Under this GAIN Voucher, we have been working with PNNL to develop a reliable and repeatable casting process utilizing its existing equipment.

To date, several castings have been performed and the cast ingots analyzed.

In an iterative process, the casting methodology is modified based on the characterization results as we approach an optimized process to achieve the desired results.

This work is expected to culminate in a process suitable to produce fuel samples for our upcoming irradiation tests.

Growing Importance of Energy Security

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.

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.

It has become clear that a stable domestic energy supply ensures energy security and provides the strongest protection against energy price volatility.

Increasingly, policymakers view nuclear energy as critical to a secure energy future.

Future Potential Collaborations and Other Opportunities

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.

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.

HALEU Consortium Membership

To support establishment of domestic high-assay low-enriched uranium (HALEU) infrastructure, the DOE announced on December 7, 2022 the creation of a HALEU Consortium.

According to the DOE, the purposes of the HALEU Consortium include:

(i) Provide the Secretary of Energy HALEU demand estimates for domestic commercial use, (ii) Purchase HALEU made available to members for commercial use under the Program, (iii) Carry out demonstration projects using HALEU under the Program, and (iv) Identify actionable opportunities to improve the reliability of the HALEU supply chain.

On December 15, 2022, the Company submitted a formal request to the DOE to join the HALEU Consortium to mitigate HALEU supply risk.

On January 12, 2023, the Company received written confirmation from the DOE of Lightbridge’s membership in the HALEU Consortium.

Idaho National Laboratory Agreements

In the second half of 2022, Lightbridge entered into agreements with Idaho National Laboratory (INL), in collaboration with the DOE, to support the development of Lightbridge Fuel™.

The framework agreements use an innovative structure and consist of an “umbrella” Strategic Partnership Project Agreement (SPP) and an “umbrella” Cooperative Research and Development Agreement (CRADA), each with Battelle Energy Alliance, LLC, the DOE’s operating contractor for INL, with an initial duration of seven years.

We anticipate that the initial phase of work under the two agreements that has been released will culminate in irradiation testing in the Advanced Test Reactor (ATR) of our fuel material samples, known as fuel material coupons, using enriched uranium supplied by the DOE.

The initial phase of work aims to generate irradiation performance data for Lightbridge’s delta-phase uranium-zirconium alloy relating to various thermophysical properties.

The data will support fuel performance modeling and regulatory licensing efforts for commercial deployment of Lightbridge Fuel™.

We anticipate that subsequent phases of work under the two umbrella agreements that have not yet been released may include post-irradiation examination of the irradiated fuel material coupons, loop irradiation testing in the ATR, and post-irradiation examination of one or more uranium-zirconium fuel rodlets, as well as transient experiments in the Transient Reactor Test Facility at INL.

During the first quarter of 2023, we worked with INL to complete and issue a Quality Implementation Plan (QIP) for our collaborative project at the lab.

The QIP was an essential first step to ensure all future work performed at INL on the project would be conducted in accordance with nuclear quality assurance requirements of the U.S.

Nuclear Regulatory Commission.

We are currently working with INL to demonstrate casting of delta-phase uranium-zirconium ingots with depleted uranium using existing INL equipment.

Future Steps Toward Our Fuel Development and Timeline For The Commercialization of Our Nuclear Fuel Assemblies

We anticipate fuel development milestones for Lightbridge Fuel™ over the next 2-3 years will consist of the following:

continue to execute SPP/CRADA work at INL leading to irradiation testing in the ATR of our fuel material coupons using enriched uranium supplied by INL.

conduct a feasibility study for the use of our nuclear fuel in CANDU heavy water reactors.

conduct a front-end engineering and design study for a Lightbridge pilot-scale fuel fabrication facility.

demonstrate extrusion with our uranium-zirconium fuel alloy and produce fuel material coupons for irradiation testing.

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, 2022, filed with the SEC on March 30, 2023.

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

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2023.

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

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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 to our unaudited condensed consolidated financial statements for a discussion of recent accounting standards and pronouncements.

OPERATIONS REVIEW

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 September 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):

Condensed Consolidated Results of Operations - Three Months Ended March 31, 2023 and 2022

The following table presents our historical operating results and the change in amounts for the periods indicated (rounded to millions):

Three months Ended

September 30,

Operating Expenses

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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 $0.2 million for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

There was an increase in stock-based compensation expenses of $0.1 million and an increase in director fees, employee compensation and employee benefits of $0.1 million.

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.

We are working with the U.S.

National Laboratories regarding our research and development activities.

Total R&D expenses decreased by $0.2 million for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021 due to a decrease in consulting and outside R&D expenses.

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.

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 $0.1 million and $0.3 million recorded in contributed services - research and development from the GAIN program for the three months ended September 30, 2022 and September 30, 2021, respectively, with a charge to R&D expenses and a corresponding amount recorded to contributed services - research and development.

Condensed Consolidated Results of Operations - Nine Months Ended September 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):

Nine Months Ended

September 30,

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 $0.3 million for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

This increase was primarily due to an increase in stock-based compensation expenses of $0.3 million due to the amortization of restricted stock awards issued in 2021, an increase in directors’ fees of $0.2 million due to the increase of the number of board members, an increase in dues and subscriptions of $0.1 million and an increase in insurance expense, promotion, and travel expenses of $0.2 million.

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

Total general and administrative expenses remained consistent for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

There was an increase in stock-based compensation of $0.1 million, offset by a decrease in employee compensation and employee benefits of $0.1 million.

Research and Development

Total R&D expenses decreased by $0.5 million for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

This decrease was primarily due to a decrease in consulting and outside R&D expenses of $0.3 million, a decrease in patents expenses of $0.1 million and a decrease in employee compensation and employee benefits of $0.1 million.

Total R&D expenses increased by $0.1 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

This increase was primarily due to an increase in project labor costs incurred from the U.S.

National Laboratories of $0.2 million, offset by a net decrease in other R&D costs of $0.1 million.

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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 $0.3 million and $0.5 million for the nine months ended September 30, 2022 and September 30, 2021, respectively, with a charge to R&D expenses and a corresponding amount recorded to contributed services - research and development.

There was a decrease in other operating income of $0.1 million due to a decrease in contributed services - research and development of $0.1 million for the three months ended March 31, 2022.

Contributed services - research and development are recorded with a charge to R&D expenses and a corresponding amount recorded to contributed services - research and development.

There was an increase in other income of $0.2 million due to rising interest rates over the past year which resulted in an increase in interest income earned from the purchase of treasury bills and from our bank savings account for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

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, 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 September 30, 2022, we had cash and cash equivalents of $31.3 million, as compared to $24.7 million at December 31, 2021, an increase of $6.6 million.

The Company raised $10.6 million from the sale of approximately 1.8 million shares of common stock during the nine months ended September 30, 2022.

The Company’s net cash used in operating activities for the nine months ended September 30, 2022 was $4.1 million and our cash flow projections indicate that we will have continued negative cash flows for the foreseeable future.

Liquidity Outlook

We measure liquidity in terms of our ability to fund the cash requirements of our R&D activities and our general and administrative expenses, including our contractual obligations and other commitments.

We believe that based on our current level of operating expenses and currently available cash resources, we will have sufficient funds available to cover our business activities and operating cash needs for the next 12 months.

Our long-term 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.

These long- term 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 receive government support in the future.

At March 31, 2023, we had cash and cash equivalents of $28.1 million, as compared to $28.9 million at December 31, 2022, a decrease of $0.8 million.

We raised net proceeds of $0.7 million from the sale of approximately 0.2 million shares of common stock during the three months ended March 31, 2023.

Our net cash used in operating activities for the three months ended March 31, 2023 was $1.5 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 have approximately $27.5 million of working capital as of the date of this filing.

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

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

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

There are inherent uncertainties in forecasting future required R&D or other expenditures in the future.

Once many of these anticipated agreements are finalized or other future R&D agreements are entered into and the future R&D costs are known, we expect to forecast a significantly higher level of future required R&D expenses and higher negative monthly cash flows from operations in the future.

We currently project a negative cash flow from our operations averaging approximately $1.1 million per month for both our general and administrative and R&D expenses, for total expected expenditures of approximately $13.1 million for the next 12 months.

Our R&D expenses are expected to increase over the next 12-15 months.

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

There are inherent uncertainties in forecasting the future required R&D or other expenditures in the future.

Once other anticipated agreements are finalized or other future R&D agreements are entered into and the future R&D costs are known, we expect to incur a significantly higher level of future required R&D expenses and higher negative monthly cash flows from operations in the future.

If sufficient funding becomes available to us, our R&D activities may significantly increase in the future.

This funding is needed to continue our nuclear fuel development project and to achieve our future R&D milestones.

COVID-19 may also affect costs and future operations by potentially delaying our work at the DOE’s national laboratories.

The actual amount of cash we will need to operate is subject to many factors, including, but not limited to, the timing, design and conduct of the R&D work at the DOE’s national laboratories for our fuel along with cost to commercialize our nuclear fuel.

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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.

While our available working capital at September 30, 2022 and as of the date of this filing exceeds our currently anticipated expenditures through the third 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, any such delay or reduction in operating expenses would also extend our projected fuel development timeline discussed above.

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 primary source of cash available to us for the next 12 months, in addition to cash and cash equivalents on hand, is the potential funding from equity issuances pursuant to the 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.

We may be limited on the amount of funding available under this Form S-3 shelf registration statement in the future.

We filed a prospectus supplement dated April 9, 2021 with the SEC pursuant to which we offered and sold shares of common stock having an aggregate offering price of $9.0 million through our ATM.

We filed a second prospectus supplement, dated November 19, 2021, with the SEC pursuant to which we may offer and sell shares of common stock having an aggregate offering price of up to $20.0 million from time to time, through the ATM.

We filed a prospectus supplement, dated April 4, 2023, with the SEC pursuant to which we may offer and sell shares of common stock having an aggregate offering price of up to $17.9 million from time to time, through the ATM.

As of the date of this filing, our calculated public float is below $75.0 million and we are subject to the limitations set forth in General Instruction I.B.6 of Form S-3, which limits the dollar amount of securities that we may offer and sell under the Form S-3 shelf registration statement to one-third of our non-affiliate public float over any 12 calendar month period (the above $17.9 million fundraising limit).

We have no debt or lines of credit and we have financed our operations to date through the sale of our preferred stock and common stock.

Management believes that public or private equity investments may be available in the future, however adverse market conditions, in our common stock price and trading volume, as well as other factors like COVID-19 could substantially impair our ability to raise capital in the future and continue developing our nuclear fuel.

Management believes that public or private equity investments may be available in the future;

however adverse market conditions, in our common stock price and trading volume, as well as other factors could substantially impair our ability to raise capital in the future and continue developing our nuclear fuel.

Short-Term and Long-Term Liquidity Sources

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.

As discussed above, we will seek new financing bringing 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 to us.

The primary potential sources of cash that may be available to us are as follows:

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government funding to support the remaining R&D activities required to continue the development of our fuel products and move them to a commercial stage.

In support of our long-term business with respect to our fuel technology business, we endeavor to create strategic alliances with other parties during the next three years, to support the remaining R&D activities that are required to further enhance and complete the development of our fuel products to a commercial stage.

In support of our long-term business with respect to our fuel technology business, we endeavor to create strategic alliances with other parties to support the remaining R&D activities that are 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.

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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