Lightbridge Corporation

Thank you for standing by and welcome to the Lightbridge Corporation Business Update and Third Quarter 2021 Conference Call. Please note that today's call is being recorded. It is now my pleasure to introduce Matthew Abinanti, Director of Investor Relations for Lightbridge Corporation.

Thank you, Kathleen, and thanks to all of you for joining us today. The company's earnings press release was distributed before the market opened today 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 Gray, Chief Executive Officer, along with Larry Goldman, Chief Financial Officer, Sherry Holloway, Controller, Andrei Mushikov, Executive Vice President for Nuclear Operations, and Jim Fornoff, 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 today's 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 involves 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 Gray, Chief Executive Officer of LightBridge. Hello, Seth.

Hello, Matt, and thank you all for joining us to discuss LightBridge's third quarter 2021 results. I hope you and your families are well and safe. As noted in our press release issued earlier today, we continue to make strong progress in developing our fuels, significantly improve the economics and safety of existing and new nuclear power plants, including large reactors and small modular reactors. We recently achieved a major milestone, completing our work at Idaho National Laboratory for our first U.S. Department of Energy Gain Voucher Award. This work supports irradiation testing of our fuel, and makes the safety and design case for light-bridge fuel samples to be tested in the advanced test reactor at Idaho National Lab. We also began work on our second GAIN voucher at Pacific Northwest National Laboratory, which is focused on the manufacturing process of light-bridge fuel. Turning to our strong patent portfolio, during the third quarter, United States, Canada, Japan, and Australia awarded additional patents to Lightbridge in support of our efforts to commercialize Lightbridge fuel. At the corporate level, we expanded our board of directors to seven members, five of whom are independent directors, as that term is defined under NASDAQ listing standards. We also formed a new board committee dedicated to environmental, social, and governance oversight and guidance. The ESG committee reflects Lightbridge's dedication to environmental and social responsibility, which is an integral part of our long-term performance strategy. Nuclear energy represents a significant portion of clean energy globally, and we believe the industry will continue to attract greater interest from socially conscious investors as the metrics of ESG practices are standardized around the world. I'll turn the call over to Andrei Mushakov, Executive VP for Nuclear Operations. to review our fuel development activities. Andre?

Thank you, Seth. As Seth mentioned, we have successfully completed work under the U.S. Department of Energy's Gain Voucher Program in collaboration with Idaho National Laboratory. Our work consisted of designing an experiment for the irradiation of light-beach 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 light-bridge fuel material both before and after radiation in the advanced test reactor. 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 of parameters such as sample enrichment, thermal hydraulic capacity, maximum sample temperature, neutron fluids, and the physical location of test capsules within the ATR. Next steps in the testing program will be the contract for the high assay low enriched uranium material and fabrication of the sample coupons for insertion in the advanced test reactor. Our goal is to have the experiment available for insertion in the ATR when its core internal change-out maintenance outage is completed. The timing of the insertion is subject to the final duration of the maintenance outage, as well as the availability of testing positions in the ATR, and Idaho National Laboratory's prior commitments for testing. Once the required burn-up is achieved in the ATR, post-radiation examination will be performed. We began work on our second Gain Voucher with the Pacific Northwest National Laboratory in the third quarter. The scope of this project is a demonstration of our fuel casting process using depleted uranium in a 50% by weight alloy with zirconium. This is a key step in the fabrication process for our fuel. and it also feeds into our needs for fabrication of radiation fuel samples for the advanced test reactor at Idaho National Laboratory. We are currently completing the procurement of depleted uranium and zirconium materials with our sub-tier suppliers, which is a component of Lightbridge's mentioned contribution to the project. The total value of the project is approximately $663,000, with three-quarters of this amount funded by the U.S. Department of Energy for the scope performed by Pacific Northwest National Laboratory. Back to you, Seth.

Thank you, Andre. And I want to thank the teams at LightBridge and Idaho National Lab for their collaborative efforts under what were unprecedented conditions during the global pandemic to complete this important work. I also want to thank the US Department of Energy and the GAEN program for their continued support of advanced nuclear technology R&D at LightBridge. I find it encouraging to see nuclear energy being recognized as a necessary way to effectively meet our 24-hour energy needs and displace carbon-emitting sources. We're hearing more thoughtful conversations emerging with knowledgeable experts in government, NGOs, companies, institutional investors, and others being given a voice in their attempts to increase both formal and informal public discussion about nuclear's role in addressing climate challenges. In a recent interview at the UN Climate Change Conference, COP26, U.S. Secretary of Energy Jennifer Granholm stated that the Biden administration is, quote, very bullish on these advanced nuclear reactors. We have, in fact, invested a lot of money in the research and development of those, unquote. She also stated that wind and solar are not yet capable of generating baseload capacity and that half of the United States' clean power now is through nuclear. Quote, if you look at the overall power, it's about 20%. Globally, 29% of the clean power is nuclear. The holy grail is to identify clean baseload power. Nuclear is dispatchable clean baseload power. So we want to be able to bring more on. These advanced nuclear reactors and the existing fleet are safe. We have a bold standard of regulation in the United States." Historically, governments and public policy would take the lead in nuclear's role in addressing climate change, but now the private sector is also taking leading roles. According to the United Nations Framework Convention on Climate Change, there are more than 1,600 companies throughout the world with combined revenues of over $11.4 trillion that have made net zero commitments and will therefore play a critical role in shaping what energy policy will look like. In fact, in the most recent iteration of the reconciliation bill being drafted in the U.S. Congress, Nuclear power would receive a tax credit of $0.03 per kilowatt hour, or $30 per megawatt hour. That would significantly help to keep the existing reactor fleet in operation. Additionally, Exelon recently announced that it will spend $300 million to upgrade its Byron, Dresden, and Braidwood nuclear power stations in Illinois in response to a bill signed in September to shift the state to 100% clean energy by 2050. The three plans have been scheduled to close, but subsidies included in the bill allowed Exelon to keep them running. The International Energy Agency has stated that along with an increase in renewables, a significant expansion in global nuclear capacity is the only pathway to net zero emissions and an improved outlook for the planet. According to the World Nuclear Association, nuclear power capacity worldwide is increasing steadily, with about 50 reactors under construction, mostly in Asia, producing a capacity of 55 gigawatt hours. However, this simply isn't enough capacity to meet global energy demand by the end of the decade. Nevertheless, by 2050, which is the seminal year for climate change, according to the Intergovernmental Panel on Climate Change, We are not surprised to see the recent activity in the uranium market either. Perhaps only in terms of its velocity are we surprised. The world is and will continue to need carbon-free nuclear power, and with that need comes an increase in the demand for uranium. Yet uranium supply has become less certain due to years of persistently low prices. and we expect demand to only grow as nuclear power becomes more abundant as advanced technologies such as small modular reactors are licensed and built. Now I will turn the call over to Larry Goldman, Chief Financial Officer, to summarize the company's financial results. Larry?

Thank you, Seth, and good afternoon, everyone. For further information regarding our third quarter 2021 financial results and disclosures, please refer to our earnings release that we filed this morning and our Form 10-Q that we will file with the SEC later today. Companies' working capital position at September 30, 2021, was $15.4 million, compared to $17.1 million at December 31, 2020. Total assets were $16.6 million, and total liabilities were $1.1 million at September 30, 2021. Total cash used in operating activities was $8.8 million for the nine months ended September 30, 2021, an increase of approximately $3.2 million compared to $5.6 million for the nine months ended September 30, 2020. This increase was due primarily to the dissolution of the Envision Joint Venture and the payment of approximately $4.2 million to Framitone for outstanding invoices for the work performed and other expenses incurred. Total cash provided by financing activities was $3.4 million for the nine months ended September 30, 2021, a decrease of $1.8 million compared to the nine months ended September 30, 2020. This is primarily due to the decrease in the net proceeds from the issuance of common stock in 2021, which was $3.4 million for the nine months ended September 30, 2021, as compared to $5.2 million for the nine months ended September 30, 2020. On October 29, 2021, we entered into a share exchange agreement, relating to our non-voting Series A convertible preferred stock, where we exchanged all of the outstanding 663,767 shares of Series A convertible preferred stock for 262,910 shares of our common stock at a conversion price of $10 per common share, which I note was above the market price on the date of conversion. In support of our long-term business and future financing requirements with respect to our fuel development, we expect to continue to seek additional DOE funding and equity 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. I will now turn the call over to Sherry Holloway, our controller, who will go over our P&L financial information for the third quarter of 2021. Sherry? Thank you, Larry.

Net loss for the third quarter of 2021 was $1.9 million compared to $3.1 million for the third quarter of 2020. Total R&D expenses increased by approximately 0.2 million for the three-month ended September 30th, 2021 to 0.4 million as compared to 0.2 million for the three-month ended September 30th, 2020. There was an increase of approximately 0.2 million in outside research and development work with the DOE's national laboratories related to our GAIN voucher. All other R&D expenses for the three months ended September 30th, 2021 and the three months ended September 30th, 2020 were consistent period over period. Total G&A expenses decreased by approximately 1.1 million for the three months ended September 30th, 2021 to 1.7 million as compared to 2.8 million for the three months ended September 30th, 2020. There was a decrease in professional fees of approximately 1.4 million, primarily due to a decrease in the legal and professional fees relating to the Frampton arbitration, which was settled earlier in the year. These decreases were offset by increase of approximately 0.3 million in employee compensation primarily due to an increase in the bonus accrual for 2021. Net other operating income was 0.3 million for the three months ended September 30th, 2021, consisting of grant income from our first game voucher. Now over to you, Seth.

Thank you, Sherry. 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.

Thank you, Seth. With the market recovery in uranium accelerating as quickly as it has, is there a particular reason behind this dramatic price increase?

Here's what we think are the reasons for the surge in uranium prices. According to UXC, Natural uranium spot prices surged from $30 per pound in August to $50 per pound in September of this year and currently settled around $43 a pound. There are some fundamental factors driving spot prices up, including one, significantly lower global uranium production due to COVID-19. Two, producer and intermediary record buying in 2020 as these two groups accounted for 80% of spot volume. Three, signing a year ago an amendment to the Russian suspension agreement, which reduces Russian export limits to U.S. utilities over time, with the enriched uranium limit decreasing significantly beyond 2021. And four, Kazakh production targets for 2021 and 2022 are expected to remain 20% below planned levels authorized under what is called the subsoil use contracts for individual projects. Another overarching factor emerging around the globe is the realization among policymakers, the media, and many others that nuclear power must play an essential role in reducing CO2 emissions. Global climate change goals can only be met with a significant increase in nuclear power as part of the energy generating mix. As I mentioned earlier, in the most recent iteration of the reconciliation bill the U.S. Congress is considering, nuclear power would receive a tax credit of $0.03 per kilowatt hour, $30 per megawatt hour. That would be significant and would help, including help to keep existing reactors in operation and hence, you know, needing more uranium.

Thank you. Has there been any progress or updates regarding the possible additional test loops at the advanced test reactor at Idaho National Laboratory?

Yes. Part of the U.S. government's increasing support for nuclear power has been to make the advanced test reactor into a user facility that industry, including LightBridge, can access. The core internals change outage is currently underway that Andre talked about at the advanced test reactor. We expect that outage will run until about mid 2022. We understand that the new top closure plate will include penetrations that would allow for adding new flow loops. That's very good. We understand the DOE is exploring providing funding to add at least one flow loop to the ATR. We support adding two flow loops. There are people at DOE and in Congress who are aware of these issues and the benefits for the U.S. nuclear power industry, and we look forward to more progress.

How does LightBridge fuels potential applications compared to other approaches, such as the TRISO approach?

Andre?

Yes, light-bridge fuels' unique material composition, fuel geometry, and construction enable operational flexibility for water-cooled reactors that other fuels cannot offer. Virtually every operating reactor in the world is water-cooled. While tricep-type fuels offer safety benefits for planned advanced reactors, the implementation in water-cooled reactor environments is limited by the fuel geometry, typically cylindrical compact of triso particles. Triso fuel is particularly well-suited to high-temperature coolant conditions, such as in planned helium-cooled advanced reactor designs, whereas light-bridge fuel is applicable to both the existing reactor fleet as well as several proposed advanced small modular reactor designs.

Thank you, Andrei. And for our last question, Are you confident that small modular reactors will use Lightbridge Fuel? Are the SMR companies aware of the progress you've made?

We expect that Lightbridge Fuel will bring significant benefit to SMRs, including reducing the cost per unit of electricity generated by SMRs. The companies proposing SMR designs are aware of Lightbridge Fuel and the potential advantages it can offer to their designs. At this time, most of the SMR vendors are focused on completing the design and licensing process for their reactors. We apprise SMR vendors of our progress and our R&D efforts with national labs and otherwise. We feel that as we continue to make progress, SMR designers and their customers who operate the SMRs will implement light-bridge fuel because of its inherent safety and economic advantages in water-cooled reactors.

And that was our last question.

Well, thanks, Matt. And thanks, everybody, for participating on today's call. We look forward to providing additional updates in the future. In the meantime, we can be reached, as always, at ir.ltbridge.com. Stay safe. Stay well. Goodbye.

This concludes today's conference call. You may now disconnect. Thank you for participating.