Lightbridge Corp (NASDAQ:LTBR ) Q1 2022 Earnings Conference Call May 12, 2022 4:00 PM ET
Matthew Abenante - Director, IR
Seth Grae - President, CEO & Executive Director
Andrey Mushakov - EVP, Nuclear Operations
Lawrence Goldman - CFO, Treasurer & Corporate Secretary
James Fornof - VP, Nuclear Program Management
Good day, ladies and gentlemen, thank you for standing by, and welcome to the Lightbridge Corporation Business Update and First Quarter 2022 Conference Call. Please note that today's call is being recorded.
It is now my pleasure to introduce Matthew Abenante, Director of Investor Relations for Lightbridge Corporation.
Thank you, Olivia, and thanks to all of you for joining us today. The company's earnings press release was distributed after the market closed yesterday and can be viewed on the Investor Relations page of the Lightbridge website at www.ltbridge.com.
Joining us on the call today is Seth Grae, Chief Executive Officer; along with Larry Goldman, Chief Financial Officer; Sherrie Holloway, Controller; Andrey Mushakov, Executive Vice President for Nuclear Operations; and Jim Fornof, Vice President for Nuclear Program Management.
I would like to remind our listeners that any statements on this call that are not historical facts are forward-looking statements. Today's presentation includes forward-looking statements about the company's competitive position and product and service offerings.
During this call, words such as expect, anticipate, believe and intend will be used in our discussion of goals or events in the future. This presentation is based on current expectations and involve certain risks and uncertainties that may cause actual results to differ significantly from such estimates. These and other risks are set forth in more detail in Lightbridge's filings with the Securities and Exchange Commission. Lightbridge does not assume any obligation to update or revise any such forward-looking statements, whether as a result of new developments or otherwise.
And with that, I would like to turn the call over to our first speaker, Seth Grae, Chief Executive Officer of Lightbridge. Hello, Seth.
Hello, Matt, and thank you all for joining us to discuss Lightbridge's first quarter 2022 results. Since it's only been a bit over a month since our last conference call, we'll keep the opening remarks brief to get to your questions.
We are continuing to make steady progress on our fuel development activities, including the ongoing efforts at Pacific Northwest National Laboratory, or PNNL, performing under our second funding voucher from the U.S. Department of Energy's Gateway for Accelerated Innovation in Nuclear, or GAIN program.
As a brief reminder, our work at PNNL advances a critical stage in the manufacturing process of Lightbridge Fuel, by demonstrating a casting process using depleted uranium zirconium material. Receiving the second GAIN voucher has served as an important validation for Lightbridge by the U.S. Department of Energy.
Lightbridge is well aligned with the support the U.S. government is providing, to develop advanced nuclear technologies that can help the existing large reactors and new, small modular reactors. We anticipate future fuel development milestones will include agreements to manufacture our nuclear fuel material samples for capsular radiation in a test reactor, while continuing to develop and optimize our nuclear fuel manufacturing processes using depleted or natural uranium and culminating with the design and manufacturing of a multi-lobe fuel rod with enriched uranium for loop irradiation experiments in the test reactor.
These irradiation testing experiments in the test reactor would generate data necessary to support regulatory licensing approval of our metallic fuel rod for demonstration in an operating commercial power reactor. We are actively working with the U.S. government and the private sector to reach these key milestones.
I want to congratulate NuScale Power for their successful listing on the New York Stock Exchange last week. NuScale is a leading innovator in small modular reactor designs. And I was very happy to see the investment community come together in support of this important technology.
This further validates our added focus on fueling SMRs that are in development and licensing. SMRs being developed by several companies have the potential collectively to generate massive amounts of power, with the versatility to contribute significantly to the world meeting climate goals. We believe that Lightbridge Fuel can provide SMRs all the benefits that our technology would bring to large reactors and with anticipated additional economic benefits and safety enhancements.
Russia's invasion of Ukraine has led to growing concerns about energy security, and we, at Lightbridge, participate in some of these discussions. Countries need to wean off reliance on fossil fuels from nations that threaten their national security. The world's growing emphasis on ESG has also become increasingly important. Increasing concerns for energy security and ESG have brought nuclear power into focus as an indispensable part of a diversified energy base.
Existing large reactors remain a focus for Lightbridge. While we don't expect that many large -- in the near term, we were pleased to see the Biden administration allocate $6 billion to help prevent nuclear power plants from closing. Nuclear power currently provides about 20% of the nation's power and over 50% of carbon-free electricity.
As a result, the Biden administration has identified the current U.S. fleet of 93 large reactors as a vital resource to achieve net zero emissions by 2050. Upkeep of the current nuclear power plants is of the utmost importance today, while bridging efforts to the next generation of reactors.
I'll turn the call over now to Andrey Mushakov, Executive VP for Nuclear Operations, who will review our near-term research and development opportunities. Andrey?
Thank you, Seth. As Seth mentioned, we continue to make progress on our fuel development program. As previously reported, we completed work under our first U.S. Department of Energy's GAIN voucher award, in collaboration with Idaho National Laboratory.
Our work consisted of designing an experiment for the irradiation of Lightbridge's metallic fuel material samples in the Advanced Test Reactor at Idaho National Laboratory. Together, we established a test plan for the measurement of key thermophysical properties of Lightbridge Fuel materials, both before and after irradiation in the ATR.
From there, Idaho National Laboratory performed a detailed design and established the safety case needed for insertion of the experiment in the Advanced Test Reactor. This included the control parameters, such as sample enrichment, thermohydraulic capacity, maximum sample temperature, neutron fluence and the physical location of test capsules within the Advanced Test Reactor.
Next steps on the testing program will be the contract for fabrication of the enriched uranium coupon samples for insertion in the Advanced Test Reactor. The timing of the insertion is subject to the final duration of the maintenance outage, the availability of facing positions in the Advanced Test Reactor, Idaho National Laboratory's prior commitments for testing as well as fabrication and delivery of the coupon samples. Once the required burn up is achieved in the Advanced Test Reactor, Post Irradiation Examination will be performed.
We began to work on our second GAIN voucher with the Pacific Northwest National Laboratory, or PNNL, in the third quarter of 2021. The scope of this project is a demonstration of our fuel casting process using depleted uranium in a 50 weight percent alloy with zirconium. This is a key step in the fabrication process of power fuel, and it also informs our approach to fabrication irradiation fuel samples for the Advanced Test Reactor at Idaho National Laboratory.
We have completed the procurement and delivery to PNNL of depleted uranium zirconium materials with our sub-tier vendors, which is a component of Lightbridge's cost share contribution to the project. The total value of the project is approximately $663,000, with 3/4 of this amount funded by the U.S. Department of Energy for the scope performed by PNNL.
As previously announced, we also had a successful demonstration of our patented co-extrusion process using surrogate materials in place of uranium. The surrogate rods are manufactured using our co-extrusion process at the 6-foot nominal length, designed for small modular reactors. The successful demonstration of our high-temperature co-extrusion process illustrates the primary form and process for Lightbridge Fuel, including the helical test of the fuel rods and the metallurgical bond between the central displacer, surrogate fuel alloy and the cladding.
Rods produced during this demonstration will be used for further development activities, including validation of computer models of the co-extrusion process and corrosion testing of S-fabricated cladding alloys.
We designed Lightbridge Fuel to enable small modular reactors to more efficiently load follow, ramping up and down in power as renewables are available, which are replacing fossil fuel plants.
In addition, we expect this technology to reduce the cost of generating electricity from a small modular reactor, which strengthens the business case for deploying large numbers of Small Modular Reactors to deliver reliable power and meet climate goals.
Thank you, Andrey. Now I'll turn the call over to Larry Goldman, Chief Financial Officer, to summarize the company's financial results.
Thank you, Seth, and good afternoon, everyone. For further information regarding our first quarter 2022 financial results and disclosure, please refer to our earnings release that we filed at the close of market yesterday and our Form 10-Q that we will file with the SEC later today.
The company maintained a strong working capital position at March 31, 2022. We had working capital of $28.3 million as compared to $24.7 million at December 31, 2021, with no debt financing. Our cash and cash equivalents were $28.2 million as compared to $24.7 million at December 31, 2021.
Total assets were $28.9 million and total liabilities were $0.5 million at March 31, 2022. Total cash used in operating activities were $1.9 million for the quarter, a decrease of $4.4 million from the $6.3 million of cash used in operating activities for the first quarter of 2021. This $4.4 million decrease was due primarily to the dissolution of our former joint venture in the first quarter of 2021 and the payment of approximately $4.2 million for outstanding invoices for work performed and other expenses incurred.
Cash provided by financing activities was $5.4 million in the first quarter of 2022 compared to 0 in the first quarter of 2021. This increase was due to an increase in the net proceeds from the issuance of common stock by our at-the-market ATM facility.
We remain very strategic and focused on shareholder value creation. In 2021, our ATM program was mainly used in the second half of the year, when we raised $14.2 million of net proceeds, taking advantage of the strong equity markets where we, as well as most of our peer companies, experienced overall increases in stock prices at the time, which allowed us to strengthen our balance sheet.
Many NASDAQ companies have an ATM program. Today, we have ample working capital and flexibility to support our near-term fuel development expenditures and other strategic initiatives. This is very important to Lightbridge and our stockholders as well as our external stakeholders, such as the federal government, to ensure we have sufficient working capital as well as the ability to access capital in the future. At the same time, Lightbridge is always looking for opportunities to secure funding from other sources to minimize dilution to our stockholders.
In support of our long-term business future financing requirements with respect to our fuel development, we expect to continue to seek additional DOE funding in the future, along with new strategic alliances that may contain cost sharing contributions and additional funding from others, in order to help fund our future R&D milestones, leading to the commercialization of Lightbridge Fuel.
Lightbridge is working with the U.S. National Laboratories on research and development activity and is currently negotiating new contracts for additional future scopes of R&D work in 2022 and beyond.
I will now turn the call over to Sherrie Holloway, our Controller, who will go over select P&L financial information for the first quarter of 2022. Sherrie?
Thank you, Larry. Total R&D expenses were $0.3 million in the first quarter of 2022 compared to $0.4 million in the first quarter of 2021. There was a decrease in employee compensation and employee benefits of approximately $0.1 million.
Total G&A expenses increased by approximately $0.1 million for the first quarter of 2022 as compared to the first quarter of 2021. This increase was primarily due to an increase in employee compensation and employee benefits of approximately $0.1 million; an increase in director fees of approximately $0.1 million, due to the addition of new Board members; an increase in promotion expenses of approximately $0.1 million; and an increase in stock-based compensation of approximately $0.2 million, due to the issuance of restricted stock awards in 2021.
These increases were offset by a decrease in professional fees of approximately $0.4 million, relating to fees incurred in connection with the arbitration matter in 2021 that were not repeated during the first quarter of 2022.
Total net other operating income related to contributed services, research and development was $0.1 million for the first quarter of 2022 and 2021, with a charge to R&D expenses and a corresponding amount recorded to contributing services, research and development. Net loss for the first quarter of 2022 was $2 million, which was unchanged compared to first quarter of 2021.
Thank you, Sherrie. And with that, we will go to the question-and-answer session. Thank you to everyone who has submitted questions. Matt, please go ahead with the questions.
Okay. Our first question, are there still 3 performance upgrade variants? Those are 10%, 17%, and 30%, being planned for Lightbridge Fuel? Can you explain the physical differences between the 3 variants? And will nuclear power plants require some upgrades to achieve performance uprates? And what do you think the rough estimated costs will be?
Well, yes, we are still considering having those 3 variants for commercial deployment of our metallic fuel technology in large light-water reactors. Some of these variants may also be applicable to the Small Modular Reactors, the SMRs. However, a more detailed assessment of power upgrade opportunities and SMRs would be required for each particular SMR design.
The main physical differences among the 3 variants would come in the form of different uranium enrichment level and composition and concentration of what is called burnable absorbers inside the fuel rods, depending on the operating cycle length of each fuel variant.
According to an economic study performed by Pace Global, a Siemens business, which is available on the Lightbridge website, a onetime cost of reactor upgrades for accommodating a 10% up rate, with a 24-month operating cycle extended from 18 months in an existing 1,100-megawatt electric pressurized water reactor was estimated at $85 million per reactor, which we believe utilities could balance sheet finance and the work could be done within the time frame of a normal refueling outage.
Are any of Lightbridge's numerous patents reaching expiration?
Well, none at the moment. During the next several years, we have some information here that, as of December 31, 2021, we held 5 U.S. patents and more than 140 foreign patents. The expiration date of these patents are generally 20 years from their application dates.
Some of our U.S. patents, covering our old seed-blanket fuel assembly designs will begin to expire in 2027. Other U.S. patents covering our all-metal fuel assembly design will expire in the 2031 to 2035 time frame.
In addition to our extensive patent portfolio, we maintain a large body of trade secrets, particularly relating to our proprietary co-extrusion manufacturing process for our metallic fuel rods. These trade secrets provide further protection of our intellectual property well beyond 2035, and we plan to continue to file new patent application.
Is the 3-lobe or 4-lobe design for Lightbridge Fuel design being planned? And is there an advantage with either design?
Sure. Yes. We devote multiple variants of our metallic fuel rod technology, including 3-lobe as well as 4-lobe variants, for specific reactor designs. The specific fuel rod design used for a particular reactor depends on the reactor's existing fuel assembly design and the fuel proliferation envelope required to provide the power plant the desired fuel cycle.
I'm sorry. Yes, go ahead, Matt.
This is our last question. Could you explain the design reasons using casting and powder metallurgical routes?
Jim, do you want to take that one?
Yes, sure, Seth. Yes, we're developing our fuel manufacturing processes to ensure that they meet the high level of nuclear safety and quality, while, at the same time, controlling the costs and maximize material utilization, including reduction of waste streams.
We continue to work with a variety of suppliers to evaluate and optimize these processes. And this includes the work that Andrey described that we're currently performing at PNNL under our second GAIN voucher.
The specifics of these process steps and their optimization or trade secrets, as you mentioned, Seth. And our process selection decisions are made to balance the requirements of safety, quality, reliability and of course, cost control.
Okay. Thanks, Jim. And thank you, everybody, for participating on today's call. We look forward to providing additional updates in the near future. In the meantime, we can be reached at ir@ltbridge.com. Stay safe and stay well. Goodbye.
Ladies and gentlemen, that concludes our conference for today. Thank you for your participation. You may now disconnect.