LTBR 10-Q
LIGHTBRIDGE Corp (LTBR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended:
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission File Number:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Empl. Ident. No.) |
(Address of principal executive offices, Zip Code)
(
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class: |
| Trading Symbol(s): |
| Name of Each Exchange on Which Registered: |
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| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
☒ | Smaller reporting company | ||
| Emerging growth company | ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares outstanding of the issuer's common stock, as of August 3, 2021 is as follows:
Class of Securities |
| Shares Outstanding |
Common Stock, $0.001 par value |
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LIGHTBRIDGE CORPORATION
Form 10-Q
JUNE 30, 2021
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Item 1. | Financial Statements (unaudited) |
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| Unaudited Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 |
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| Notes to Condensed Consolidated Financial Statements (unaudited) |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
PART I—FINANCIAL INFORMATION
LIGHTBRIDGE CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
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| June 30, |
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| December 31, |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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Other receivables |
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Prepaid expenses and other current assets |
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Total Current Assets |
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Other Assets |
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Trademarks |
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Total Assets |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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Accrued legal settlement costs |
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Total Current Liabilities |
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Commitments and Contingencies - Note 4 |
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Stockholders' Equity |
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Preferred stock, $ |
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Convertible Series A preferred shares, |
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Convertible Series B preferred shares, |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders' Equity |
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Total Liabilities and Stockholders' Equity |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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| Table of Contents |
LIGHTBRIDGE CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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| Three Months Ended |
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| Six Months Ended |
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| June 30, |
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Revenue |
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Operating Expenses |
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General and administrative |
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Research and development |
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Total Operating Expenses |
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Other Operating Income |
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Distribution from joint venture |
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Grant income |
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Total Other Operating Income |
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Operating Loss |
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Other Income |
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Interest income |
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Foreign currency transaction gain |
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Total Other Income |
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Net Loss Before Income Taxes |
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Income taxes |
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Net Loss |
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Accumulated preferred stock dividend |
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Deemed additional dividend on preferred stock dividend due to the beneficial conversion feature |
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Net loss attributable to common stockholders |
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Net Loss Per Common Share, Basic and Diluted |
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Weighted Average Number of Common Shares Outstanding |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
| Table of Contents |
LIGHTBRIDGE CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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| Six Months Ended |
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| June 30, |
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Operating Activities |
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Net Loss |
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Adjustments to reconcile net loss from operations to net cash used in operating activities: |
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Common stock issued for services |
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Stock-based compensation |
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Patent write-offs |
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Changes in operating working capital items: |
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Other receivables |
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Prepaid expenses and other current assets |
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Accounts payable and accrued liabilities |
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Accrued legal settlement costs |
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Net Cash Used in Operating Activities |
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Investing Activities |
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Patents and trademarks |
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Net Cash Used in Investing Activities |
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Financing Activities |
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Net proceeds from issuances of common stock and exercise of stock options |
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Net Cash Provided by Financing Activities |
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Net Decrease in Cash and Cash Equivalents |
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Cash and Cash Equivalents, Beginning of Period |
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Cash and Cash Equivalents, End of Period |
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Supplemental Disclosure of Cash Flow Information: |
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Cash paid during the period: |
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Interest paid |
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Income taxes paid |
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Non-Cash Financing Activities: |
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Accumulated preferred stock dividend |
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Conversion of Series A convertible preferred stock to common stock and payment of paid-in-kind dividends to Series A preferred stockholder |
| $ |
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Payment of accrued liabilities with common stock |
| $ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
| Table of Contents |
LIGHTBRIDGE CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND JUNE 30, 2021
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| Series A |
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| Series B |
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| Additional |
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| Preferred Stock |
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| Preferred Stock |
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| Common Stock |
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| Paid-in |
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| Accumulated |
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| Total |
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| Shares |
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| Amount |
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| Amount |
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| Amount |
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| Capital |
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| Deficit |
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| Equity |
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Balance – January 1, 2020 |
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Conversion of 11,874 preferred shares to 1,255 common shares |
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Shares issued - registered offerings – net of offering costs |
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Stock-based compensation |
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Net loss for the three months ended March 31, 2020 |
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Balance – March 31, 2020 |
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Conversion of 17,080 preferred shares to 1,847 common shares |
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Shares issued - registered offerings – net of offering costs |
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Exercise of 6,548 options at $3.82 each |
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Stock-based compensation |
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Net loss for the three months ended June 30, 2020 |
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Balance – June 30, 2020 |
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Balance – January 1, 2021 |
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Shares issued to consultant & directors for services |
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Stock-based compensation |
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Net loss for the three months ended March 31, 2021 |
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Balance – March 31, 2021 |
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Conversion of 16,026 preferred shares to 1,846 common shares |
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Shares issued to consultant for services |
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Stock-based compensation |
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Net loss for the three months ended June 30, 2021 |
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Balance – June 30, 2021 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
| Table of Contents |
LIGHTBRIDGE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation, Summary of Significant Accounting Policies, and Nature of Operations
Basis of presentation
The accompanying unaudited condensed consolidated financial statements of Lightbridge Corporation and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America, including a summary of the Company's significant accounting policies, have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2020, included in our Annual Report on Form 10-K for the year ended December 31, 2020.
In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three and six-month period have been made. Results for the interim period presented are not necessarily indicative of the results that might be expected for the entire fiscal year. When used in these notes, the terms "Lightbridge", "Company," "we," "us" or "our" mean Lightbridge Corporation and all entities included in our condensed consolidated financial statements.
The Company was formed on October 6, 2006, when Thorium Power, Ltd., which was incorporated in the state of Nevada on February 2, 1999, merged with Thorium Power, Inc. ("TPI"), which was incorporated in the state of Delaware on January 8, 1992 (subsequently and collectively referred to as "we" or the "Company"). On September 29, 2009, the Company changed its name from Thorium Power, Ltd. to Lightbridge Corporation and began its focus on developing and commercializing metallic nuclear fuels. The Company is a nuclear fuel technology company developing and working to commercialize it next generation nuclear fuel technology.
Going Concern, Liquidity and Management's Plan
The Company's available working capital at June 30, 2021 does not exceed its currently anticipated expenditures through the second quarter of 2022. There are inherent uncertainties in forecasting future expenditures, especially forecasting for uncertainties such as future research and development (R&D) costs and how the COVID-19 outbreak, including the emergence and spread of variant strains of the virus, may affect future costs and operations. Also, the cash requirements of the Company's future planned operations to commercialize its nuclear fuel, including any additional expenditures that may result from unexpected developments, requires it to raise significant additional capital, including receiving government support. Taking into account these uncertainties as well as the updated projected fuel development timeline of
At June 30, 2021, the Company had approximately $
The Company's plans to fund future operations include: (1) raising additional capital through future equity issuances or convertible debt financings; (2) additional funding through new relationships to help fund future R&D costs; and (3) seeking other sources of capital. The Company may issue securities, including common stock, preferred stock, and stock purchase contracts through private placement transactions or registered public offerings, pursuant to current and future registration statements. The current Form S-3 was filed with the SEC on March 25, 2021 registering the sale of up to $
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| Table of Contents |
Basis of Consolidation
These condensed consolidated financial statements include the accounts of Lightbridge, a Nevada corporation, and the Company's wholly-owned subsidiaries, TPI, a Delaware corporation, and Lightbridge International Holding LLC, a Delaware limited liability company. These wholly-owned subsidiaries are inactive. All significant intercompany transactions and balances have been eliminated in consolidation.
Certain Risks, Uncertainties and Concentrations
The Company will need additional funding by way of a combination of strategic alliances, government grants, further offerings of equity securities, or an offering of debt securities in order to support its future R&D activities required to further enhance and complete the development of its fuel products to a proof of concept stage and a commercial stage thereafter.
There can be no assurance that the Company will be able to successfully continue to conduct its operations if there is a lack of financial resources available in the future to continue its fuel development, and a failure to do so would have a material adverse effect on the Company's future R&D activities, financial position, results of operations, and cash flows. Also, the success of the Company's operations will be subject to other numerous contingencies, some of which are beyond management's control. These contingencies include general and regional economic conditions, contingent liabilities, potential competition with other nuclear fuel developers, including those entities developing accident tolerant fuels, changes in government regulations, support for nuclear power, changes in accounting and taxation standards, inability to achieve overall long-term goals, future impairment charges to its assets, and global or regional catastrophic events. The Company may also be subject to various additional political, economic, and other uncertainties.
On January 30, 2020, the World Health Organization ("WHO") announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the "COVID-19 outbreak") and the risk to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak a pandemic, based on increased exposure globally. The current spread of COVID-19, including the emergence and spread of variant strains of the virus, that is impacting global economic activity and market conditions could lead to adverse changes in the Company's ability to conduct R&D activities with the United States national labs and others. The COVID-19 outbreak has impacted our business operations and results of operations for the six months ended June 30, 2021 and year ended December 31, 2020, resulting in the reduction of R&D expenses and an increase in general and administrative expenses due to severance payments to former employees. However, the effects of the pandemic are fluid and changing rapidly, including with respect to vaccine and treatment developments and deployment and potential mutations of COVID-19. While the Company continues to monitor the impact of COVID-19 on its business, the Company is unable to accurately predict the ultimate impact on future results of operations, financial condition and liquidity that COVID-19 will have due to various uncertainties, including the geographic spread of the virus, the severity of the disease, the duration of the outbreak, and actions that may be taken by governmental authorities and other third-parties.
On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payment, net operating loss carryback period, alternative minimum tax credit refund, modification to the net interest deduction limitation, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation method for qualified improvement property. It also appropriated funds for the SBA Paycheck Protection Program loans that are forgivable in certain situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19. Management decided not to apply for these funds. The CARES Act did not have an impact on our results of operations, financial condition and liquidity.
Grant Income
The Company concluded that its government grant was not within the scope of ASC Topic 606 as it did not meet the definition of a contract with a customer. Additionally, the Company concluded that the grant met the definition of a contribution and the grant is a non-reciprocal transaction. The Company determined that Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition did not apply, as the Company is a business entity and the grant is received from governmental agencies.
In the absence of applicable guidance under U.S. generally accepted accounting principles ("U.S. GAAP"), the Company's management developed a policy to recognize grant income at the time the related costs are incurred and the right to payment is realized.
The Company believes this policy is consistent with the overarching premise in ASC Topic 606, to ensure that revenue recognition reflects the transfer of promised goods or services to customers in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods or services, even though there is no exchange as defined in ASC Topic 606. Additionally, the Company determined that the recognition of grant income as costs are incurred and amounts become realizable is analogous to the concept of transfer of control of a service over time under ASC Topic 606.
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Further, the Company believes that showing grant income on a gross method, with the grant income shown as other operating income and the related costs as a charge to R&D expense, rather than depicting the grant income as a reduction of R&D expense, is a more meaningful presentation.
The Company recognized grant income of approximately $
Patents and Trademarks
Through September 30, 2020, patents were stated on the consolidated balance sheets at cost. Costs, such as filing fees with patent granting agencies and legal fees directly relating to those filings, incurred to file patent applications were capitalized when the Company believed that there was a high likelihood that the patent would be issued and there would be future economic benefit associated with the patent. These costs were amortized from the date of the patent application on a straight-line basis over the estimated useful life of
Beginning January 1, 2021, patent filing fees with patent granting agencies and legal fees directly relating to those filings, incurred to file patent applications were expensed as the Company believes that there is not a high likelihood that there will be a future economic benefit associated with the patents, due to the uncertainties in the current fuel development timelines and the patents being commercialized. The Company continues to expense patent annuity fees as these fees are maintenance fees required by the patent office at certain points in time after a patent is granted, in order to keep the patent legal rights in force. As of June 30, 2021, and December 31, 2020 the carrying value of the patents on the balance sheets was $0.
Costs for filing and legal fees for trademark applications are capitalized. Trademarks are considered intangible assets with an indefinite useful life and therefore should not be amortized. The Company performed an impairment test in the fourth quarter of 2020 and no impairment of the trademarks was identified. As of June 30, 2021 and December 31, 2020, the carrying value of trademarks was approximately $
Leases
In accordance with ASU 2016-02, Leases (Topic 842), which requires recognition of most lease arrangements on the balance sheet, the Company recognizes operating lease right of use assets and liabilities at commencement date based on the present value of the future minimum lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet in accordance with the short-term lease recognition exemption. The Company applies the practical expedient to non-separate and non-lease components for all leases that qualify. Lease expense is recognized on a straight-line basis over the lease term. The Company has only one lease for office rent and the lease is for a term of 12 months without renewal options. See Note 4 for additional information.
Stock-Based Compensation
The stock-based compensation expense incurred by Lightbridge for employees and directors in connection with its equity incentive plan is based on the employee model of ASC 718, and the fair value of the options is measured at the grant date. In accordance with ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, options granted to our consultants are accounted for in the same manner as options issued to employees.
Awards with service-based vesting conditions only – Expense recognized on a straight-line basis over the requisite service period of the award.
Awards with performance-based vesting conditions – Expense is not recognized until it is determined that it is probable the performance-based conditions will be met. When achievement of a performance-based condition is probable, a catch-up of expense is recorded as if the award had been vesting on a straight-line basis from the award date. The award will continue to be expensed on a straight-line over the requisite service period basis until a higher performance-based condition is met, if applicable.
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Awards with market-based vesting conditions – Expense recognized on a straight-line basis over the requisite service period, which is the lesser of the derived service period or the explicit service period if one is present. However, if the market condition is satisfied prior to the end of the requisite service period, the Company accelerates all remaining expense to be recognized.
Awards with both performance-based and market-based vesting conditions – If an award vesting or exercisability is conditional upon the achievement of either a market condition or performance or service conditions, the requisite service period is generally the shortest of the explicit, implicit, and derived service period.
The Company elected to use the Black-Scholes pricing model to determine the fair value of stock options on the measurement date of the grant for service-based vesting conditions and the Monte-Carlo valuation method for performance-based or market-based vesting conditions. Shares that are issued to officers on the exercise dates of the stock options may be issued net of the minimum statutory withholding requirements to be paid by the Company on behalf of the employees. As a result, the actual number of shares issued are fewer than the actual number of shares exercised under the stock option.
Recent Accounting Pronouncements – To Be Adopted
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared with current U.S. GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective July 1, 2024, for the Company. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements and related footnote disclosures.
Note 2. Net Loss Per Share
Basic net loss per share is computed using the weighted-average number of common shares outstanding during the period except that it does not include unvested common shares subject to repurchase or cancellation. Diluted net income per share is computed using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options, warrants and convertible preferred shares (see Note 6. Stockholders' Equity and Stock-Based Compensation).
The treasury stock method is used in calculating diluted EPS for potentially dilutive stock options and share purchase warrants, which assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants, would be used to purchase common shares at the average market price for the period, unless including the effects of these potentially dilutive securities would be anti-dilutive.
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The following table sets forth the computation of the basic and diluted loss per share:
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| Three Months Ended |
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| Six Months Ended |
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| June 30, |
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| June 30, |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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Basic |
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Numerator: |
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Net loss attributable to common stockholders |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Denominator: |
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Weighted-average common shares outstanding |
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Basic net loss per share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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| ( | ) |
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Diluted |
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Numerator: |
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Net loss attributable to common stockholders, basic |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Effect of dilutive securities |
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Net loss, diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Denominator: |
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Weighted average common shares outstanding - basic |
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Potential common share issuances: |
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Incremental dilutive shares from equity instruments (treasury stock method) |
|
| — |
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| — |
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| — |
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| — |
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Weighted-average common shares outstanding |
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Diluted net loss per share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
The following outstanding securities have been excluded from the computation of diluted weighted shares outstanding for the periods noted below, as they would have been anti-dilutive due to the Company's losses for the three and six months ended June 30, 2021 and 2020 and because the exercise price of certain of these outstanding securities was greater than the average closing price of the Company's common stock:
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| Three and Six Months Ended |
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| June 30, |
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| 2021 |
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| 2020 |
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Warrants outstanding |
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Stock options outstanding |
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RSUs outstanding |
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Series A convertible preferred stock to common shares |
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Series B convertible preferred stock to common shares |
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Total |
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Note 3. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following (rounded to the nearest thousand):
|
| June 30, |
|
| December 31, |
| ||
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| 2021 |
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| 2020 |
| ||
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Trade payables |
| $ |
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| $ |
| ||
Accrued bonuses |
|
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Accrued legal and consulting expenses |
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Accrued expenses |
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Total |
| $ |
|
| $ |
| ||
Note 4. Commitments and Contingencies
Commitments
Operating Leases
The Company leases office space for a
The future minimum lease payments required under the Company's non-cancellable operating leases for 2021 total approximately $
| 11 |
| Table of Contents |
Contingency
Settlement of Arbitration
On February 11, 2021, the Company entered into a settlement agreement (the "Settlement Agreement") with Framatome SAS and Framatome Inc. (together, "Framatome"), resolving the pending claims and counterclaims between the parties in arbitration and judicial proceedings related to the parties' inactive joint venture, Enfission, LLC. Under the terms of the Settlement Agreement, all joint venture agreements were terminated and the joint venture was dissolved on March 23, 2021. The Company accrued $
Mediation Settlement
A former Chief Financial Officer of the Company filed a complaint against the Company with the US Occupational Safety and Health Administration ("OSHA") on March 9, 2015. This complaint was dismissed by OSHA in January 2018 without any findings against the Company. On March 14, 2018, an appeal was filed with the U.S Department of Labor Office of Administrative Law Judges ("OALJ"). On September 6, 2019, the Company filed a motion for summary decision seeking a decision in its favor as a matter of law. The motion for summary judgement was denied on September 30, 2020. The complaint was mediated on May 13, 2021 and the parties subsequently reached an agreement to resolve all claims for the total monetary sum of approximately $
As of June 30, 2021 and December 31, 2020, legal fees of approximately $
Note 5. Research and Development Costs
On December 19, 2019, the Company was awarded a voucher from the U.S. Department of Energy's (DOE) Gateway for Accelerated Innovation in Nuclear (GAIN) program to support development of Lightbridge Fuel™ in collaboration with Idaho National Laboratory (INL). The scope of the project included experiment design for irradiation of Lightbridge metallic fuel material samples in the Advanced Test Reactor (ATR) at INL. On April 22, 2020, the Company entered into a Cooperative Research and Development Agreement (CRADA) with Battelle Energy Alliance, LLC, the operating contractor of INL, in collaboration with DOE. Signing the CRADA was the last step in the contracting process to formalize a voucher award from the GAIN program. The project commenced in the second quarter of 2020. The initial total project value was estimated at approximately $
For the three months and six months ended June 30, 2021, the Company recorded approximately $
On March 25, 2021, the Company was awarded a second voucher from the DOE's GAIN program to support development of Lightbridge Fuel™ in collaboration with the 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™. The project commenced in July 2021. The total project value is approximately $
| 12 |
| Table of Contents |
Note 6. Stockholders' Equity and Stock-Based Compensation
On June 28, 2021, at our annual shareholder meeting, the shareholders' approved an amendment to the Articles of Incorporation of the Company to increase the number of authorized shares of common stock from
At June 30, 2021, the Company had
At December 31, 2020, the Company had
Common Stock Equity Offerings
ATM Offerings
On May 28, 2019, the Company entered into an at-the-market ("ATM") equity offering sales agreement ("ATM Sales Agreement") with Stifel, Nicolaus & Company, Incorporated ("Stifel"), which was amended on April 9, 2021, pursuant to which the Company may issue and sell shares of its common stock from time to time through Stifel as the Company's sales agent. Sales of the Company's common stock through Stifel, if any, will be made by any method that is deemed to be an "at-the-market" equity offering as defined in Rule 415 promulgated under the Securities Act of 1933. On March 25, 2021, the Company filed a new shelf registration statement on Form S-3, registering the sale of up to $
The Company records its ATM sales on a settlement date basis. No ATM sales occurred during the six months ended June 30, 2021. The Company sold approximately
Preferred Stock Equity Offerings
Series A Preferred Stock - Securities Purchase Agreement
On August 2, 2016, the Company issued
| 13 |
| Table of Contents |
Holders of the Series A Preferred Stock are also entitled to participating dividends whenever dividends in cash, securities (other than shares of the Company's common stock) or property are paid on common shares. The amount of the dividends is the amount to which the holder would be entitled if all shares of Series A Preferred Stock had been converted to common stock immediately prior to the record date.
The Company has the option of forcing the conversion of the Series A Preferred Stock if the trading price for the Company's common stock is more than two times the applicable conversion price (approximately $32.94 per share) before August 2, 2019, or if the trading price is more than three times the applicable conversion price. The Company has not forced the conversion of any of the outstanding Series A Preferred Stock during the six months ended June 30, 2021 and 2020 and from the date of issuance.
The Series A Preferred Stock was initially convertible into
Additionally, comparison of the $
The holders of the Series A Preferred Stock have no voting rights. In addition, as long as
On April 8, 2021, the holder of the Series A Preferred Shares converted
The accumulated PIK dividends at June 30, 2021 and December 31, 2020 was approximately $
Series B Preferred Stock - Securities Purchase Agreement
On January 30, 2018, the Company issued
Holders of the Series B Preferred Stock are also entitled to participating dividends whenever dividends in cash, securities (other than shares of the Company's common stock paid on shares of common stock) or property are paid on common shares or shares of Series A Preferred Stock (as defined below). The amount of the dividends will equal the amount to which the holder would be entitled if all shares of Series B Preferred Stock had been converted to common stock immediately prior to the record date.
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| Table of Contents |
The holders of the Series B Preferred Stock have no voting rights. In addition, as long as the shares of Series B Preferred Stock are outstanding, the Company may not take certain actions without first having obtained the affirmative vote or waiver of the holders of a majority of the outstanding shares of Series B Preferred Stock. The Company has the option at any time after August 2, 2019 to redeem some or all of the outstanding Series B Preferred Stock for an amount in cash equal to the liquidation preference plus the amount of any accrued but unpaid dividends of the Series B Preferred Stock being redeemed. The holders of the Series B Preferred Stock do not have the ability to require the Company to redeem the Series B Preferred Stock.
The Company has not redeemed any of the outstanding Series B Preferred Stock during the six months ended June 30, 2021 and 2020 and from the date of issuance.
The Company has the option of forcing the conversion of all or part of the Series B Preferred Stock if at any time the average closing price of
Of the $
Additionally, comparison of the original $
The accumulated PIK dividends (unpaid) at June 30, 2021 and December 31, 2020 were approximately $
Warrants
The Company's outstanding warrants at June 30, 2021 and December 31, 2020 are below. These warrants are classified within equity on the unaudited condensed consolidated balance sheets.
|
| June 30, |
|
| December 31, |
| ||
Outstanding Warrants |
| 2021 |
|
| 2020 |
| ||
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|
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|
| ||
Issued to Investors on October 25, 2013, entitling the holders to purchase 20,833 common shares in the Company at an exercise price of $138.00 per common share up to and including April 24, 2021. In 2016, 4,954 of these warrants were exchanged for common stock, and all remaining warrant holders agreed to new warrant terms, which excluded any potential net cash settlement provisions in exchange for a reduced exercise price of $75.00 per share (warrants expired). |
|
| — |
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| |
Issued to Investors on November 17, 2014, entitling the holders to purchase 45,577 common shares in the Company at an exercise price of $138.60 per common share up to and including May 16, 2022. On June 30, 2016, the warrant holders agreed to new warrant terms, which excluded any potential net cash settlement provisions in order to classify them as equity in exchange for a reduced exercise price of $75.00 per share. |
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Issued to an investment bank and subsequently transferred to a principal of the investment bank regarding the Series B Preferred Stock investment on January 30, 2018, entitling the holder to purchase 11,119 common shares in the Company at an exercise price of $18.00 per share, up to and including January 30, 2021 (warrants expired). |
|
| — |
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| |
Total |
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| Table of Contents |
Stock-based Compensation – Stock Options
Adoption of 2020 Stock Plan
On March 9, 2020, the Board of Directors adopted the Company's 2020 Omnibus Incentive Plan (the "2020 Plan"). On September 3, 2020, the shareholders approved the 2020 Plan to authorize grants of the following types of awards (a) Options, (b) Stock Appreciation Rights, (c) Restricted Stock and Restricted Stock Units ("RSUs"), and (d) Other Stock-Based and Cash-Based Awards. On June 28, 2021, the Company's shareholders voted to amend the 2020 Plan to increase the number of shares available for award under the 2020 Plan to
On October 28, 2020, the Compensation Committee of the Board granted from the 2020 Plan time-based RSUs to certain of the Company's executive officers, employees, and consultants. Each RSU represents a contingent right to receive, upon vesting, one share of the Company's Common Stock. The number of RSUs granted to executive officers, employees and consultants totalled
On October 28, 2020, the Compensation Committee of the Board approved a grant of a total of
The 2021 options issued for the consultants of the Company were assigned a fair value ranging from $
Expected volatility |
| % | ||
Risk free interest rate |
| % | ||
Dividend yield rate |
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| |
Weighted average years |
|
| ||
Closing price per share – common stock |
| $ | $ |
|
The components of stock-based compensation expense included in the Company's unaudited condensed consolidated statements of operations for the three months and six months ended June 30, 2021 and 2020 are as follows:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
|
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|
|
|
|
|
| ||||
General and administrative expenses |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Total stock-based compensation expense |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Stock option transactions to the employees, directors and consultants are summarized as follows for the six months ended June 30, 2021:
|
| Options Outstanding |
|
| Weighted Average Exercise Price |
|
| Weighted Average Grant Date Fair Value |
| |||
Beginning of the period – January 1, 2021 |
|
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|
| $ |
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| $ |
| |||
Granted |
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| |||
Exercised |
|
| — |
|
|
| — |
|
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| — |
|
Forfeited |
|
| ( | ) |
|
|
|
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|
| ||
Expired |
|
| ( | ) |
|
|
|
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|
| ||
End of the period – June 30, 2021 |
|
|
|
| $ |
|
| $ |
| |||
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|
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Options exercisable |
|
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|
| $ |
|
| $ |
| |||
| 16 |
| Table of Contents |
A summary of the status of the Company's non-vested options as of June 30, 2021 and December 31, 2020, and changes during the year ended December 31, 2020 and the six months ended June 30, 2021, is presented below:
|
| Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Fair Value Grant Date |
| |||
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Non-vested – December 31, 2019 |
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Granted |
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Vested |
|
| ( | ) |
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Forfeited |
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| ( | ) |
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Non-vested – December 31, 2020 |
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Granted |
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Vested |
|
| ( | ) |
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|
| ||
Forfeited |
|
| — |
|
|
|
|
|
| — |
| |
Non-vested – June 30, 2021 |
|
|
|
|
|
|
|
|
| |||
The above tables include options issued and outstanding as of June 30, 2021 as follows:
i. A total of
ii. A total of
As of June 30, 2021, there was approximately $
The following table provides certain information with respect to the above-referenced stock options that were outstanding and exercisable at June 30, 2021:
|
| Stock Options Outstanding |
|
| Stock Options Vested |
| ||||||||||||||||||
|
| Weighted |
|
|
|
|
|
| Weighted |
|
|
|
|
| ||||||||||
|
| Average |
|
|
|
|
|
| Average |
|
|
|
|
| ||||||||||
|
| Remaining |
|
|
|
| Weighted |
|
| Remaining |
|
|
|
| Weighted |
| ||||||||
|
| Contractual |
|
| Number |
|
| Average |
|
| Contractual |
|
| Number |
|
| Average |
| ||||||
|
| Life |
|
| of |
|
| Exercise |
|
| Life |
|
| of |
|
| Exercise |
| ||||||
Exercise Prices |
| -Years |
|
| Awards |
|
| Price |
|
| -Years |
|
| Awards |
|
| Price |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
$ |
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
|
| $ |
| ||||||
$ |
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
|
| $ |
| ||||||
$ |
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
|
| $ |
| ||||||
$ |
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
|
| $ |
| ||||||
$ |
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
|
| $ |
| ||||||
Total |
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
|
| $ |
| ||||||
| 17 |
| Table of Contents |
Restricted Stock Awards Outstanding
The following summarizes our RSUs activity:
|
|
|
| Weighted |
| |||
|
|
|
| Average |
| |||
|
| Number of |
|
| Grant Date |
| ||
|
| Shares |
|
| Fair Value |
| ||
Total awards outstanding at January 1, 2021 |
|
|
|
| $ |
| ||
Total shares granted |
|
| — |
|
| $ |
| |
Total shares vested |
|
| — |
|
| $ |
| |
Total shares forfeited |
|
| — |
|
| $ |
| |
Total unvested shares outstanding at June 30, 2021 |
|
|
|
| $ |
| ||
Scheduled vesting for outstanding RSUs awards at June 30, 2021 is as follows:
|
| Year Ending December 31, |
| |||||||||||||
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| Total |
| ||||
Scheduled vesting |
|
|
|
|
|
|
|
|
|
|
|
| ||||
At June 30, 2021, there was approximately $
Note 7 – Subsequent Events
Mediation Settlement
On July 13, 2021 a mediation settlement was reached (see Note 4).
Cooperative Research and Development Agreement
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 is anticipated to commence in the third quarter of 2021. The total project value is approximately $
| 18 |
| Table of Contents |
FORWARD-LOOKING STATEMENTS
In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. We use words such as "believe", "expect", "anticipate", "project", "target", "plan", "optimistic", "intend", "aim", "will", or similar expressions, which are intended to identify forward-looking statements. Such statements include, among others:
| · | those concerning market and business segment growth, demand, and acceptance of our nuclear fuel technology and other steps to commercialization of Lightbridge Fuel™; |
|
|
|
| · | any projections of sales, earnings, revenue, margins, or other financial items; |
|
|
|
| · | any statements of the plans, strategies, and objectives of management for future operations and the timing and outcome of the development of our nuclear fuel technology; |
|
|
|
| · | any statements regarding future economic conditions or performance; |
|
|
|
| · | uncertainties related to conducting business in foreign countries; |
|
|
|
| · | any statements about future financings and liquidity |
|
|
|
| · | the Company's anticipated financial resources and position; and |
|
|
|
| · | all assumptions, expectations, predictions, intentions, or beliefs about future events and other statements that are not historical facts |
You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, as well as assumptions that if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties, among others, include:
| ·
| our ability to commercialize our nuclear fuel technology, including risks related to the design and testing of nuclear fuel incorporating our technology and the degree of market adoption of the Company's product and service offerings; |
|
|
|
| · | dependence on strategic partners; |
|
|
|
| · | our ability to fund general corporate overhead and outside research and development costs; |
|
|
|
| · | the demand for fuel for nuclear reactors, including small modular reactors, and our ability to attract new customers; |
|
|
|
| · | our ability to manage the business effectively in a rapidly evolving market; |
|
|
|
| · | our ability to employ and retain qualified employees and consultants that have experience in the nuclear industry; |
|
|
|
| · | competition and competitive factors in the markets in which we compete, including from accident tolerant fuels; |
|
|
|
| · | the availability of nuclear test reactors and the risks associated with unexpected changes in our nuclear fuel development timeline; |
|
|
|
| · | the increased costs associated with metallization of our nuclear fuel; |
|
|
|
| · | risks associated with the further spread and uncertainty of COVID-19, including the ultimate impact of COVID-19 on people, economies, our ability to access capital markets, the Company's financial position, results of operations or liquidity; |
|
|
|
| · | public perception of nuclear energy generally; |
| 19 |
| Table of Contents |
| · | changes in laws, rules, and regulations governing our business; |
|
|
|
| · | changes in the political environment; |
|
|
|
| · | development and utilization of, and challenges to, our intellectual property; |
|
|
|
| · | the risks associated with potential shareholder activism; |
|
|
|
| · | potential and contingent liabilities; and |
|
|
|
| · | the other risks identified in Item 1A. Risk Factors included in our Annual report on Form 10-K for the year ended December 31, 2020. |
Most of these factors are beyond our ability to predict or control and you should not put undue reliance on any forward-looking statement. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. Forward-looking statements speak only as of the date on which they are made. The Company assumes no obligation and does not intend to update these forward-looking statements for any reason after the date of the filing of this report, to conform these statements to actual results or to changes in our expectations, except as required by law.
| 20 |
| Table of Contents |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is intended to help the reader understand Lightbridge Corporation, our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes thereto contained in Part I, Item 1 of this report.
This MD&A consists of the following sections:
| · | Overview of Our Business and recent developments — a general overview of our business and updates; |
|
|
|
| · | Critical Accounting Policies and Estimates — a discussion of accounting policies that require critical judgments and estimates; |
|
|
|
| · | Operations Review — an analysis of our condensed consolidated results of operations for the periods presented in our condensed consolidated financial statements; and |
|
|
|
| · | Liquidity, Capital Resources, and Financial Position — an analysis of our cash flows, and an overview of our financial position. |
As discussed in more detail under "Forward-Looking Statements" immediately preceding this MD&A, the following discussion contains forward-looking statements that involve risks, uncertainties, and assumptions such as statements of our plans, objectives, expectations, and intentions. Our actual results may differ materially from those discussed in these forward-looking statements because of the risks and uncertainties inherent in future events.
OVERVIEW OF OUR BUSINESS
When used in this Quarterly Report on Form 10-Q, the terms "Lightbridge", the "Company", "we", "our", and "us" refer to Lightbridge Corporation together with its wholly-owned subsidiaries Lightbridge International Holding LLC and Thorium Power Inc. Lightbridge's principal executive offices are located at 11710 Plaza America Drive, Suite 2000, Reston, Virginia 20190 USA.
Overview
At Lightbridge we are developing the next generation of nuclear fuel to impact in a meaningful way the world's climate and energy 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. 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 for large numbers 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. Today, there are approximately 440 operable nuclear power reactors worldwide, of which about 400 are operating. 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, financings, and the ability for large reactors to be profitable without running almost constantly.
We believe our metallic fuel will offer significant economic and safety benefits over traditional 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. 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 also plan to explore using Lightbridge Fuel™ in new SMRs to produce hydrogen for liquid non-carbon fuels for use in hard-to-decarbonize sectors such as aviation and shipping. Our ongoing research and development (R&D) initiatives are entirely compatible with Lightbridge Fuel™ powering SMRs for multiple purposes. The first SMRs that could use our fuel are expected to begin operations in 2029.
| 21 |
| Table of Contents |
We have built a significant portfolio of patents reflecting years of R&D, and we anticipate testing of our fuel through third party vendors and others, including the United States Department of Energy (DOE) national laboratories. Currently, we are doing all of our R&D activities with the U.S. national laboratories, and are planning contracts for additional future scopes of work.
Development of Lightbridge Fuel™
Recent Developments
| · | On May 11, 2021, we announced successful demonstration of the manufacturing process for three-lobe, six-foot rods using surrogate materials. This demonstration of Lightbridge's proprietary manufacturing process uses an internally developed and patented high-temperature coextrusion process. The six-foot length of the surrogate rods is the typical length of the fuel rods used by many small modular reactors (SMRs) now in development and licensing. Future fabrication of high-assay low-enriched uranium (HALEU) rodlets for loop irradiation testing in the Advanced Test Reactor, and ultimately commercial length HALEU fuel rods, will use similar processing techniques to create Lightbridge Fuel™. Performing fabrication development activities with surrogate materials allows Lightbridge to use a broader range of suppliers and is a cost-effective approach as it does not require uranium material. |
|
|
|
| · | On March 25, 2021, the Company was awarded a second voucher from the DOE's GAIN program to support development of Lightbridge Fuel™ in collaboration with the 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 executed a Cooperative Research and Development Agreement (CRADA) with the Battelle Memorial Institute, Pacific Northwest Division, the operating contractor of the PNNL, in collaboration with the DOE. The project is anticipated to commence in the third quarter of 2021. The total project value is approximately $663,000, with three-quarters of this amount funded by DOE for the scope performed by PNNL. |
|
|
|
| · | We were awarded a GAIN voucher by the DOE in 2019 for the experiment design for irradiation of material samples of Lightbridge Fuel™ in the Advanced Test Reactor (ATR) at Idaho National Laboratory (INL). On April 22, 2020, we entered into a CRADA with Battelle Energy Alliance, LLC (BEA), the DOE's operating contractor at INL. The project commenced in the second quarter of 2020 and was originally expected to be completed in the second quarter of 2021. However, because of project staffing issues at INL related to the laboratory's COVID-19 restrictions and U.S. export control matters, the project is currently expected to be completed by the end of the third quarter of 2021. |
|
|
|
| · | We expanded our patent portfolio by successfully obtaining three new patents in 2021, in the United States and other key foreign countries. The new patents will help safeguard the Company's intellectual property, which is an integral component of the Company's plans to monetize the Lightbridge Fuel™ technology. |
Information regarding our fuel development strategy and timelines is included in Part II. Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations, on our 2020 Annual Report on Form 10-K.
Impact of COVID-19 to our Business
The recent COVID-19 pandemic has impacted our business operations and results of operations for the six months ended June 30, 2021 and year ended December 31, 2020, resulting in the reduction of our R&D expenses and an increase in our general and administrative expenses due to severance payments made to former employees. The future impacts of the COVID-19 pandemic, including the emergence and spread of variant strains of the virus, on our financial position, results of operations and future liquidity and capital resources availability is unknown and uncertain.
In an effort to protect the health and safety of our employees, we took proactive, aggressive action from the earliest signs of the outbreak in China, including working from home and suspending employee travel. In an effort to contain COVID-19 or slow its spread, governments around the world have also enacted various measures, including orders to close all businesses not deemed "essential," isolate residents to their homes or places of residence, and practice social distancing when engaging in essential activities. However, the effects of the pandemic are fluid and changing rapidly, including with respect to vaccine and treatment developments and deployment and potential mutations of COVID-19.
| 22 |
| Table of Contents |
We will continue to actively monitor the COVID-19 situation and may take further actions altering our business operations that we determine are in the best interests of our employees and stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on our financial position, results of operations or liquidity, including the effects on our employees and future prospects, including our R&D activities for fiscal 2021 and beyond.
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. We will be opportunistic in this regard and may also partner or contract with entities in nuclear that could be synergistic to our fuel business or present an attractive growth opportunity in the clean technology space.
Settlement of Arbitration
On February 11, 2021, the Company entered into a settlement agreement (the "Settlement Agreement") with Framatome SAS and Framatome Inc. (together, "Framatome"), resolving the pending claims and counterclaims between the parties in arbitration and judicial proceedings related to the parties' inactive joint venture, Enfission, LLC. Under the terms of the Settlement Agreement, all joint venture agreements were terminated and the joint venture was dissolved on March 23, 2021. Lightbridge paid Framatome on March 15, 2021 approximately $4.2 million for outstanding invoices for work performed by Framatome and other expenses incurred by Framatome.
Mediation Settlement
A former Chief Financial Officer of the Company filed a complaint against the Company with the US Occupational Safety and Health Administration ("OSHA") on March 9, 2015. The complaint was mediated on May 13, 2021 and the parties subsequently reached an agreement to resolve all claims for the total monetary sum of approximately $675,000 in exchange for a dismissal of the pending litigation, full release of all claims against the Company, and other conditions. On July 13, the settlement agreement was finalized by both parties and the Company applied for court approval by the administrative law judge (OALJ) assigned to this matter. The settlement was approved by the OALJ on July 22, 2021. The Company will issue the settlement payment and the insurers will reimburse the Company for the $675,000 settlement payment. The settlement sum was authorized and approved by the Company's insurers.
Availability of Suitable test Loops in the ATR
After the Halden research reactor was shut down in 2018, we embarked on a global search for an alternative for loop irradiation testing of our metallic fuel rods. Ultimately, we settled on the ATR at INL and applied to DOE for and won a GAIN Voucher in December 2019 to kick off our initial collaboration with the U.S. national laboratory complex. Our initial understanding was that we would have access to a government-funded PWR water test loop in the ATR to generate sufficient data to support our lead test assembly (LTA) testing and potentially eliminate the need for lead test rod (LTR) testing in a large commercial reactor. However, the ATR currently has only one such test loop available, limiting how much fuel can be tested in the reactor concurrently. We believe that INL could add two additional test loops, which we have determined to be an unmanageable cost for Lightbridge. We plan to work with the government and industry to increase the ATR's test loops capacity without Lightbridge paying for them. We believe we have strong arguments for the government to pay most of the cost for the additional test loops.
If new test 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. As a result, our fuel development timelines would be extended to 15-20 years before securing our first orders for batch reloads in large commercial PWRs. Consequently, the projected fuel development costs would increase substantially, making it unfeasible for Lightbridge to fund this fuel development effort on our own.
| 23 |
| Table of Contents |
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make a variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and (ii) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements. For a discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our financial statements, please see "Critical Accounting Policies and Estimates" under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed on March 25, 2021. There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2021.
Our management expects to make judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increase, these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable, actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material impact on our results of operations and/or financial condition.
Recent Accounting Standards and Pronouncements
Refer to Note 1 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 June 30, 2021 and 2020
The following table presents our historical operating results and the increase (decrease) in amounts for the periods indicated:
|
| Three months Ended |
|
| Increase |
|
| Increase |
| |||||||
|
| June 30, |
|
| (Decrease) |
|
| (Decrease) |
| |||||||
|
| 2021 |
|
| 2020 |
|
| Change $ |
|
| Change % |
| ||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative |
| $ | 1,515,899 |
|
| $ | 2,028,667 |
|
| $ | (512,768 | ) |
|
| (25 | )% |
Research and development |
| $ | 273,314 |
|
| $ | 115,776 |
|
| $ | 157,538 |
|
|
| 136 | % |
Total Operating Expenses |
| $ | 1,789,213 |
|
| $ | 2,144,443 |
|
| $ | (355,230 | ) |
|
| (17 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Operating Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution from joint venture |
| $ | 110,000 |
|
| $ | — |
|
| $ | 110,000 |
|
| — | % | |
Grant income |
| $ | 67,794 |
|
| $ | — |
|
| $ | 67,794 |
|
| — | % | |
Total Other Operating Income |
| $ | 177,794 |
|
| $ | — |
|
| $ | 177,794 |
|
| — | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Loss |
| $ | (1,611,419 | ) |
| $ | (2,144,443 | ) |
| $ | (533,024 | ) |
|
| (25 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income |
| $ | 1,322 |
|
| $ | 12,337 |
|
| $ | (11,015 | ) |
|
| (89 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before Income Taxes |
| $ | (1,610,097 | ) |
| $ | (2,132,106 | ) |
| $ | (522,009 | ) |
|
| (24 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (1,610,097 | ) |
| $ | (2,132,106 | ) |
| $ | (522,009 | ) |
|
| (24 | )% |
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.
| 24 |
| Table of Contents |
Total general and administrative expenses decreased by approximately $0.5 million for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020. There was a decrease in professional fees of approximately $0.3 million primarily due to a decrease in the legal and professional fees relating to the Framatome arbitration, a decrease in patent expense of approximately $0.1 million and a decrease in employee compensation and employee benefits of approximately $0.3 million. These decreases were offset by an increase of approximately $0.1 million in insurance expense and an increase of approximately $0.1 million in consulting fees.
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, including work performed.
Total research and development expenses increased by approximately $0.2 million for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, due to an increase of approximately $0.1 million in outside research and development work with the DOE's National Laboratories related to the GAIN voucher and an increase of approximately $0.1 million in various other R&D expenses. All other R&D expenses for the three months ended June 30, 2021 and the three months ended June 30, 2020 were consistent period over period. For the three months and six months ended June 30, 2021, we continue our work to develop our fuel development strategy and transition our fuel development work to the DOE's National Laboratories. 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 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 an increase in the anticipated distribution from our dissolved joint venture of approximately $0.1 million for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020. This increase is due to an anticipated final distribution from the joint venture after the dissolution and wind-down of the affairs of the joint venture.
There was an increase in grant income of approximately $0.1 million for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, with a corresponding amount charged to R&D expenses. There was no grant income for the three months ended June 30, 2020.
Other Income
There was a decrease in other income due to a decrease in interest income generated from the interest earned from the purchase of treasury bills and from our bank savings account for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020.
| 25 |
| Table of Contents |
Condensed Consolidated Results of Operations – Six Months Ended June 30, 2021 and 2020
The following table presents our historical operating results and the increase (decrease) in amounts for the periods indicated:
|
| Six months Ended |
|
| Increase |
|
| Increase |
| |||||||
|
| June 30, |
|
| (Decrease) |
|
| (Decrease) |
| |||||||
|
| 2021 |
|
| 2020 |
|
| Change $ |
|
| Change % |
| ||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative |
| $ | 3,298,759 |
|
| $ | 3,965,421 |
|
| $ | (666,662 | ) |
|
| (17 | )% |
Research and development |
| $ | 642,764 |
|
| $ | 505,600 |
|
| $ | 137,164 |
|
|
| 27 | % |
Total Operating Expenses |
| $ | 3,941,523 |
|
| $ | 4,471,021 |
|
| $ | (529,498 | ) |
|
| (12 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Operating Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution from joint venture |
| $ | 110,000 |
|
| $ | — |
|
| $ | 110,000 |
|
| — | % | |
Grant income |
| $ | 171,113 |
|
| $ | — |
|
| $ | 171,113 |
|
| — | % | |
Total Other Operating Income |
| $ | 281,113 |
|
| $ | — |
|
| $ | 281,113 |
|
| — | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Loss |
| $ | (3,660,410 | ) |
| $ | (4,471,021 | ) |
| $ | (810,611 | ) |
|
| (18 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income |
| $ | 38,325 |
|
| $ | 74,829 |
|
| $ | (36,504 | ) |
|
| (49 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before Income Taxes |
| $ | (3,622,085 | ) |
| $ | (4,396,192 | ) |
| $ | (774,107 | ) |
|
| (18 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (3,622,085 | ) |
| $ | (4,396,192 | ) |
| $ | (774,107 | ) |
|
| (18 | )% |
Operating Expenses
General and Administrative Expenses
Total general and administrative expenses decreased by approximately $0.7 million for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. There was a decrease professional fees of approximately $0.5 million primarily due to a decrease in the legal and professional fees relating to the Framatome arbitration, a decrease in patent expense of approximately $0.1 million and a decrease in employee compensation due to employee severance payments of approximately $0.3 million made in 2020. These decreases were offset by an increase of approximately $0.1 million in insurance expense and an increase of approximately $0.1 million in consulting fees.
Research and Development
Total R&D expenses for the six months ended June 30, 2021 increased by approximately $0.1 million for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. There was an increase of approximately $0.3 million in outside research and development work with the DOE's National Laboratories related to the GAIN voucher and an increase of approximately $0.1 million in patent expense. These increases were offset by a decrease in employee compensation and employee benefits of approximately $0.3 million. All other R&D expenses for the six months ended June 30, 2021 and the six months ended June 30, 2020 were consistent period over period.
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.
Other Operating Income
There was an increase in the anticipated distribution from our dissolved joint venture of approximately $0.1 million for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. This increase is due to an anticipated final distribution from the joint venture after the dissolution and wind-down of the affairs of the joint venture.
There was an increase in grant income of approximately $0.2 million for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, with a corresponding amount charged to R&D expenses. There was no grant income for the six months ended June 30, 2020.
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Other Income
There was a decrease in other income due to a decrease in interest income generated from the interest earned from the purchase of treasury bills and from our bank savings account for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. This decrease was offset by a foreign currency transaction gain recorded relating to the settlement payment to Framatome.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
Liquidity Outlook
Our cash requirements for the future planned operations to commercialize our nuclear fuel, including any additional expenditures that may result from unexpected developments, requires us to raise significant additional capital, including receiving government support. Our cash balance at June 30, 2021 does not exceed our current anticipated expenditures through the second quarter of 2022.
At June 30, 2021, we had cash and cash equivalents of approximately $13.8 million, as compared to approximately $21.5 million at December 31, 2020, a decrease of approximately $7.7 million. The Company's net cash used in operating activities for the six months ended June 30, 2021 was approximately $7.7 million, and current projections indicate that the Company will have continued negative operating cash flows until the commercialization of its nuclear fuel.
We have approximately $13.5 million of total working capital as of the date of this filing. We currently project a negative cash flow from our current operations averaging approximately $0.8 million per month for our general and administrative and total R&D expenses, for total expected expenditures of approximately $9 million to $10 million for the next 12 to 15 months. We believe however that our actual expenditures will exceed our current available working capital through the second quarter of 2022. There are inherent uncertainties in forecasting future required R&D expenditures, as we are currently working on establishing our fuel development agreements with the DOE's National Laboratories. Once many of these agreements are finalized 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.
If sufficient funding becomes available to us, our R&D activities may significantly increase in the future. This funding is needed to continue our fuel development project and to achieve our future R&D milestones. COVID-19 may also affect costs and operations by potentially delaying our future 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. Accordingly, there is high potential for budget variances in the current cost projections and fuel development timelines of our current planned operations over the fuel development period.
We will also need to receive substantial U.S. government support throughout our nuclear fuel R&D period in order to fund our R&D efforts in the future. If we are unable to obtain this government funding that meets our future R&D cash requirements, we will need to seek other funding, if available. This will result in dilution to our existing stockholders. If we can raise additional funds through the issuance of preferred stock, other equity or convertible securities, these securities could have rights or preferences senior to those of our common stock and could contain covenants that restrict our operations in the future. 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 current and long-term fuel development costs and corporate overhead expenses, 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 current primary sources of cash available to us for the next 12 months are potential funding from equity issuances, including potential future at-the-market financing under our at-the-market equity offering sales agreement, as amended, with Stifel, Nicolaus & Company, Incorporated, and U.S. government support. The Company has an effective Form S-3 that was filed with the 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. Due to the offering limitations currently applicable under General Instruction I.B.6. of Form S-3 and the market valuation of our current public float, we are currently limited on the amount of funding available under a new shelf registration statement, as further described in Note 6 to our unaudited condensed consolidated financial statements. 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 to continue the nuclear fuel development project.
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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. 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:
| · | Equity or debt investment from third party investors in Lightbridge; |
| · | Collaboration with potential industry partners; and |
| · | Strategic investment and U.S. 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, to support the remaining R&D activities that is required to further enhance and complete the development of our fuel products to a commercial stage. We may be unable to form such strategic alliances on terms acceptable to us or at all.
See Note 6. Stockholders' Equity and Stock-Based Compensation of the Notes to our unaudited condensed consolidated financial statements included in Part I. Item 1. Financial Statements, of this Quarterly Report on Form 10-Q for information regarding our prior equity financings.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Required.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Company's management, the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of June 30, 2021 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company's internal control over financial reporting during the second quarter of 2021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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| Table of Contents |
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. For a description of legal proceedings involving the Company, see the information set forth below and under Contingency in Note 4. Commitments and Contingencies of the Notes to our condensed consolidated financial statements in Part I. Item 1. Financial Statements and Supplementary Data, of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
There have been no other material changes to our risk factors from the risk factors previously disclosed in the 2020 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES OR USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
ITEM 5. OTHER INFORMATION
On August 4, 2021, Ms. Kathleen Kennedy Townsend notified the Company's Board of Directors of her decision to resign as a director, effective August 30, 2021. Ms. Townsend's resignation was not in connection with any disagreement with the Company or any matter relating to the Company's operations, policies or practices.
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| Table of Contents |
ITEM 6. EXHIBITS
EXHIBIT INDEX –
Exhibit Number |
| Description |
| Articles of Incorporation of the Company, as amended through July 26, 2021 | |
|
|
|
| ||
|
|
|
| Rule 13a-14(a)/15d-14(a) Certification - Principal Executive Officer | |
|
|
|
| Rule 13a-14(a)/15d-14(a) Certification - Principal Financial Accounting Officer | |
|
|
|
| ||
|
|
|
101.INS |
| XBRL Instance Document |
|
|
|
101.SCH |
| XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
104 |
| Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
| 30 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LIGHTBRIDGE CORPORATION |
| |
|
|
|
|
Date: August 9, 2021 | By: | /s/ Seth Grae |
|
| Name: | Seth Grae |
|
| Title: | President, Chief Executive Officer and Director |
|
|
| (Principal Executive Officer) |
|
|
|
|
|
| By: | /s/ Larry Goldman |
|
| Name: | Larry Goldman |
|
| Title: | Chief Financial Officer |
|
|
| (Principal Financial Officer and Principal Accounting Officer) |
|
| 31 |