# LIGHTBRIDGE Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [LIGHTBRIDGE Corp](/companies/ltbr.md) (CIK 1084554)
- Form: 10-Q
- Filed: 2024-05-10
- Accepted by EDGAR: May 10, 2024, 16:15 ET
- Period: 2024-03-31
- Accession: 0001477932-24-002689
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1084554/000147793224002689/ltbr_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1084554/000147793224002689/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $0 | us-gaap:Revenues |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $1.0m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$3.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$2.8m | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 13,491,954 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | −$1.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Current assets | at 2024-03-31 | $28.3m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $28.9m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $907.4k | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2024-03-31 | $28.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 30,355 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, as well as those included in our Annual Report on Form 10-K for the year ended December 31, 2023.

This MD&A consists of the following sections:

- Overview of Our Business and Development of Lightbridge Fuel™ - a general overview of our business and updates;
- Critical Accounting Estimates - a discussion of critical judgments and estimates;
- Operations Review - an analysis of our 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” preceding this MD&A, the following discussion contains forward-looking statements that are based on our management’s current expectations, estimates, and projections, which are subject to a number of risks and uncertainties. Our actual results may differ materially from those discussed in these forward-looking statements because of the risks and uncertainties inherent in future event*s, including those set forth under “Forward-Looking Statements” and Part II. Item 1A. Risk Factors included herein.*

### OVERVIEW OF OUR BUSINESS AND DEVELOPMENT OF LIGHTBRIDGE FUELTM

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.

### Our Business

At Lightbridge, we are developing next generation nuclear fuel for water-cooled reactors that could significantly improve the economics and safety of existing and new nuclear power plants, large and small, and enhance proliferation resistance of spent nuclear fuel while supplying clean energy to the electric grid. 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 believe Lightbridge can benefit from a growing nuclear power industry, and that our nuclear fuel can help enable that growth to happen.

15

#### Table of Contents

We believe our metallic fuel will offer significant economic and safety benefits over traditional nuclear fuel, primarily because of the superior heat transfer properties and the resulting lower operating temperature of all-metal fuel. We also believe that uprating a reactor with Lightbridge Fuel™ will add incremental electricity at a lower levelized cost than any other means of generating baseload electric power, including any renewable, fossil, or hydroelectric energy source, or any traditional nuclear fuel.

Emerging nuclear technologies include small modular reactors (SMRs), which are now in the development and licensing phases. We expect that Lightbridge Fuel™ can provide water-cooled SMRs with the same benefits our technology brings to large reactors, with such benefits being even more meaningful to the economic case for deployment of SMRs, including potential load following capability when included on a virtually zero-carbon electric grid with renewable energy sources. We expect Lightbridge Fuel™ to generate more power in SMRs than traditional nuclear fuels.

We have built a significant portfolio of patents, and we anticipate testing our nuclear fuel through third-party vendors and others, including the United States Department of Energy’s (DOE) national laboratories. Currently, we are performing the majority of our R&D activities within and in collaboration with the DOE’s national laboratories.

### Recent Developments

#### FEED Study with Centrus Energy for a Lightbridge Pilot Fuel Fabrication Facility

On December 5, 2023, we entered into an agreement with Centrus Energy Corp. (Centrus Energy) to conduct a front-end engineering and design (FEED) study for a Lightbridge Pilot Fuel Fabrication Facility (LPFFF) to manufacture Lightbridge Fuel™ using high-assay low-enriched uranium (HALEU) at the American Centrifuge Plant in Piketon, Ohio. The FEED study’s objective is to identify infrastructure and licensing requirements as well as the estimated cost and construction schedule for the LPFFF. Centrus Energy’s wholly-owned subsidiary, American Centrifuge Operating, LLC, is leading the study. As of the date hereof, Centrus Energy has completed the initial phase of the FEED study and issued a preliminary report. The Company has expensed approximately $0.2 million in connection with the work that has been completed by Centrus Energy. After reviewing the preliminary report, we will decide whether to proceed to the final phase of the FEED study. If we decide to move forward with the final phase of the FEED study, the remaining work is expected to be completed in 2024 at an additional fixed price cost of approximately $0.3 million.

#### Romania Feasibility Study of Lightbridge Fuel™ for use in CANDU reactors

On October 16, 2023, we engaged Institutul de Cercetări Nucleare Pitești, a subsidiary of Regia Autonoma Tehnologii pentru Energia Nucleara in Romania to perform an engineering study to assess the compatibility and suitability of Lightbridge Fuel™ for use in CANDU reactors. This assessment covers key areas including mechanical design, neutronics analysis, and thermal and thermal-hydraulic evaluations. The findings from this engineering study will play an important role in guiding future economic evaluations and navigating potential regulatory licensing-related issues for potential use of Lightbridge Fuel™ in CANDU reactors. The remaining work is expected to be completed in 2024 at an additional fixed price of approximately $0.1 million.

#### Idaho National Laboratory Agreements

In December 2022, Lightbridge entered into agreements with Battelle Energy Alliance, LLC (BEA), the DOE’s operating contractor for Idaho National Laboratory (INL), to support the development of Lightbridge Fuel™. The framework agreements use an innovative structure that consists of an “umbrella” Strategic Partnership Project Agreement (SPPA) and an “umbrella” Cooperative Research and Development Agreement (CRADA), each with BEA, with an initial duration of seven years.

We anticipate that the initial phase of work under the two agreements that has been released will culminate in casting and extrusion of unclad fuel material samples using enriched uranium supplied by the DOE that will subsequently be inserted for irradiation testing in the Advanced Test Reactor (ATR) at INL. The initial phase of work aims to generate irradiation performance data for Lightbridge’s delta-phase uranium-zirconium alloy relating to various thermophysical properties. The data will support fuel performance modeling and regulatory licensing efforts for commercial deployment of Lightbridge Fuel™.

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

In 2023, we worked with INL to complete and issue a Quality Implementation Plan (QIP) for our collaborative project at INL which was an essential first step to ensure all future work performed at INL on the project would meet the U.S. nuclear industry quality assurance requirements. Additionally, we worked with INL to demonstrate casting of delta-phase uranium-zirconium ingots with depleted uranium using existing INL equipment. As part of that effort, we cast several laboratory-scale ingots using depleted uranium and zirconium alloy materials.

16

#### Table of Contents

On March 18, 2024, we announced a successful extrusion demonstration at INL of a billet into an unclad cylindrical rod, made of depleted uranium and zirconium alloy using the same composition of uranium and zirconium elements in the alloy as what is planned to be ultimately used in Lightbridge Fuel™. We will work with INL to analyze the extruded rod to confirm the extrusion process parameters prior to producing future fuel samples using enriched uranium for irradiation testing in the ATR.

On March 26, 2024, the Company and BEA entered into Modification No. 2 (“Modification No. 2”) to the project task statement (PTS) under the SPPA, dated December 9, 2022, as amended on May 23, 2023, by and between the Company and BEA. Pursuant to the terms of Modification No. 2, the potential amounts payable by the Company to reimburse BEA for its expenses and employee time were increased by approximately $0.6 million, bringing the total estimated cost for the work to be performed under the “umbrella” SPPA to $1.7 million.

After Modification No. 2, total cash payments from the Company to BEA under both agreements were estimated at approximately $4.3 million (excluding project contingencies) on a cost reimbursable basis over the performance periods under the initial releases. As of March 31, 2024, the Company had approximately $3.1 million in outstanding PTS commitments to BEA.

#### Nuclear Energy University Program Awards

Texas A&M University (TAMU), NuScale Power, and Structural Integrity Associates are working on a 3-year study of our nuclear fuel, led by TAMU. In mid-2023, TAMU was awarded $1 million by the DOE’s Nuclear Energy University Program (NEUP) R&D Awards to conduct this study. The project entails a characterization of the performance of the Lightbridge Fuel™ Helical Cruciform advanced fuel design, which will generate sets of experimental data on friction factor, flow, and heat transfer behavior under NuScale’s SMR simulated normal and off-normal conditions.

We previously announced the ongoing NEUP project with the Massachusetts Institute of Technology (MIT). The study led by MIT and funded by DOE relates to evaluation of accident tolerant fuels in various SMRs. The project aims to simulate the fuel and safety performance of Lightbridge Fuel™ for the NuScale SMR and provide scoping analysis to improve the safety and economics of water-cooled SMRs.

We do not have any contractual obligations with the collaboration teams working on the above-mentioned projects and will not receive any revenue or record any economic benefits from these awards.

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

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

- continue to execute SPPA/CRADA work at INL leading to casting and extrusion of unclad fuel material samples using enriched uranium and their subsequent insertion for irradiation testing in the ATR.
- complete a feasibility study for the use of our nuclear fuel in CANDU heavy water reactors.
- complete a FEED study for a LPFFF in collaboration with Centrus Energy.
- commence manufacturing efforts relating to co-extrusion of cladded rodlets for loop irradiation testing.

The long-term milestones towards development and commercialization of nuclear fuel assemblies include, among other things, irradiating nuclear material samples and prototype fuel rods with enriched uranium in test reactors, conducting post-irradiation examination of irradiated material samples and/or prototype fuel rods, performing thermal-hydraulic experiments, performing seismic and other out-of-reactor experiments, performing advanced computer modeling and simulations to support fuel qualification, designing a lead test assembly (LTA), entering into a lead test rod/assembly agreement(s) with a host reactor(s), demonstrating the production of lead test rods and/or lead test assemblies at a pilot-scale fuel fabrication facility and demonstrating the operation of lead test rods and/or lead test assemblies in commercial reactors.

There are inherent uncertainties 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 accurately predict the timing of the commercialization of our nuclear fuel technology. However, based on our best estimate and assuming adequate R&D funding levels, we expect to begin demonstration of lead test rods (LTRs) and/or possibly LTAs with our metallic fuel in commercial reactors in the 2030s and begin receiving purchase orders for initial fuel reload batches from utilities 15-20 years from now, with deployment of our nuclear fuel in the first reload batch in a commercial reactor taking place approximately two years thereafter. We are exploring ways of shortening this timeframe that may include securing access to expanded irradiation test loop capacity in existing or new research reactor facilities.

17

#### Table of Contents

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

### CRITICAL ACCOUNTING 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 Estimates” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 4, 2024. There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2024.

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.

### 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 March 31, 2024 and 2023

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

| Operating Expenses | Three Months Ended March 31, 2024 | 2023 | Increase (Decrease) Change $ | Increase (Decrease) Change % |
| --- | ---: | ---: | ---: | ---: |
| General and administrative | $2.2 | $1.9 | $0.3 | 16% |
| Research and development | $1.0 | $0.4 | $0.6 | 150% |
| Total Operating Expenses | $3.2 | $2.3 | $0.9 | 39% |
| Operating Loss | $(3.2) | $(2.3) | $0.9 | 39% |
| Other Income | $0.4 | $0.3 | $0.1 | 33% |
| Net loss before Income Taxes | $(2.8) | $(2.0) | $0.8 | 40% |
| Net Loss | $(2.8) | $(2.0) | $0.8 | 40% |

### Operating Expenses

#### General and Administrative

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

Total general and administrative expenses increased by $0.3 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase of $0.3 million was primarily due to an increase in employee compensation and employee benefits and directors’ fee of $0.1 million, due to increases in compensation, an increase in postage and recruitment expenses of $0.1 million due to our SEC proxy mailings to shareholders and recruitment fees for new R&D employees and an increase in stock-based compensation of $0.1 million, due to the stock-based compensation amortization of RSAs issued in November 2023.

Total stock-based compensation included in general and administrative expenses was $0.4 million and $0.3 million for three months ended March 31, 2024 and March 31, 2023, respectively.

18

#### Table of Contents

#### Research and Development

R&D expenses consist primarily of costs associated with our CRADA and SPPA with INL for the R&D of our fuel, employee compensation and related fringe benefits including stock-based compensation and related allocable overhead costs for the R&D of our fuel.

The following table presents our total R&D expenses, including internal costs and other outside R&D costs, for the three months ended March 31, 2024 and 2023 (rounded to millions):

|  | March 31, 2024 | 2023 |
| --- | ---: | ---: |
| INL Project | $0.4 | $0.2 |
| Romania Feasibility Study | 0.1 | — |
| Centrus Energy FEED Study | 0.2 | — |
| Allocated employee compensation and stock-based compensation expenses | 0.2 | 0.1 |
| Other outside R&D expenses | 0.1 | 0.1 |
| Total | $1.0 | $0.4 |

Total R&D expenses increased by $0.6 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023 due to the increase in R&D activities related to the development of our fuel. This increase primarily consisted of an increase in INL project labor costs and outside R&D expenses of $0.5 million, and an increase in allocated employee compensation and employee benefits of $0.1 million.

We currently project investing approximately $8 million to $9 million in the R&D of our nuclear fuel over the next 12 to 15 months.

Due to the nature of our R&D expenditures, future costs and schedule estimates are inherently uncertain and can vary significantly as new information and the outcome of these R&D activities become available. Our future business operations are dependent on budgetary constraints due primarily to market conditions and the uncertainty of future liquidity and capital resources available to us to conduct our future R&D activities.

### Other Income

There was an increase in other income of $0.1 million due to rising interest rates over the past year, which resulted in an increase in interest income earned from the purchase of treasury bills and from our bank savings account for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

### LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL POSITION

### Liquidity Outlook

We measure liquidity in terms of our ability to fund the cash requirements of our R&D activities and our general and administrative expenses, including our contractual obligations and other commitments. We believe that based on our current level of operating expenses and currently available cash resources, we will have sufficient funds available to cover our business activities and operating cash needs for the next 12 months. Our long-term cash requirements for R&D are currently estimated to be an average of $10.0 million of outside or third-party R&D expenditures per year over the next 10-15 years. In order to meet these long-term cash requirements for future planned operations to develop and commercialize our nuclear fuel, including any additional expenditures that may result from unexpected developments, it will be necessary for our project to receive direct or indirect funding and/or in-kind support from government and/or strategic partners and/or other third-party sources.

At March 31, 2024, we had cash and cash equivalents of $27.9 million, as compared to $28.6 million at December 31, 2023, a decrease of $0.7 million. We raised net proceeds of $1.2 million from the sale of approximately 0.4 million shares of common stock during the three months ended March 31, 2024. Our net cash used in operating activities for the three months ended March 31, 2024 was $1.9 million and our cash flow projections indicate that we will have continued negative cash flows for the foreseeable future. We currently do not anticipate any incoming cash flows, other than the sale of common stock through our ATM offering. We are not profitable, and we cannot provide any assurance that we will become profitable in the future. We will continue to incur losses because we are in the early development stage of commercializing our nuclear fuel.

We have approximately $27.6 million of working capital as of the date of this filing. We currently project a negative cash flow from our operations for both our general and administrative and R&D expenses, resulting in total expected expenditures of approximately $16.2 million for the next 12 months. Our R&D expenses are expected to increase over the next 12-15 months. Our cash balance at March 31, 2024 and as of the date of this filing exceeds our anticipated cash requirements for the next 12 months. There are inherent uncertainties in forecasting the R&D and other expenditures that will be required in the future. Once other anticipated agreements are finalized or other future R&D agreements are entered into and the future R&D expenses are known, we expect to incur a significantly higher level of future required R&D expenses and higher negative monthly cash flows from operations.

19

#### Table of Contents

If sufficient funding becomes available to us, our R&D activities may significantly increase in the future. This funding is needed to continue our nuclear fuel development project and to achieve our future R&D milestones. 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 the 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 continue to utilize our ATM to finance our future R&D and corporate activities.

We will need to receive substantial funding and in-kind support from government, strategic partners and/or other third-party sources throughout our nuclear fuel R&D development period in order to fund our ongoing R&D efforts in the future. If we are unable to obtain such funding and/or in-kind support that meets our future R&D cash requirements, we will need to seek other funding, which may include the issuance of additional shares of the Company’s common stock, 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.

Our current source of cash available to us for the next 12 months, in addition to cash and cash equivalents on hand, is the potential funding from equity issuances pursuant to the at-the-market equity offering sales agreement, as amended, with Stifel, Nicolaus & Company, Incorporated. The Company previously had an effective shelf registration statement on Form S-3 that was filed with the Securities and Exchange Commission, or SEC, on March 25, 2021, registering the sale of up to $75 million of the Company’s securities which was declared effective on April 5, 2021. We filed a prospectus supplement, dated April 4, 2023, with the SEC pursuant to which we may offer and sell shares of common stock having an aggregate offering price of up to $17.9 million from time to time, through the ATM. We filed a new shelf registration statement on Form S-3 on March 29, 2024 and that became effective on April 19, 2024. We filed a prospectus supplement, dated May 10, 2024, with the SEC pursuant to which we may offer and sell shares of common stock having an aggregate offering price of up to $6.6 million from time to time, through the ATM.

Under current SEC regulations set forth under General Instruction I.B.6. of Form S-3, if at any time our public float is less than $75.0 million, and for so long as our public float remains less than $75.0 million, the amount we can raise through primary public offerings of securities in any twelve-month period using shelf registration statements is limited to an aggregate of one-third of our public float, which is referred to as the baby shelf rules. As of the date of this filing, we are subject to the baby shelf rules for any offerings conducted on our current shelf registration statement, and therefore may be limited on the amount of funding available under this Form S-3 shelf registration statement in the future. Although we expect this ATM facility to continue to be a source of working capital for the Company in 2024, there is no assurance that an ATM financing arrangement will be available to us in the future. See Note 7. Stockholders’ Equity and Stock-Based Compensation of the Notes to our 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.

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 could substantially impair our ability to raise capital in the future and continue developing our nuclear fuel.

### Short-Term and Long-Term Liquidity Sources

Our current source of liquidity is cash raised from our ATM facility.

As discussed above, we will seek new financing in order to bring us additional sources of capital, depending on the capital market conditions of our common stock. There can be no assurance that these additional sources of capital will be made available on terms acceptable to us, or at all. 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/or 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.

20

#### Table of Contents

In support of our long-term business with respect to our fuel technology business, we endeavor to create strategic alliances with other parties to support the remaining R&D activities that are required to further enhance and complete the development of our fuel products to a commercial stage. We may be unable to form such strategic alliances on terms acceptable to us or at all.

See Note 7. Stockholders’ Equity and Stock-Based Compensation of the Notes to our 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.

The following table provides detailed information about our net cash flows for the three months ended March 31, 2024 and 2023 (rounded in millions):

### Cash Flows

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net Cash Used in Operating Activities | $(1.9) | $(1.5) |
| Net Cash Used in Investing Activities | — | — |
| Net Cash Provided by Financing Activities | 1.2 | 0.7 |
| Net Cash Outflow | $(0.7) | $(0.8) |

#### Operating Activities

Our net cash used in operating activities increased by $0.4 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. This increase was primarily due to increased spending on R&D and general and administrative expenses.

#### Financing Activities

Our net cash provided by financing activities increased by $0.5 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. This increase was due to an increase in the net proceeds received from the issuance of common stock under our at-the-market (ATM) facility.

Cash provided by our ATM facility was $1.2 million (sale of approximately 0.4 million common shares) and $0.7 million (sale of approximately 0.2 million common shares) for the three months ended March 31, 2024 and 2023, respectively.

### 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.

### Inflation

Our business, revenues, and operating results have not been affected in any material way by inflation.

## Market risk

As filed, 162 characters.

The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.

## Controls and procedures

As filed, 3,968 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.

21

#### Table of Contents

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 March 31, 2024 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. As previously disclosed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2023, in management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2023, management determined that there was a material weakness related to the design of our information technology general controls (ITGC) over logical access to key information systems used in the financial reporting process, resulting in certain segregation of duties conflicts. Additionally, certain business process controls that are dependent on information from these systems were also not effective. Notwithstanding the material weakness, there were no restatements of prior period finance statements, and no changes in previously released financial results were required as a result of the material weakness.

### Ongoing Remediation of Previously Identified Material Weakness

The Company’s management, under the oversight of the Audit Committee, has undertaken measures to remediate these deficiencies. This includes enhancing the design of logical access controls to ensure appropriate segregation of duties through improved internal documentation and monitoring activities. Management began to implement these remedial steps during the fourth quarter of fiscal 2023 by removing privileged access to accounting software. The material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively. The Company may also identify additional measures that may be required to remediate the material weaknesses in the Company’s internal control over financial reporting, necessitating further action.

### Changes in Internal Control Over Financial Reporting

Except as noted above, there were no changes in the Company’s internal control over financial reporting during the first quarter of 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

22

#### Table of Contents

## Risk factors

As filed, 4,097 characters.

Other than as set forth below, there have been no other material changes to our risk factors from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

***Acquisition activity presents certain risks to our business, operations and financial condition, and we may not realize the financial and strategic goals contemplated at the time of a transaction.***

We expect that acquisitions will be an important part of our long-term growth strategy. Successful execution following the closing of an acquisition is essential to achieving the anticipated benefits of the transaction. We may make acquisitions to support our growth and our acquisition strategy depends on our ability to complete and integrate the acquisitions. Mergers and acquisitions are inherently risky, and any mergers and acquisitions that we complete may not be successful. The process of integrating an acquired company's business into our operations is challenging and may result in expected or unexpected operating or compliance challenges, which may require significant expenditures and a significant amount of our management's attention that would otherwise be focused on the ongoing operation of our business. The potential difficulties or risks of integrating an acquired company's business include, among others:

- the effect of any potential acquisition on our financial and strategic positions and our reputation,
- risk that we fail to successfully implement our business plan for the combined business,
- risk that we are unable to obtain the anticipated benefits of any potential acquisition, including synergies or economies of scale,
- challenges in reconciling business practices or in integrating activities, logistics or information technology and other systems,
- challenges in reconciling accounting issues, especially if an acquired company utilizes accounting principles different from those we use,
- retention risk with respect to key collaborators and employees and challenges in retaining, assimilating and training new employees,
- potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquired company, which could result in unexpected litigation, regulatory exposure, financial contingencies and known and unknown liabilities, and
- challenges in complying with newly applicable laws and regulations, including obtaining or retaining required approvals, licenses and permits.

23

#### Table of Contents

Any potential acquisitions may also result in the expenditure of available cash and amortization of expenses any of which could have a material adverse effect on our results of operations or financial condition. Investments in immature businesses with unproven track records have an especially high degree of risk, with the possibility that we may lose the value of our entire investments or incur additional unexpected liabilities. Large or costly acquisitions or investments may also diminish our capital resources and liquidity or limit our ability to engage in additional transactions for a period of time. All of the foregoing risks may be magnified as the cost, size or complexity of a potential acquisition or acquired company increases, or where the acquired company's market or business are materially different from ours, or where more than one integration is occurring simultaneously or within a concentrated period of time.

In addition, in the future we may require significant financing to complete an acquisition or investment, whether through bank loans, raising of debt, issuance of equity securities or otherwise. We cannot assure you that such financing options will be available to us on reasonable terms, or at all. If we are not able to obtain such necessary financing, it could have an impact on our ability to consummate any potential acquisition or investment and execute our growth strategy. The issuance of a significant number of shares as consideration for any potential acquisition would have a dilutive effect on our existing stockholders.

Filed May 10, 2024.
Source: SEC EDGAR, the filing index for accession 0001477932-24-002689. Last ingested by Listed: Nov 4, 2026, 16:45 ET. No prices; not investment advice.