# LIGHTBRIDGE Corp: Form 10-Q for the period ended Sep 30, 2019

- Company: [LIGHTBRIDGE Corp](/companies/ltbr.md) (CIK 1084554)
- Form: 10-Q
- Filed: 2019-11-05
- Accepted by EDGAR: Nov 5, 2019, 22:01 ET
- Period: 2019-09-30
- Accession: 0001477932-19-006166
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1084554/000147793219006166/ltbr_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1084554/000147793219006166/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2019-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2019-07-01 to 2019-09-30 | $751.5k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2019-01-01 to 2019-09-30 | $2.2m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2019-07-01 to 2019-09-30 | −$2.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2019-01-01 to 2019-09-30 | −$9.2m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2019-07-01 to 2019-09-30 | −$2.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2019-01-01 to 2019-09-30 | −$8.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2019-07-01 to 2019-09-30 | −$0.81 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 9 months, 2019-01-01 to 2019-09-30 | −$3.07 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted shares (weighted) | 3 months, 2019-07-01 to 2019-09-30 | 3,222,226 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2019-01-01 to 2019-09-30 | 3,058,797 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2019-01-01 to 2019-09-30 | −$4.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2019-09-30 | $20.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2019-09-30 | $21.3m | us-gaap:AssetsCurrent |
| Total assets | at 2019-09-30 | $23.0m | us-gaap:Assets |
| Current liabilities | at 2019-09-30 | $1.7m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2019-09-30 | $21.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 41,613 characters.

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.

### Company Overview

Lightbridge is a leading nuclear fuel technology company. Our goal is to produce the next generation of nuclear fuel that could significantly improve the economics, safety, and proliferation resistance of existing and new reactors, with a meaningful impact on addressing climate change and air pollution. We project that the world’s energy and climate needs can only be met if nuclear power’s share of the energy-generating mix grows substantially.

Our primary focus is the development and commercialization of metallic fuel rods that will replace the uranium oxide ceramic pellets that have traditionally fueled nuclear reactors. We believe our metallic fuel offers 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 reactor. 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.

We have built a significant portfolio of patents reflecting years of research and development, and we anticipate substantial completion of our research efforts and the testing of our fuel through Enfission.

From 2008 to 2018, we also had a nuclear consulting business segment, which provided early funding for our metallic nuclear fuel development efforts. We discontinued our consulting business segment in 2018; however, we may opportunistically provide nuclear power consulting and strategic advisory services to commercial and governmental entities worldwide.

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### Enfission, LLC

On January 24, 2018 we formed Enfission, LLC (“Enfission”), a 50/50 joint venture with Framatome Inc., to develop, license, manufacture, and sell nuclear fuel assemblies based on Lightbridge-designed metallic fuel technology and other advanced nuclear fuel intellectual property. Framatome Inc. is a wholly-owned US subsidiary of Framatome SAS, which we refer to individually or collectively in this report, together with their affiliates, as Framatome. Framatome is a global leader in designing, manufacturing, and installing components and fuel for nuclear power plants, and Framatome offers a full range of reactor services.

We currently conduct our fuel development activities principally through Enfission. Enfission serves as the exclusive vehicle through which the Company and Framatome are researching, developing, obtaining regulatory approvals, manufacturing and will be using, marketing and selling nuclear fuel assemblies based on the Lightbridge metallic fuel technology comprising uranium-zirconium (U-Zr) multi-lobe, helically twisted fuel rods and associated manufacturing processes and other advanced nuclear fuel intellectual property contributed by both Lightbridge and Framatome within the operating domain. The operating domain of Enfission includes pressurized water reactors (excluding water-cooled water-moderated energetic reactor (Russian VVER) types) and boiling water reactors, which collectively constitute most of the power reactors in the world, as well as water-cooled small modular reactors and water-cooled research reactors. While we expect our focus to be on Enfission for the foreseeable future, Lightbridge maintains the rights to develop fuel for VVER reactors outside Enfission, and Lightbridge also maintains the right to develop fuel for pressurized heavy water reactors (including CANDU reactors) outside Enfission. Lightbridge, as an American-owned and controlled company is also exploring opportunities particularly available to it, such as at US national laboratories.

In addition to distributions from Enfission based on our ownership interest in the joint venture, we anticipate receiving future licensing revenues in connection with sales by Enfission of nuclear fuel incorporating our intellectual property.

Enfission has entered into a phase of the fuel development project that will require both parties of the Enfission joint venture to agree on the future direction of the project and the joint venture. Lightbridge and Framatome have engaged in discussions about possible amendments to the agreements serving as the foundation for the joint venture, which agreements are described below under “—Agreements with Enfission and Framatome.” The Company believes that the proposed amendments may be necessary for the joint venture parties to come to an agreement regarding budget commitments for fiscal years 2019 and 2020, which have not yet been agreed between the parties. In addition, Lightbridge has raised certain issues concerning compliance with the terms of the existing joint venture agreements with Framatome. Negotiations remain ongoing, and there can be no assurance that the joint venture parties will amend the joint venture agreements, resolve issues related to compliance with the existing agreements, or agree on budget commitments, including for the current year. If Lightbridge and Framatome are unable to resolve these matters, future development work will likely be scaled back or delayed, and the goals of the joint venture could be frustrated.

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

### Ownership and Management of Enfission

Lightbridge owns 50 percent of Enfission’s Class A voting membership units and Framatome owns the other 50 percent. Any distributions will be first allocated to cause the capital accounts of the initial members to be equal, then allocated on a 50/50 basis. Lightbridge and Framatome each provided certain intellectual property to Enfission. Certain additional capital contributions made by Lightbridge and Framatome will partly be in the form of exclusive license rights to intellectual property developed pursuant to a research and development services agreement with Enfission.

Seth Grae, our Chief Executive Officer, also serves as Chief Executive Officer of Enfission. Enfission is managed by a board of directors composed of six directors, half of whom are appointed by Lightbridge and the other half are appointed by Framatome. The Enfission board acts by majority vote, provided that at least one director appointed by each of Lightbridge and Framatome votes in favor of the action. Certain major decisions require the approval of at least two-thirds of the directors, and certain fundamental decisions, including amending the Enfission operating agreement and issuing additional membership units, require the approval of two-thirds of the Class A members.

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### Agreements with Enfission and Framatome

Enfission has entered into several agreements with Lightbridge and Framatome relating to intellectual property, the provision of personnel and administrative support to Enfission, and research and development efforts.

Lightbridge and Framatome have also directly entered into binding agreements forming the foundation for Enfission, including the following agreements in November 2017, which govern joint research and development activities and the treatment of all related existing and future intellectual property:

- R&D Services Agreement (“RDSA”) — The RDSA defines the terms and conditions for joint research and development activities between Framatome and Lightbridge. Enfission is a party to the RDSA. Key terms and conditions of the RDSA include: (i) designating a 17x17 fuel assembly as the first joint project of the parties; (ii) establishing a framework for future work release orders relating to research and development activities of the parties; and (iii) granting rights to the use of background and foreground intellectual property needed to perform research and development activities.
- Co-Ownership Agreement (“COA”) — The COA governs the co-ownership between Framatome and Lightbridge of the foreground information developed by and between Framatome and Lightbridge, with one another and through Enfission. The COA will survive the life of Enfission. The COA is limited to a domain consisting of the metallic fuel developed by Enfission for the following types of commercial light water reactors and research reactors: (i) pressurized water reactors, excluding water-cooled water-moderated energetic reactor (VVER) types, (ii) boiling water reactors, (iii) light water-cooled small and medium size reactors, and (iv) water-cooled research reactors. The domain expressly excludes maritime, naval, and military applications.
- Intellectual Property Annex (“IP Annex”) — The IP Annex is a higher-level reference document attached to the Enfission operating agreement and summarizes the parties’ understanding regarding intellectual property matters. The IP Annex will remain in force only during the life of Enfission.

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### Nuclear Power as Clean and Low Carbon Emissions Energy Source

Nuclear power provides clean, reliable baseload electricity. According to the World Nuclear Association (WNA), nuclear power plants produce no greenhouse gas emissions during operation, and over the course of its life-cycle, nuclear produces about the same amount of CO2 equivalent emissions per unit of electricity as wind. The WNA further notes that almost all proposed pathways to achieving significant decarbonization suggest an increased role for nuclear power, including those published by the International Energy Agency, Massachusetts Institute of Technology Energy Initiative, US Energy Information Administration, and World Energy Council.

We believe that deep cuts to CO2 emissions are only possible with electrification of most of the transportation and industrial sectors globally and powering them and the current electricity needs of the world with non-emitting or low-emitting power. We believe this can be done only with a large increase in nuclear power, several times the amount that is generated globally today. We believe that our nuclear fuel technology will be an essential element of reaching this goal.

### Nuclear Fuel Development

Since 2008, we have been engaged in the design and development of proprietary, innovative nuclear fuels to improve the cost competitiveness, safety, proliferation resistance and performance of nuclear power generation. In 2010, we announced the concept of all-metal fuel (i.e., non-oxide fuel) for currently operating as well as new-build reactors. Our focus on metallic fuel is based on listening to the voices of prospective customers, as nuclear utilities have expressed interest in the improved economics and enhanced safety that we believe metallic fuel can provide.

The fuel in a nuclear reactor generates heat energy. That heat is then converted through steam into electricity that is sold. We have designed our innovative, proprietary metallic fuels to be capable of significantly higher burnup and power density compared to conventional oxide nuclear fuels. Burnup is the total amount of electricity generated per unit mass of nuclear fuel and is a function of the power density of a nuclear fuel and the amount of time the fuel operates in the reactor. Power density is the amount of heat power generated per unit volume of nuclear fuel. Conventional oxide fuel used in existing commercial reactors is just about at the limit of its burnup and power density capability. As a result, further optimization to increase power output from the same core size and improve the economics and safety of nuclear power generation using conventional oxide fuel technologies is limited. A new fuel is needed to bring enhanced performance to reactors; we are developing that new fuel.

As the nuclear industry prepares to meet the increasing global demand for electricity production, longer operating cycles and higher reactor power outputs have become a much sought-after solution for the current and future reactor fleet. We believe our proprietary nuclear fuel designs have the potential to improve the nuclear power industry’s economics by:

- providing an increase in power output of potentially up to 10% while simultaneously extending the operating cycle length from 18 to 24 months in existing pressurized water reactors (PWRs), including in Westinghouse-type four-loop PWR plants which are currently constrained to an 18-month operating cycle by oxide fuel, or increasing the power potentially up to 17% while retaining an 18-month operating cycle;
- enabling increased reactor power output via a power uprate (potentially up to a 30% increase) or a longer operating cycle (instead of a power uprate) without changing the core size in new build PWRs; and
- reducing the volume of spent fuel per unit of electricity generated as well as enhancing proliferation resistance of spent fuel.

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We believe our fuel designs will allow current and new build nuclear reactors to safely increase power production and reduce operations and maintenance costs on a per kilowatt-hour basis. New build nuclear reactors could also benefit from the reduced upfront capital investment per kilowatt of generating capacity in case of implementing a power uprate. In addition to the projected electricity production cost savings, we believe that our technology can result in utilities or countries needing to deploy fewer new reactors to generate the same amount of electricity (in case of a power uprate), resulting in significant capital cost savings. For utilities or countries that already have operating reactors, our technology could be utilized to increase the power output of those reactors as opposed to building new reactors.

Due to the significantly lower fuel operating temperature, our metallic nuclear fuel rods are also expected to provide major improvements to safety margins during off-normal events. US Nuclear Regulatory Commission licensing processes require engineering analysis of a large break loss-of-coolant accident (LOCA), as well as many other scenarios. The LOCA scenario assumes failure of a large water pipe in the reactor coolant system. Under LOCA conditions, the fuel and cladding temperatures rise due to reduced cooling capacity. Preliminary analytical modeling shows that under a design-basis LOCA scenario, unlike conventional uranium dioxide fuel, the cladding of the Lightbridge-designed metallic fuel rods would stay at least 200 degrees below the 850-900 degrees Celsius temperature at which steam begins to react with the zirconium cladding to generate hydrogen gas. Build-up of hydrogen gas in a nuclear power plant can lead to the hydrogen exploding, which is what happened at the Fukushima Daiichi nuclear power plant in Japan in 2011. Lightbridge fuel is designed to prevent hydrogen gas generation in design-basis LOCA situations, which is a major safety benefit.

The Company plans to conduct the initial testing and demonstration of its advanced metallic nuclear fuel in the United States.

### Recent Research and Development Advancements

- Demonstrated co-extrusion manufacturing process using surrogate materials to full commercial length for large light water reactors (12-ft long), as well as for small modular reactors (6-ft long). The surrogate materials were designed to simulate the flow stresses, temperatures and extrusion pressures expected in the manufacture of the Lightbridge Fuel™ rods utilizing a uranium-zirconium alloy.
- Defined lead test rod (LTR) high-level design requirements. This is key input for the technical scope of an LTR contract with a host utility.
- Completed critical heat flux (CHF) performance evaluation of the LTR. CHF is a critical element of thermal-hydraulic design and safety evaluations.
- Completed neutronics analysis of baseline fuel assembly behavior. This is a necessary step before a neutronics analysis of the entire core can be performed.

### Future Steps Toward the Development and Sale of Nuclear Fuel Assemblies

In the near-term, Enfission will seek to enter into a lead test rod agreement with a US electric utility within the next several months. Enfission plans to enter into an agreement to manufacture fuel material samples for test reactor irradiation over the next 12 months. Please see Item 1A, *Risk Factors* in our Annual Report on Form 10-K filed on March 29, 2019 for a discussion of certain risks that may delay or impair such developments including without limitation the availability of financing, reliance on cooperation from Framatome within Enfission, and the many risks inherent in developing a new type of nuclear fuel. The Company has entered into a phase of the fuel development project that will require both parties of the Enfission joint venture to agree on the future direction of the project, in order for the fuel development project in Enfission to move forward and discussions between the Company and Framatome are ongoing about the future direction of the joint venture. In particular, the joint venture parties are still negotiating a budget commitment for the remainder of fiscal year 2019 and fiscal year 2020 and future development work could be scaled back or delayed until the parties agree on a budget commitment with an associated scope of work.

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The long-term milestones towards Enfission’s development and sale of nuclear fuel assemblies include, among other things, developing the capacity and know-how to fabricate lead test assemblies incorporating our nuclear fuel technology, irradiating material samples, performing out-of-reactor corrosion experiments, and demonstrating operation of lead test rods and/or lead test assemblies in commercial reactors. Beyond the near-term developments discussed above, there is inherent uncertainty in the cost and outcomes of the many steps needed for successful deployment of our fuel in commercial nuclear reactors, which makes it difficult to predict the timing of the commercialization of our nuclear fuel technology with any accuracy. Going forward, we intend to disclose estimated timing concerning particular developments as we develop greater visibility into such developments.

### 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 29, 2019. There have been no significant changes in our critical accounting policies and estimates during the nine months ended September 30, 2019.

Our management expects to make judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increase, these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable, actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material impact on our results of operations and/or financial condition.

### Recent Accounting Standards and Pronouncements

Refer to Note 1 of the Notes to our unaudited condensed consolidated financial statements for a discussion of recent accounting standards and pronouncements.

### OPERATIONS REVIEW

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

Our goal is to develop and commercialize innovative, proprietary nuclear fuel designs, which we expect will significantly enhance the nuclear power industry’s economics due to higher power output and improved safety margins.

We are focusing our technology development efforts on the metallic fuel with a potential power uprate of up to 10% and an operating cycle extended from 18 to 24 months in existing Westinghouse-type four-loop pressurized water reactors. Those reactors represent the largest segment of our global target market. The metallic fuel could also be adapted for use in other types of water-cooled commercial power reactors, such as boiling water reactors, Russian-type VVER reactors, CANDU heavy water reactors, water-cooled small and modular reactors, as well as water-cooled research reactors.

We have obtained and will continue to seek patent validation in key countries that either currently operate or are expected to build and operate a large number of suitable nuclear power reactors.

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### Condensed Consolidated Results of Operations – Three Months Ended September 30, 2019 and 2018

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

|  | Three Months Ended September 30, 2019 | 2018 | Increase (Decrease) Change $ | Increase (Decrease) Change % |
| --- | ---: | ---: | ---: | ---: |
| **Revenues** | $— | $— | $— | — |
| **Operating Expenses** |  |  |  |  |
| General and administrative expenses | $1,463,568 | $1,889,401 | $(425,833) | -23% |
| Research and development expenses | $751,473 | $864,060 | $(112,587) | -13% |
| Total Operating Expenses | $2,215,041 | $2,753,461 | $(538,420) | -20% |
| **Other Operating Income and (Loss)** |  |  |  |  |
| Other income from joint venture | $247,568 | $203,180 | $44,388 | 22% |
| Equity in loss from joint venture | $(555,113) | $(1,743,340) | $(1,188,227) | -68% |
| **Total Other Operating Income and (Loss)** | $(307,545) | $(1,540,160) | $(1,232,615) | -80% |
| **Total Operating Loss** | $(2,522,586) | $(4,293,621) | $(1,771,035) | -41% |
| **Other Income and (Expenses)** | $81,172 | $79,035 | $2,137 | 3% |
| **Net loss - before income taxes** | $(2,441,414) | $(4,214,586) | $(1,773,172) | -42% |
| **Net loss** | $(2,441,414) | $(4,214,586) | $(1,773,172) | -42% |

### Revenue

The market for nuclear industry consulting services is competitive, fragmented, and subject to rapid change. Our main business is developing our nuclear fuel. We may pursue some consulting services opportunities in the future, but we have further increased the focus and resources of the Company to the fuel division and away from consulting. There was no revenue for the three months ended September 30, 2019 and 2018.

### 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.

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Total general and administrative expenses decreased by approximately $0.4 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. There was a decrease in stock-based compensation of approximately $0.3 million due to the decrease in stock option expense for prior stock option awards, and a decrease in professional fees of approximately $0.2 million due to decrease in legal fees, accounting fees and other professional fees, which was offset by an increase in employee compensation and employee benefits of approximately $0.1 million due to an increase in the number of employees and employee compensation. Total stock-based compensation included in general and administrative expenses was approximately $20,000 and $368,000 for the three months ended September 30, 2019 and 2018, respectively.

See Note 7. Stockholders’ Equity and Stock-Based Compensation of the Notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information regarding our stock-based compensation.

### Research and Development

Corporate 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 and billed to our Enfission joint venture. Total research and development expenses decreased by approximately $0.1 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018.

There was a decrease in professional fees of approximately $0.1 million and a decrease in stock-based compensation of approximately $0.2 million, which was offset by an increase in employee compensation and employee benefits in supporting research and development activities for Enfission of approximately $0.2 million. Total stock-based compensation included in research and development expenses was approximately $0 and $0.2 million for the three months ended September 30, 2019 and 2018, respectively.

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

### Other Operating Income and (Loss) – Related Party

Reported in other operating income is other income for activities performed by our employees and consultants billed to the Enfission joint venture for research and development work and our share of the allocated loss in Enfission. Total other operating income and (loss) decreased by approximately $1.2 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018.

Other income from joint venture for the three months ended September 30, 2019 and 2018 was approximately $0.2 million. As of September 30, 2019, approximately 76% of the total Enfission cash inflow or capital contributions into Enfission were funded by Lightbridge (approximately $9.1 million) and the remaining 24% was funded as capital contributions into Enfission from Framatome (approximately $2.9 million).

Equity in loss from joint venture for the three months ended September 30, 2019 and 2018 were approximately $0.5 million and $1.7 million, respectively, which consists of our share of the allocated loss in Enfission. The decrease in the share of loss in Enfission was due to less research and development expenses incurred by Enfission and a decrease in the loss allocated to Lightbridge for the quarter ended September 30, 2019.

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### Other Income (Expenses)

Other income for the three months ended September 30, 2019 and 2018 were approximately $0.1 million, which consists of interest income generated from the interest earned from the purchase of treasury bills and from our bank savings account for the three months ended September 30, 2019 and 2018.

### Provision for Income Taxes

We incurred a pre-tax net loss for both 2019 and 2018. We reviewed all sources of income for purposes of recognizing the deferred tax assets and concluded a full valuation allowance for 2019 and 2018 was necessary. Therefore, we did not have a provision for taxes for the three months ended September 30, 2019 and 2018.

### Condensed Consolidated Results of Operations – Nine Months Ended September 30, 2019 and 2018

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

|  | Nine Months Ended September 30, 2019 | 2018 | Increase (Decrease) Change $ | Increase (Decrease) Change % |
| --- | ---: | ---: | ---: | ---: |
| **Revenues** | $— | $— | $— | — |
| **Operating Expenses** |  |  |  |  |
| General and administrative expenses | $4,051,484 | $5,566,022 | $(1,514,538) | -27% |
| Research and development expenses | $2,218,826 | $2,313,124 | $(94,298) | -4% |
| Total Operating Expenses | $6,270,310 | $7,879,146 | $(1,608,836) | -20% |
| **Other Operating Income and (Loss)** |  |  |  |  |
| Other income from joint venture | $908,224 | $790,554 | $117,670 | 15% |
| Equity in loss from joint venture | $(3,812,463) | $(4,545,112) | $(732,649) | -16% |
| **Total Other Operating Income and (Loss)** | $(2,904,239) | $(3,754,558) | $(850,319) | -23% |
| **Total Operating Loss** | $(9,174,549) | $(11,633,704) | $(2,459,155) | -21% |
| **Other Income and (Expenses)** | $315,691 | $(819,382) | $1,135,073 | 139% |
| **Net loss - before income taxes** | $(8,858,858) | $(12,453,086) | $(3,594,228) | -29% |
| **Net loss** | $(8,858,858) | $(12,453,086) | $(3,594,228) | -29% |

### Revenue

The market for nuclear industry consulting services is competitive, fragmented, and subject to rapid change. Our main business is developing our nuclear fuel. We may pursue some consulting services opportunities in the future, but we have further increased the focus and resources of the Company to the fuel division and away from consulting. There was no revenue for the nine months ended September 30, 2019 and 2018.

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### General and Administrative Expenses

General and administrative expenses consist mostly of compensation and related costs for personnel and facilities, stock-based compensation, finance, human resources, information technology, and fees for consulting and other professional services. Professional services are principally comprised of legal, audit, strategic advisory services, and outsourcing services.

Total general and administrative expenses decreased by approximately $1.5 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. There was a decrease in stock-based compensation of approximately $0.9 million due to the acceleration of the vesting of stock options awarded in 2018, and a decrease in professional fees of approximately $0.8 million due to decrease in legal fees, accounting fees and other professional fees, which was offset by an increase in employee compensation and employee benefits of approximately $0.2 million due to an increase in the number of employees and employee compensation. Total stock-based compensation included in general and administrative expenses was approximately $0.3 million and $1.2 million for the nine months ended September 30, 2019 and 2018, respectively.

See Note 7. Stockholders’ Equity and Stock-Based Compensation of the Notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information regarding our stock-based compensation.

### Research and Development

Corporate 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 and billed to our Enfission joint venture. Total research and development expenses decreased by approximately $0.1 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018.

There was a decrease in stock-based compensation of approximately $0.4 million, which was offset by an increase in consulting fees in supporting research and development activities for Enfission of approximately $0.2 million and an increase in employee compensation and employee benefits in supporting research and development activities for Enfission of approximately $0.1 million. Total stock-based compensation included in research and development expenses was approximately $0.3 million and $0.7 million for the nine months ended September 30, 2019 and 2018, respectively.

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

### Other Operating Income and (Loss) – Related Party

Reported in other operating income is other income for activities performed by our employees and consultants billed to the Enfission joint venture for research and development work and our share of the allocated loss in Enfission. Total other operating income and (loss) decreased by approximately $0.9 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018.

Other income from joint venture for the nine months ended September 30, 2019 and 2018 were approximately $0.9 million and $0.8 million, respectively. Equity in loss from joint venture for the nine months ended September 30, 2019 and 2018 were $3.8 million and $4.5 million, respectively, which consists of our share of the allocated loss in Enfission. The decrease in the share of loss in Enfission was due to less research and development expenses incurred by Enfission and a decrease in the loss allocated to Lightbridge for the nine months ended September 30, 2019.

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### Other Income (Expenses)

There was a net decrease in other expenses of approximately $1.1 million. This change was due to a decrease in amortization of deferred financing costs of approximately $1.0 million due to the write-off of the deferred financing costs in the first quarter of 2018 for the expired equity line option agreement, and an increase of $0.1 million in interest income generated from the interest earned from the purchase of treasury bills and from our bank savings account for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018.

### Provision for Income Taxes

We incurred a pre-tax net loss for both 2019 and 2018. We reviewed all sources of income for purposes of recognizing the deferred tax assets and concluded a full valuation allowance for 2019 and 2018 was necessary. Therefore, we did not have a provision for taxes for the nine months ended September 30, 2019 and 2018.

### LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION

At September 30, 2019, we had cash and cash equivalents of approximately $20.6 million, as compared to approximately $24.6 million at December 31, 2018, a $4.0 million decrease in cash and cash equivalents. The cash inflow of approximately $3.8 million resulted from net proceeds from the sale of approximately 0.5 million shares of common stock during the nine months ended September 30, 2019. This cash inflow was offset by net cash used in operating activities of approximately $4.1 million and our cash used in investing activities for our capital investment in Enfission and patent filing costs of approximately $3.7 million. We used cash during the nine months ended September 30, 2019 primarily to fund our research and development expenses and general and administrative expenses. We did not have any consulting revenue for the nine months ended September 30, 2019 and presently do not expect to have consulting revenue for the next 12 months.

We currently project a negative cash flow from operations averaging approximately $0.8 million per month for our general and administrative and corporate research and development expenses for total expected expenditures of approximately $9.6 million for the next 12 months. In addition, we currently anticipate the amount of cash outlays to Enfission and third parties for research and development expenditures for our nuclear fuel products to be approximately $6 million to $8 million over the next 12 to 15 months. The Company believes that its current financial resources, as of the date of the issuance of the accompanying financial statements, are sufficient to fund its current 12 month operating budget, alleviating the substantial doubt raised by our historical operating results and satisfying our estimated liquidity needs 12 months from the issuance of the accompanying financial statements.

We can provide no assurances about meeting our budgeted expenditures regarding our future research and development efforts for the next 12 months and beyond, as well as predicting future market trends in nuclear that can affect the future sale of our nuclear fuel. Furthermore, any negative results from our research and development may require us to increase our research and development spending to achieve our desired milestones in developing our nuclear fuel. Presently, we fund substantially all of the cash that is required for the research and development activities to be conducted in Enfission. These additional capital needs relate to the development, manufacturing, and commercialization of our nuclear fuel assemblies. We have the ability to delay incurring certain operating expenses in the next 12 to 15 months, which could reduce our cash flow shortfall, if needed.

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To maintain our Nasdaq listing, we executed a one-for-twelve reverse stock split of our issued and outstanding common stock, which became effective on October 21, 2019. On November 4, 2019, we received written notification from the Nasdaq Listing Qualifications Staff indicating that we regained compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market. The current primary sources of cash available to us for the next 12 months are potential funding from equity investments, including our 2019 ATM. We have no debt or debt credit lines and we have financed our operations to date through our prior years’ consulting revenue margins and the sale of our preferred stock and common stock. Management believes that public or private equity investments will be available in the future, however adverse market conditions in our common stock price and trading volume, as well as other factors could substantially impair our ability to raise capital in the future.

### 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, over the next 12 months. 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 or Enfission; and
- Strategic investment to support the remaining research and development activities required to further enhance and complete the development of our fuel products to a commercial stage.

In support of our long-term business plan with respect to our fuel technology business, we endeavor to create strategic alliances with other parties during the next three years, to support the remaining research and development activities through Enfission that is required to further enhance and complete the development of our fuel products to a commercial stage. We may be unable to form such strategic alliances on terms acceptable to us or at all.

See Note 7. Stockholders’ Equity and Stock-Based Compensation of the Notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our prior financings and 2019 ATM.

### 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.

## Controls and procedures

As filed, 3,544 characters.

### Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (a) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (b) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating such controls and procedures, the Company recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2019 due to the material weakness in internal control over financial reporting described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

In connection with the preparation of our unaudited condensed consolidated financial statements included elsewhere herein, we identified a material weakness in internal control over financial reporting. Specifically, we did not design an effective control to review the equity method investment balance as it relates to the review of the allocation of our proportionate share of the equity loss reported in our investee’s (Enfission) financial statements.

This material weakness resulted in a material error correction related to the equity method investment presented in our condensed consolidated balance sheets and condensed consolidated statements of loss and shareholders’ equity for the period ended September 30, 2019. Notwithstanding the material weakness, there were no restatements of prior period financial statements, and no changes in previously released financial results were required as a result of the material weakness.

### Remediation

Our management has been enhancing our existing control process that entails a detailed review of the allocation of our proportionate share of the equity loss reported in our investee’s (Enfission) financial statements to the financial statement balances of our investee. We expect that the remediation of the material weakness will be completed by the end of fiscal 2019.

### Changes in Internal Control Over Financial Reporting

Other than the changes resulting from the remediation activities described above, there were no changes in the Company’s internal control over financial reporting during the third quarter of 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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## Risk factors

As filed, 125 characters.

There have been no material changes to our risk factors from the risk factors previously disclosed in the 2018 Annual Report.

Filed Nov 5, 2019.
Source: SEC EDGAR, the filing index for accession 0001477932-19-006166. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.