LIGHTBRIDGE Corp (LTBR)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is intended to help the reader understand Lightbridge Corporation, our operations, and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes thereto, which are contained in Part II. Item 8. Financial Statements and Supplementary Data of this report.

This MD&A consists of the following sections:

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 events, including those set forth under “Forward-Looking Statements” and Part I. Item 1A. Risk Factors.

Overview of Our Business and Recent Developments of Lightbridge Fuel™

When used in this Annual Report on Form 10-K, 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 or to “behind the meter” customers for electric power, including data centers. We believe 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.

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.

Technology industry companies believe that nuclear energy can offer a strategic, sustainable, and reliable solution for powering data centers. Advances in reactor technology, combined with growing corporate and governmental support for clean energy, can position nuclear power as a cornerstone of future energy strategies for data-intensive industries. We believe that by integrating nuclear power, the data center sector can achieve operational efficiency, energy security, and sustainability. We believe uses of our fuel could include providing additional power via power uprates of existing reactors, which may be willing to pay a premium for reliable, clean, and sustainable baseload electricity. Oil and gas producing companies are investing in low-emission energy technologies to reduce fossil fuel emissions from oil and gas production. Advances in nuclear reactor and fuel technology can position nuclear power as a key energy source for this purpose.

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 enable power uprates in SMRs.

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 of Lightbridge Fuel™

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 use a rolling wave planning approach for project management purposes on the released scopes of work. It is an iterative planning technique in which the work to be accomplished in the near term is planned in detail, while work further in the future is planned at a higher level. As such, periodic revisions to the scope and/or cost estimates are anticipated.

The Company anticipates entering into additional modifications to the Project Task Statements (PTS) under the SPPA and/or CRADA with INL to expand the scope of work, including performing additional extrusions, updating the experiment design for irradiation testing of coupon samples in the ATR, as well as other potential activities. We are discussing these additional scopes and timing of work with INL to be performed under the two “umbrella” agreements with BEA; which we anticipate will increase our R&D expenses for the SPPA and/or CRADA. In late 2024, we worked with INL to re-baseline the project scope, schedule, and cost estimate at completion. As a result, the expected cost estimate at completion was increased by approximately $2.0 million. The successful execution of this project is subject to risks, including potential delays, cost overruns, regulatory challenges, and changes in funding availability, and if the project scope does increase, then the project will be successfully executed or completed. Regardless of whether further project modifications occur, INL has indicated to the Company that due to resource and manufacturing equipment constraints, INL may not be able to meet the Company’s preferred project timeline, and that the total project cost will exceed the current budget.

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.

On March 26, 2024, the Company and BEA entered into Modification No. 2 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.

On October 24, 2024, the Company and BEA entered into Modification No. 3 PTS under the SPPA, dated December 9, 2022, as amended on May 23, 2023 and March 26, 2024, by and between the Company and BEA. Pursuant to the terms of Modification No. 3, the potential amounts payable by the Company to reimburse BEA for its expenses and employee time were increased by approximately $0.3 million, bringing the total estimated cost for the work to be performed under the “umbrella” SPPA to approximately $2.0 million.

On January 16, 2025 the Company and BEA entered into Modification No. 3 PTS under the CRADA, dated September 27, 2022, as amended on May 22, 2023, May30, 2023, by and between the Company and BEA. Pursuant to the terms of Modification No. 3, the potential amounts payable by the Company to reimburse BEA for its expenses and employee time were increased from $2.6 million by approximately $1.6 million, bringing the total estimated cost for the work to be performed under the “umbrella” CRADA to $4.2 million. This modification also required that a $0.6 million advance payment be made, which was paid on January 16, 2025.

After Modification No. 3, to the PTS under the CRADA and the anticipated Modification No. 4 to the PTS under the SPPA, total cash payments from the Company to BEA under both Agreements are estimated at approximately $6.5 million (excluding project contingencies) on a cost reimbursable basis over the performance periods under the initial releases.

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 (RATEN ICN) 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. On July 2, 2024, we issued a change order adding a new task to the remaining scope of this engineering study. Following the change order, the Company paid a total fee of approximately $0.2 million for this engineering study, which was completed in 2024. We anticipate performing additional studies with RATEN ICN.

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. The TAMU study is expected to be completed in 2026. In mid-2023, TAMU was awarded $1.0 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 (ATFs) 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. In October 2024, MIT presented a technical paper with preliminary safety evaluation results at the TopFuel 2024 Conference in Grenoble, France. According to MIT, the results have shown promising safety and performance benefits for Lightbridge Fuel™. Compared to conventional fuel, Lightbridge Fuel™ demonstrated improved thermal-hydraulic margins, lower operating temperatures, and greater potential for power uprates, which contributes to enhancing reactor economics.

We do not have any performance 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:

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 process 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.

The above future steps describe our current proposed approach to deploying Lightbridge Fuel™ in CANDU and/or U.S. PWR 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 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. Lightbridge aims to engage early with relevant nuclear regulators to inform our future R&D activities.

Fuel Development Strategy

We believe our metallic fuel can be used in different types of water-cooled commercial power reactors, such as pressurized water reactors (PWRs), boiling-water reactors (BWRs), Russian-designed water-cooled, water-moderated energetic reactors (VVERs), CANDUs, water-cooled SMRs, and water-cooled research reactors.

We have obtained patent validation in key countries that we believe would have a commercial market for our fuel and will continue to seek patent validation in countries that either currently operate or are expected to build and operate a large number of nuclear power reactors compatible with our fuel technology.

Below is a brief description of each key fuel development step leading up to a lead test assembly (LTA) operation in a commercial reactor.

Fuel Fabrication

In the short to medium term, we expect the development of the fabrication processes for Lightbridge Fuel™ to be performed utilizing existing facilities and equipment within the DOE national laboratory complex and other facilities. Discussions are currently ongoing with the INL to perform process development activities and establish the capability to manufacture development quantities of fuel rods for irradiation testing.

Fabrication of LTAs will require a dedicated pilot-scale fuel fabrication facility. We estimate the major scopes of work to establish a manufacturing capability for LTR/LTA could take several years to complete and require tens of millions of dollars in capital expenditures. Expanding that pilot-scale fuel fabrication facility to batch reload quantities would require a substantial additional capital investment in the manufacturing facility and equipment (in the order of hundreds of millions of dollars). These estimates assume sufficient funding availability and that the project receives prioritization by the DOE and U.S. Nuclear Regulatory Commission (NRC) to facilitate access to the required quantities of the HALEU material and timely regulatory licensing of such a facility.

Nuclear Material/Coupon Sample Irradiation Test

Lightbridge’s irradiation testing program includes coupon irradiation of material samples of its uranium-zirconium fuel alloy which will allow characterization of the underlying thermophysical behavior of the fuel alloy. This project is currently underway with INL, and we expect insertion of fuel material coupons in the ATR in 2026 and completion of irradiation testing to full burnup and post-irradiation examination of the fuel material coupons in approximately several years thereafter. The data obtained from this program will be a fundamental component of Lightbridge’s accelerated fuel qualification approach described below as it will be used to inform and develop the physics-based models and simulations of the fuel rod behaviors.

Loop Irradiation Testing

The purpose of the loop irradiation testing of Lightbridge’s metallic fuel rods is to demonstrate the performance and behavior of the fuel rods under prototypic commercial reactor operating conditions typical of PWRs at a power level and burnup accumulation higher than the fuel would experience in normal operation in a commercial power plant. This will provide a physical demonstration of the capabilities of the fuel rods to ensure reactor safety. Such testing is expected to provide information of sufficient detail to validate the performance of individual fuel rods such that their behavior in normal operating conditions of a NRC-regulated nuclear power plant would be sufficiently well understood to request a license amendment from the NRC for operation of a LTA.

We plan on such a loop irradiation test to be performed in the ATR at INL. The ATR currently has limited irradiation loop test facilities; however, the planned installation of the new so-called “I-loops” in the coming years will increase the loop irradiation capacity of ATR for performing tests on Lightbridge Fuel™ in the desired test conditions.

We expect the performance of the irradiation test to take three years of in-reactor time plus an additional one year for post-irradiation examination, wherein analysis of the fuel rod performance and behavior is performed, from the time when the additional test loop becomes available.

Preparation for Lead Test Assembly Operation

Insertion of a LTA with Lightbridge’s fuel rods in a nuclear power plant requires the power plant owner to obtain approval from the NRC based on a safety evaluation and justification that the LTA will not be detrimental to the plant’s licensed operations. This justification must address numerous technical areas (e.g., neutronics design, mechanical design, thermal hydraulic design, materials science, reactor operations, etc.) and include considerations of the performance of the LTA itself as well as its interaction with other fuel assemblies in the reactor core which may be impacted by the presence of the LTA. The safety evaluation must result in confirmation that the plant’s ability to ensure plant worker and public safety is not compromised due to the operation of the LTA. This safety justification will require cooperation between Lightbridge, the fuel manufacturer, and the power plant owner.

With historical approaches, the development and qualification of a nuclear fuel system can take 20-30 years as the approach has been driven largely by a cycle of physical testing and design changes based on the results of those physical tests. Computer modeling and simulation has increasingly been used in support of fuel qualification efforts, but the cyclical approach continues to be the default methodology.

Advanced nuclear fuel developers are now taking an approach that leverages significant improvements in computational capability in a methodology referred to as Accelerated Fuel Qualification (AFQ). The AFQ approach combines physics-informed modeling and simulation coupled with targeted physical testing such that the overall fuel qualification effort could be significantly reduced in terms of cost and time. Lightbridge intends to leverage the AFQ methodologies to qualify its advanced fuels.

Along with leveraging the AFQ approach, uranium-zirconium fuel technology has the benefits of being previously demonstrated in operating icebreaker reactors and several aspects of the performance of the fuel have been demonstrated. This enables Lightbridge to begin designing a LTA and developing the necessary computer models of the fuel behavior, prior to obtaining the results of the loop irradiation testing of the fuel rod.

Along with the irradiation testing and computer simulations, some physical testing of the fuel assembly design will be required. Lightbridge anticipates that such ‘out-of-pile’ testing to justify the LTA performance may take four years.

We expect that the LTA design effort, development of computer modeling and simulation capabilities, and performance of the LTA safety justification may take eight years. The NRC’s review and approval of the license amendment for LTA insertion is expected to require two years after the license amendment is submitted.

Based on these activities and time estimates, Lightbridge expects to have LTAs of its fuel ready for insertion in a commercial reactor in the 2030s.

The above fuel development strategy is based on the following key assumptions:

Operations Review

Consolidated Results of Operations

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

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.

General and administrative expenses increased by $1.4 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase of $1.4 million was primarily due to an increase in employee compensation and employee benefits of $0.3 million, an increase in consulting fees and professional fees of $0.3 million, an increase in stock-based compensation of $0.6 million, an increase in IT expenses of $0.1 million, an increase in travel and recruitment expenses of $0.1 million, and an increase in patent expense of $0.1 million, partially offset by a decrease in insurance expense of $0.1 million.

Total stock-based compensation included in general and administrative expenses was $1.7 million and $1.1 million for the years ended December 31, 2024 and 2023, respectively.

Research and Development (R&D)

R&D expenses consist primarily of costs associated with our CRADA and SPPA agreements with INL, employee compensation and related fringe benefits including stock-based compensation and other research and development costs for the development of our Lightbridge Fuel™.

The following table presents the total R&D expenses for the year ended December 31, 2024 and 2023 (rounded to millions):

R&D expenses increased by $2.7 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023 due to the increase in R&D activities related to the development of Lightbridge Fuel™. This increase primarily consisted of an increase in INL project labor costs of $0.9 million, an increase of outside R&D costs of $0.4 million, an increase in R&D employees and allocated employee compensation and employee benefits of $1.0 million, an increase in quality assurance expenses of $0.1 million, an increase in R&D modeling computer hardware and software and travel expenses of $0.2 million and an increase in stock-based compensation expenses of $0.1 million.

Total stock-based compensation included in research and development expenses was $0.3 million and $0.2 million for the years ended December 31, 2024 and 2023, respectively.

We currently anticipate investing approximately $17.0 million in the R&D of our nuclear fuel for 2025. Meeting this future budgeted R&D spending for the next 12 months is uncertain and actual spending may differ.

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 $0.2 million due to higher cash balances 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 year ended December 31, 2024, as compared to the year ended December 31, 2023.

Provision for Income Taxes

We incurred a pre-tax net loss for both 2024 and 2023. We reviewed all sources of income for the purpose of recognizing the deferred tax assets and concluded a full valuation allowance for 2024 and 2023 was necessary. Therefore, we did not have a provision for taxes for both years ended December 31, 2024 and 2023. Prior period ownership changes, coupled with the Company’s projections of no taxable income for the foreseeable future, will substantially limit any future benefit to be derived from our NOLs.

See Note 7. Income Taxes of the Notes to our Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for information regarding our income taxes and the limitations on the utilization and amount of our net operating loss carry-forwards.

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. 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 December 31, 2024, we had cash and cash equivalents of $40.0 million, as compared to $28.6 million at December 31, 2023, an increase of $11.4 million. We raised net proceeds of $21.4 million from the sale of approximately 4.5 million shares of common stock during the year ended December 31, 2024. Our net cash used in operating activities for the year ended December 31, 2024, was $9.5 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 at-the-market (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 R&D development stage of our nuclear fuel.

To complete the development and commercial deployment of Lightbridge Fuel™ we currently estimate a total R&D, including Capital Expenditures (CAPEX) investment in the range of $200 million to $300 million or approximately $20.0 million per year over the next 10-15 years. We plan to raise this capital through a combination of strategic and financial investors, as well as potentially receiving grants from the DOE and/or other government sources.

Sufficient funding is needed to continue our nuclear fuel development project and to achieve our future R&D milestones leading to the commercialization of our nuclear fuel. The actual amount of cash we will need to reach the commercialization of our nuclear fuel 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 other costs to commercialize our nuclear fuel. Accordingly, there is high potential for budget variances in the current above cost projections and fuel development timelines of our current planned operations over the above cited fuel development period. Currently, we plan to continue to utilize our ATM to finance our future R&D and general and administrative activities.

We will also 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.

We have approximately $48.4 million of working capital as of the date of this filing. We currently project a negative cash flow from our operations from both our general and administrative and R&D expenses, resulting in total expected expenditures of approximately $25.0 million for 2025. Our R&D expenses are expected to increase over the next 12 months based on our fuel development activities. Our cash balance at December 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. We may also be unsuccessful in raising the capital necessary in the future to continue the R&D development of our fuel. 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 to further develop our fuel, resulting in higher negative monthly cash flows from operations in future periods.

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. We filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (SEC) on March 29, 2024, registering the sale of up to $75.0 million of the Company’s securities that was declared effective on April 19, 2024. On May 10, 2024, we filed a prospectus supplement, which was further supplemented on July 19, 2024 and August 9, 2024 pursuant to which we may offer and sell shares of common stock having an aggregate offering price of up to $12.6 million from time to time, through the ATM. On November 22, 2024, we filed a prospectus supplement pursuant to which we may offer and sell shares of common stock having an aggregate offering price of up to $45.0 million from time to time through the ATM.

Although we expect this ATM facility to continue to be our primary source of working capital for the Company in 2025, there is no assurance that an ATM financing arrangement will be available to us in the future. See Note 8. Stockholders’ Equity and Stock-Based Compensation of the Notes to our Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K 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

Currently, our primary 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:

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 8. Stockholders’ Equity and Stock-Based Compensation of the Notes to our Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for information regarding our prior equity financings.

Cash Flow

The following table provides detailed information about our net cash flows for the years ended December 31, 2024 and 2023 (amounts reflected in millions):

Operating Activities

Cash used in operating activities increased by $3.0 million in 2024 as compared to 2023. This increase was primarily due to increased spending on R&D, general and administrative expenses and changes in working capital, which included an increase in prepaid assets of $0.1 million, and was partially offset by an increase in accounts payable and accrued liabilities of $0.2 million.

Investing Activities

Net cash used in our investing activities was insignificant for the years ended December 31, 2024 and 2023.

Financing Activities

Cash provided by financing activities increased by $14.7 million. 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 in the year ended December 31, 2024 of $15.0 million, partially offset by an increase in net share settlement of equity awards for the payment of withholding taxes of $0.3 million.

Cash provided by our ATM facility was $21.4 million (sale of approximately 4.5 million common shares) and $6.4 million (sale of approximately 1.5 million common shares) for the years 2024 and 2023, respectively. Cash used during the years 2024 and 2023 related to the payment of withholding taxes on the net share settlement of equity awards was $0.5 million and $0.2 million, respectively.

See Note 12. Subsequent Events to our Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for information regarding cash provided by our ATM facility after December 31, 2024.

Project Task Statements - INL

On December 9, 2022, we entered into initial project task statements with BEA, the operating contractor of INL, in collaboration with the DOE, which statements set forth the initial scopes of work and funding commitments under the umbrella agreements, each dated September 27, 2022, between the Company and BEA. At December 31, 2024, we had approximately $1.7 million in project task statements to BEA relating to the research and development being conducted under the SPPA and CRADA at INL. Performance of work under these agreements may be terminated at any time by either party, without any liability, after the effective date of termination, upon giving a thirty-day written notice under the SPPA and a sixty-day written notice under the CRADA, to the other party. In the event of termination, the Company shall be responsible for BEA’s costs (including the closeout costs), through the effective date of termination, but in no event shall the Company’s cost responsibility exceed the total estimated cost stated in each PTS and any subsequent modification to the PTS.

Operating Leases

The Company leased office space for a 12-month term from January 1, 2025 through December 31, 2025 with a monthly payment of approximately $8,000. The future minimum lease payments required under the non-cancellable operating leases for 2025 total approximately $0.1 million.

Critical Accounting Estimates

The preparation of consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Our significant accounting policies are more fully described in Note 1. Basis of Presentation, Summary of Significant Accounting Policies, and Nature of Operations, in the Notes to the Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K. There were no critical accounting estimates at December 31, 2024 and 2023.

Recent Accounting Standards and Pronouncements

Refer to Note 1. Basis of Presentation, Summary of Significant Accounting Policies, and Nature of Operations of the Notes to our Consolidated Financial Statements in Part II. Item 8. Financial Statements and Supplementary Data of this Form 10-K for a discussion of recent accounting standards and pronouncements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is intended to help the reader understand Lightbridge Corporation, our operations, and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes thereto, which are contained in Part II. Item 8. Financial Statements and Supplementary Data of this report.

This MD&A consists of the following sections:

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 events, including those set forth under “Forward-Looking Statements” and Part I. Item 1A. Risk Factors.

Overview of Our Business and Recent Developments

Our Business

Our Company’s goal is to impact in a meaningful way the world’s climate and energy problems. We are developing and plan to commercialize innovative, proprietary nuclear fuel designs, which we expect will significantly enhance the nuclear power industry’s economics due to higher power output and longer fuel cycles, and we also expect the fuel will provide improved safety margins. We are an early-stage technology company in the product development phase and are pre-revenue. Our ongoing operations are currently being financed primarily by raising new equity capital.

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 to construct 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 only HALEU production plant in the world outside of Russia. The FEED study will 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, will lead the study. The work is expected to be completed in 2024 at a fixed price of approximately $0.5 million.

Engineering Study of Lightbridge Fuel™ for use in Canada Deuterium Uranium (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 will cover 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 work is expected to be completed in 2024 at a fixed price of approximately $0.2 million.

HALEU Consortium Membership

To support establishment of domestic HALEU infrastructure, the DOE announced on December 7, 2022 the creation of a HALEU Consortium. According to the DOE, the purposes of the HALEU Consortium include: (i) providing the Secretary of Energy HALEU demand estimates for domestic commercial use, (ii) purchasing HALEU made available to members for commercial use under the program, (iii) carrying out demonstration projects using HALEU under the program, and (iv) identifying actionable opportunities to improve the reliability of the HALEU supply chain. On December 15, 2022, the Company submitted a formal request to the DOE to join the HALEU Consortium to mitigate HALEU supply risk. On January 12, 2023, the Company received written confirmation from the DOE of Lightbridge’s membership in the HALEU Consortium. HALEU is a key component necessary for the fabrication and operation of Lightbridge Fuel™ in light water reactors.

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 (SPP) 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, which will be obtained during post-irradiation examination work to be released under a future Project Task Statement, will support fuel performance modeling and regulatory licensing efforts for commercial deployment of Lightbridge Fuel™.

We plan to negotiate subsequent phases of work under the two umbrella agreements that have not yet been released that 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. Our next step is to cast additional ingots using depleted uranium and zirconium alloy materials and conduct initial extrusions from those ingots in the next several months at INL.

Nuclear Energy University Program Awards

We are working with Texas A&M University (TAMU), NuScale Power, and Structural Integrity Associates on a 3-year study 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 small modular reactors (SMRs) simulated normal and off-normal conditions.

We previously announced our 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 performance obligations with the collaboration teams working on the above-mentioned projects and will not receive any revenue or record any benefits from these awards.

Fuel Development Strategy

We believe our metallic fuel can be used in different types of water-cooled commercial power reactors, such as pressurized water reactors (PWRs), boiling-water reactors (BWRs), Russian-designed water-cooled, water-moderated energetic reactors (VVERs), CANDUs, water-cooled SMRs, and water-cooled research reactors.

We have obtained patent validation in key countries (in our judgement) and will continue to seek patent validation in countries that either currently operate or are expected to build and operate a large number of nuclear power reactors compatible with our fuel technology.

Below is a brief description of each key fuel development step leading up to a lead test assembly (LTA) operation in a commercial reactor.

a. Fuel Fabrication

In the short to medium term, we expect the development of the fabrication processes for Lightbridge Fuel™ to be performed utilizing existing facilities and equipment within the DOE national laboratory complex and other facilities. Discussions are currently ongoing with the INL to perform process development activities and establish the capability to manufacture development quantities of fuel rods for irradiation testing.

Fabrication of LTAs will require a dedicated pilot-scale fuel fabrication facility. We estimate the major scopes of work to establish a manufacturing capability for LTAs would take 5-8 years to complete. In December 2023, to help us identify infrastructure and regulatory licensing requirements as well as better define cost and schedule estimates for a LPFFF, we entered into a contract with Centrus Energy to conduct a FEED Study for the LPFFF. Expanding that pilot-scale fuel fabrication facility from LTA capability to batch reload quantities would require a substantial additional capital investment in the manufacturing facility and equipment. These estimates assume sufficient funding availability and that the project receives prioritization by the DOE and US Nuclear Regulatory Commission (NRC) to facilitate access to the required quantities of the HALEU material and timely regulatory licensing of such a facility.

b. Nuclear Material/Coupon Sample Irradiation Test

Lightbridge’s irradiation testing program includes coupon irradiation of material samples of its uranium-zirconium fuel alloy which will allow characterization of the underlying thermophysical behavior of the fuel alloy. This project is currently underway, and we expect insertion of fuel material coupons in the ATR in 2025 and completion of irradiation testing to full burnup and post-irradiation examination of the fuel material coupons in approximately four years thereafter. The data obtained from this program will be a fundamental component of Lightbridge’s accelerated fuel qualification approach described below as it will be used to inform and develop the physics-based models and simulations of the fuel rod behaviors.

c. Loop Irradiation Testing

The purpose of the loop irradiation testing of Lightbridge’s metallic fuel rods is to demonstrate the performance and behavior of the fuel rods under prototypic commercial reactor operating conditions typical of PWRs at a power level and burnup accumulation higher than the fuel would experience in normal operation in a commercial power plant. This will provide a physical demonstration of the capabilities of the fuel rods in order to ensure reactor safety. Such testing is expected to provide information of sufficient detail to validate the performance of individual fuel rods such that their behavior in normal operating conditions of a NRC-regulated nuclear power plant would be sufficiently well understood to request a license amendment from the NRC for operation of a LTA.

We expect execution of such a loop irradiation test to be performed in the ATR at INL. The ATR currently has limited irradiation loop test facilities; however, installation of the new so-called “I-loops” will increase the loop irradiation capacity of ATR for performing tests on Lightbridge Fuel™ in the desired test conditions.

We expect the performance of the irradiation test to take three years of in-reactor time plus an additional one year for post-irradiation examination, wherein analysis of the fuel rod performance and behavior is performed, from the time when the additional test loop becomes available.

d. Preparation for Lead Test Assembly Operation

Insertion of an LTA with Lightbridge’s fuel rods in a nuclear power plant requires the power plant owner to obtain approval from the NRC based on a safety evaluation and justification that the LTA will not be detrimental to the plant’s licensed operations. This justification must address numerous technical areas (e.g., neutronics design, mechanical design, thermal hydraulic design, materials science, reactor operations, etc.) and include considerations of the performance of the LTA itself as well as its interaction with other fuel assemblies in the reactor core which may be impacted by the presence of the LTA. The safety evaluation must result in confirmation that the plant’s ability to ensure plant worker and public safety is not compromised due to the operation of the LTA. This safety justification will require cooperation between Lightbridge, the fuel manufacturer, and the power plant owner.

With historical approaches, the development and qualification of a nuclear fuel system can take 20-30 years as the approach has been driven largely by a cycle of physical testing and design changes based on the results of those physical tests. Computer modeling and simulation has increasingly been used in support of fuel qualification efforts, but the cyclical approach continues to be the default methodology.

Advanced nuclear fuel developers are now taking an approach that leverages significant improvements in computational capability in a methodology referred to as Accelerated Fuel Qualification (AFQ). The AFQ approach combines physics-informed modeling and simulation coupled with targeted physical testing such that the overall fuel qualification effort could be significantly reduced in terms of cost and time. Lightbridge intends to leverage the AFQ methodologies to qualify its advanced fuels.

Along with leveraging the AFQ approach, uranium-zirconium fuel technology has the benefits of being previously demonstrated in operating icebreaker reactors and several aspects of the performance of the fuel have been demonstrated. This enables Lightbridge to begin designing an LTA and developing the necessary computer models of the fuel behavior, prior to obtaining the results of the loop irradiation testing of the fuel rod.

Along with the irradiation testing and computer simulations, some physical testing of the fuel assembly design will be required. Lightbridge anticipates that such ‘out-of-pile’ testing to justify the LTA performance will take approximately four years.

We expect that the LTA design effort, development of computer modeling and simulation capabilities, and performance of the LTA safety justification will take eight years. The NRC’s review and approval of the license amendment for LTA insertion is expected to require two years after the license amendment is submitted.

Based on these activities and time estimates, Lightbridge expects to have LTAs of its fuel ready for insertion in a commercial reactor in the 2030s.

The above fuel development strategy is based on the following key assumptions:

Operations Review

Consolidated Results of Operations

The following table presents our operating results for the years indicated (rounded to millions):

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 decreased by $0.4 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The decrease of $0.4 million was primarily due to a decrease in employee compensation and employee benefits of $0.4 million, due to the increase in the time allocation percentage of G&A labor costs to research and development expenses, a decrease in consulting expenses of $0.1 million, a decrease in insurance expense of $0.1 million, a decrease in dues and subscriptions of $0.1 million, and a decrease in promotion expenses of $0.1 million, offset by an increase in stock-based compensation of $0.4 million, which was due to the partial vesting of restricted stock awards granted in 2022.

Total stock-based compensation included in general and administrative expenses was $1.1 million for the years ended December 31, 2023 and 2022.

Research and Development (R&D)

R&D expenses consist primarily of costs associated with our CRADA and SPP agreements with INL for the research and development of our fuel, employee compensation and related fringe benefits including stock-based compensation and related allocable overhead costs for the research and development of our fuel and contributed services - research and development for the work performed under the Gateway for Accelerated Innovation in Nuclear (GAIN) vouchers.

Total R&D expenses increased by $1.2 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022 due to the increase in R&D activities related to the development of our fuel. This increase primarily consisted an increase in INL project labor costs of $0.8 million, an increase in allocated employee compensation and employee benefits of $0.4 million, an increase in consulting expenses of $0.1 million, an increase in travel expenses of $0.1 million and an increase in stock-based compensation expenses of $0.1 million. This increase was offset by a decrease of $0.3 million primarily related to the GAIN voucher work recorded as research and development expenses in 2022 that was completed in the first quarter of 2023.

We currently anticipate investing approximately $6 million to $8 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, cost 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 Operating Income

There was a decrease in other operating income of $0.4 million related to a decrease in contributed services - research and development for the year ended December 31, 2023 due to the GAIN voucher project that was completed in the first quarter of 2023. There are no outstanding GAIN vouchers. Contributed services - research and development are recorded with a charge to R&D expenses and a corresponding amount recorded to contributed services - research and development.

Other Income

There was an increase in other income of $0.8 million due to rising treasury bill 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 year ended December 31, 2023, as compared to the year ended December 31, 2022.

Provision for Income Taxes

We incurred a pre-tax net loss for both 2023 and 2022. We reviewed all sources of income for the purpose of recognizing the deferred tax assets and concluded a full valuation allowance for 2023 and 2022 was necessary. Therefore, we did not have a provision for taxes for both years ended December 31, 2023 and 2022. Prior period ownership changes, coupled with the Company’s projections of no taxable income for the foreseeable future, will substantially limit any future benefit to be derived from our NOLs.

See Note 7. Income Taxes of the Notes to our Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for information regarding our income taxes and the limitations on the utilization and amount of our net operating loss carry-forwards.

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 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 December 31, 2023, we had cash and cash equivalents of $28.6 million, as compared to $28.9 million at December 31, 2022, a decrease of $0.3 million. We raised net proceeds of $6.4 million from the sale of approximately 1.5 million shares of common stock during the year ended December 31, 2023. Our net cash used in operating activities for the year ended December 31, 2023 was $6.5 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. Therefore, 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 $28.2 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 $13.8 million for the next 12 months. Our R&D expenses are expected to increase over the next 12-15 months. Our cash balance at December 31, 2023 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 future required R&D or other expenditures 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 in the future.

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 and/or 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 ATM equity offering sales agreement, as amended, with Stifel, Nicolaus & Company, Incorporated. The Company has 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 will file another prospectus supplement with the SEC after we have either sold $17.9 million of our common stock under this prospectus supplement or are required to file a new prospectus supplement when our current S-3 shelf registration expires in April 2024. 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 8. Stockholders’ Equity and Stock-Based Compensation of the Notes to the Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for information regarding our ATM financing.

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:

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.

The following table provides detailed information about our net cash flows for the years ended December 31, 2023 and 2022 (rounded in millions):

Cash Flow

Operating Activities

Cash used in operating activities decreased by $0.2 million in 2023 as compared to 2022. The decrease was primarily due to changes in net operating assets and liabilities, which were driven by an increase in prepaid assets of $0.2 million, offset by an increase in accounts payable and accrued liabilities of $0.4 million.

Investing Activities

Net cash used in our investing activities was insignificant for the years ended December 31, 2023 and 2022.

Financing Activities

Cash provided by financing activities decreased by $4.7 million. This decrease was due to a decrease in the net proceeds received from the issuance of common stock under our at-the-market (ATM) facility in fiscal year 2023 of $4.6 million and an increase in net share settlement of equity awards for the payment of withholding taxes of $0.1 million.

Cash provided by our ATM facility was $6.4 million (sale of approximately 1.5 million common shares) and $11.0 million (sale of approximately 1.9 million common shares) for the years 2023 and 2022, respectively. Cash used during the years 2023 and 2022 related to the payment of withholding taxes on the net share settlement of equity awards was $0.2 million and $0.1 million, respectively.

Contractual Obligations and Commitments

On December 9, 2022, we entered into an initial project task statements with BEA, the operating contractor of INL, in collaboration with the DOE, which statements set forth the initial scopes of work and funding commitments under the umbrella agreements, each dated September 27, 2022, between the Company and BEA. At December 31, 2023, we had approximately $2.9 million in outstanding project task statement obligations to BEA relating to the research and development being conducted under the SPP and CRADA at INL. Performance of work under these agreements may be terminated at any time by either party, without any liability, after the effective date of termination, upon giving a thirty-day written notice under the SPP and a sixty-day written notice under the CRADA, to the other party. In the event of termination, the Company shall be responsible for BEA’s costs (including the closeout costs), through the effective date of termination, but in no event shall the Company’s cost responsibility exceed the total estimated cost stated in each PTS and any subsequent modification to the PTS.

Engineering Study of Lightbridge Fuel™ for use in CANDU reactors

On October 16, 2023, the Company engaged RATEN ICN in Romania to perform an engineering study to assess the compatibility and suitability of Lightbridge Fuel™ for use in CANDU reactors. As of December 31, 2023, the Company had approximately $0.2 million in outstanding project commitments to RATEN ICN.

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

On December 5, 2023, we entered into an agreement with Centrus Energy to conduct a FEED study to add a dedicated LPFF at the American Centrifuge Plant in Piketon, Ohio. The work is expected to be completed in 2024 at a cost and with a remaining contractual obligation of approximately $0.5 million at December 31, 2023.

Operating Leases

The Company leased office space for a 12-month term from January 1, 2024 through December 31, 2024 with a monthly payment of approximately $8,000. The future minimum lease payments required under the non-cancellable operating leases for 2024 total approximately $0.1 million.

Critical Accounting Estimates

The preparation of consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Our significant accounting policies are more fully described in Note 1. Basis of Presentation, Summary of Significant Accounting Policies, and Nature of Operations, in the Notes to the Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K. There were no critical accounting estimates at December 31, 2023 and 2022.

Recent Accounting Standards and Pronouncements

Refer to Note 1. Basis of Presentation, Summary of Significant Accounting Policies, and Nature of Operations of the Notes to our Consolidated Financial Statements in Part II. Item 8. Financial Statements and Supplementary Data of this Form 10-K for a discussion of recent accounting standards and pronouncements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is intended to help the reader understand Lightbridge Corporation, our operations, and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes thereto, which are contained in Part II. Item 8. Financial Statements and Supplementary Data, of this report. This discussion contains forward-looking statements that are based on our management’s current expectations, estimates, and projections for our business, which are subject to a number of risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Forward-Looking Statements” and Part I. Item 1A. Risk Factors.

This MD&A consists of the following sections:

As discussed in more detail under “Forward-Looking Statements” immediately 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 events.

Overview of Our Business and Recent Developments

Our Business

Our Company’s goal is to impact in a meaningful way the world’s climate and energy problems. We are developing and plan to commercialize innovative, proprietary nuclear fuel designs, which we expect will significantly enhance the nuclear power industry’s economics due to higher power output and longer fuel cycles, and we also expect the fuel will provide improved safety margins. We are an early-stage technology company in the product development phase and are pre-revenue. Our ongoing operations are currently being financed primarily by raising new equity capital.

Recent Developments

In the second half of 2022, we entered into agreements with Idaho National Laboratory (INL), in collaboration with the United States Department of Energy (DOE) to support the development of Lightbridge Fuel™. The framework agreements use an innovative structure and consist of an “umbrella” Strategic Partnership Project Agreement (SPP) and an “umbrella” Cooperative Research and Development Agreement (CRADA), each with Battelle Energy Alliance, LLC (BEA), the DOE’s operating contractor for INL, 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 irradiation testing in the Advanced Test Reactor (ATR) of our fuel material coupons, using enriched uranium supplied by the DOE. 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 the commercial deployment of Lightbridge Fuel™. We anticipate that subsequent phases of work under the two umbrella agreements that have not yet been released will include post-irradiation examination of the irradiated fuel material coupons, loop radiation testing in the ATR, and post-irradiation examination of one or more uranium-zirconium fuel rodlets, as well as transient experiments at Transient Reactor Test Facility (TREAT) at INL.

The DOE’s Office of Nuclear Energy has established the Gateway for Accelerated Innovation in Nuclear (GAIN) program to provide the nuclear community with access to the technical, regulatory, and financial support necessary to expedite moving new or advanced nuclear technologies toward commercialization, while ensuring the continued safe, reliable, and economic operation of the existing nuclear reactor fleet.

We were awarded our first GAIN voucher in 2019 for the experiment design for irradiation of fuel material coupons of Lightbridge metallic fuel in the ATR at INL. On April 22, 2020, we entered into a CRADA with BEA, the DOE’s operating contractor at INL. The project commenced in the second quarter of 2020 and was originally expected to be completed in the second quarter of 2021. However, because of project staffing issues at INL related to the laboratory’s COVID-19 restrictions and U.S. export control matters, the project was completed during the third quarter of 2021. The total project amount recorded as contributed services – research and development was approximately $0.5 million. This experiment design forms the basis of our current and future efforts with the INL.

The DOE awarded us a second voucher from the GAIN program to support development of Lightbridge Fuel™ in collaboration with Pacific Northwest National Laboratory (PNNL) on March 25, 2021. The scope of the project is to demonstrate Lightbridge’s nuclear fuel casting process using depleted uranium, a key step in the manufacture of Lightbridge Fuel™. On July 14, 2021, the Company executed a CRADA with the Battelle Memorial Institute, Pacific Northwest Division, the operating contractor of the PNNL, in collaboration with the DOE. The project commenced in the third quarter of 2021. In December 2022, PNNL completed a contract extension with the Company for one month to complete the final report related to this PNNL GAIN voucher. The period of performance was extended to January 31, 2023. The work under this contract was completed in 2022, and a final report was issued by PNNL on January 31, 2023. The total project value was $0.7 million, with three-quarters of this amount provided by the DOE for the scope performed by PNNL. Under this GAIN voucher, we worked with PNNL to develop a reliable and repeatable casting process utilizing its existing equipment. As part of the scope, several castings were performed and the cast ingots analyzed. In an iterative process, the casting methodology was modified based on the characterization results as part of process demonstration to achieve acceptable results with PNNL’s existing equipment. The results of this work will help to inform a final process suitable to produce fuel material coupons for our upcoming irradiation tests.

In June 2022, Lightbridge Fuel™ was selected to participate in a study led by the Massachusetts Institute of Technology (MIT to investigate the performance and economics of accident tolerant fuels for light water cooled small modular reactors (SMRs). Among other objectives, the project will simulate the fuel and safety performance of Lightbridge Fuel™ in an SMR designed by NuScale Power and provide a scoping analysis of longer-term advanced fuel forms to improve the safety and economics of SMRs. The DOE’s Nuclear Energy University Program awarded $800,000 to MIT with the goal of bringing collaborative teams together to solve complex problems to advance nuclear technology and understanding.

We have incurred net losses and negative cash flows from operations and expect this to continue for the foreseeable future. In 2023, we will continue to evaluate spending with the overall goal of commercializing our nuclear fuel with the lowest research and development (R&D) cost, in order to maximize our shareholders’ value. Our only source of funding in 2022 and 2021 was our at-the-market (ATM) financing arrangement with Stifel, Nicolaus & Company. Although we expect this ATM facility to continue to be a significant source of working capital for the Company in 2023, there is no assurance that an ATM financing arrangement will be available to us in the future (see liquidity outlook section below). Please also see Note 8. Stockholders’ Equity and Stock-Based Compensation of the Notes to the Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for information regarding our ATM and prior financings.

Fuel Development Strategy

We believe our metallic fuel can be used in different types of water-cooled commercial power reactors, such as pressurized water reactors (PWRs), boiling-water reactors (BWRs), Russian-designed water-cooled, water-moderated energetic reactors (VVERs), CANDUs, water-cooled SMRs, and water-cooled research reactors.

We have obtained patent validation in key countries (in our judgement) and will continue to seek patent validation in countries that either currently operate or are expected to build and operate a large number of nuclear power reactors compatible with our fuel technology.

Below is a brief description of each key fuel development step leading up to a lead test assembly (LTA) operation in a commercial reactor.

a. Fuel Fabrication

In the short to medium term, we expect the development of the fabrication processes for Lightbridge Fuel™ to be performed utilizing existing facilities and equipment within the DOE national laboratory complex and other facilities. Discussions are currently ongoing with the INL and PNNL to perform process development activities and establish the capability to manufacture development quantities of fuel rods for irradiation testing.

Fabrication of LTAs will require a dedicated pilot-scale fuel fabrication facility. We estimate the major scopes of work to establish a manufacturing capability for LTAs would take 5-8 years to complete. Expanding that pilot-scale fuel fabrication facility from LTA capability to batch reload quantities would require a substantial additional capital investment in the manufacturing facility and equipment. These estimates assume sufficient funding availability and that the project receives prioritization by the DOE and US Nuclear Regulatory Commission (NRC).

b. Nuclear Material/Coupon Sample Irradiation Test

Lightbridge’s irradiation testing program includes coupon irradiation of material samples of its uranium-zirconium fuel alloy which will allow characterization of the underlying thermophysical behavior of the fuel alloy. This project is currently underway, and we expect insertion of fuel material coupons in the ATR in 2025 and completion of irradiation testing to full burnup and post-irradiation examination of the fuel material coupons in approximately four years thereafter. The data obtained from this program will be a fundamental component of Lightbridge’s accelerated fuel qualification approach described below as it will be used to inform and develop the physics-based models and simulations of the fuel rod behaviors.

c. Loop Irradiation Testing

The purpose of the loop irradiation testing of Lightbridge’s metallic fuel rod is to demonstrate the performance and behavior of the fuel rod under prototypic commercial reactor operating conditions typical of PWRs at a power level and burnup accumulation higher than the fuel would experience in normal operation in a commercial power plant. This will provide a physical demonstration of the capabilities of the fuel rod in order to ensure reactor safety. Such testing is expected to provide information of sufficient detail to validate the performance of individual fuel rods such that their behavior in normal operating conditions of a regulated nuclear power plant would be sufficiently well understood to request a license amendment from the NRC for operation of a lead test assembly.

We expect execution of such a loop irradiation test to be performed in the ATR at INL. The ATR currently has limited irradiation loop test facilities and the performance of the above-mentioned test for Lightbridge Fuel™ may require installation of a new test loop with increased heat removal capability to enable the desired test conditions.

We expect the performance of the irradiation test to take three years of in-reactor time plus an additional one year for post-irradiation examination (PIE), wherein analysis of the fuel rod performance and behavior is performed, from the time when the additional test loop becomes available.

d. Preparation for Lead Test Assembly Operation

Insertion of an LTA with Lightbridge’s fuel rods in a nuclear power plant requires the power plant owner to obtain approval from the NRC based on a safety evaluation and justification that the LTA will not be detrimental to the plant’s licensed operations. This justification must address numerous technical areas (e.g. neutronics design, mechanical design, thermal hydraulic design, materials science, reactor operations, etc.) and include considerations of the performance of the LTA itself as well as its interaction with other fuel assemblies in the reactor core which may be impacted by the presence of the LTA. The safety evaluation must result in confirmation that the plant’s ability to ensure plant worker and public safety is not compromised due to the operation of the LTA. This safety justification will require cooperation between Lightbridge, the fuel manufacturer, and the power plant owner.

With historical approaches, the development and qualification of a nuclear fuel system can take 20-30 years as the approach has been driven largely by a cycle of physical testing and design changes based on the results of those physical tests. Computer modeling and simulation has increasingly been used in support of fuel qualification efforts, but the cyclical approach continues to be the default methodology.

In order to shorten the timeframe for fuel qualification, advanced nuclear fuel developers are now taking an approach that leverages significant improvements in computational capability in a methodology referred to as Accelerated Fuel Qualification (AFQ). The AFQ approach combines physics-informed modeling and simulation coupled with targeted physical testing such that the overall fuel qualification effort is reduced in terms of cost and time, with a goal of fuel qualification taking approximately 15 years. Lightbridge intends to leverage the AFQ methodologies to qualify its advanced fuels.

Along with leveraging the AFQ approach, uranium-zirconium (U-Zr) fuel technology has the benefits of being previously demonstrated in operating icebreaker reactors and several aspects of the performance of the fuel have been demonstrated. This enables Lightbridge to begin designing an LTA and developing the necessary computer models of the fuel behavior, prior to obtaining the results of the loop irradiation testing of the fuel rod.

Along with the irradiation testing and computer simulations, some physical testing of the fuel assembly design will be required. Lightbridge anticipates that such ‘out-of-pile’ testing to justify the LTA performance will take approximately four years.

We expect that the LTA design effort, development of computer modeling and simulation capabilities, and performance of the LTA safety justification will take 8 years. The NRC review and approval of the license amendment for LTA insertion is expected to require two years after the license amendment is submitted.

Based on these activities and time estimates, Lightbridge expects to have LTAs of its fuel ready for insertion in a commercial reactor in the 2030s.

The above fuel development strategy is based on the following key assumptions:

Operations Review

Consolidated Results of Operations

The following table presents our operating results as a percentage of revenues for the years indicated (rounded to millions):

Operating Expenses

General and Administrative Expenses

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

Total general and administrative expenses increased by $0.4 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021. This increase was primarily due an increase in directors’ fees of $0.2 million due to the increase of the number of board members, an increase in dues and subscriptions of $0.1 million, increase in patent expenses of $0.2 million and an increase in insurance expense, promotion, and travel expenses of $0.3 million. These increases were offset by a decrease in professional fees of $0.4 million relating to fees incurred in connection with the arbitration matter that was settled in 2021, that were not repeated during the year ended December 31, 2022.

Total stock-based compensation included in general and administrative expenses was $0.8 million for the years ended December 31, 2022 and 2021.

Research and Development

Research and development expenses consist primarily of compensation and related fringe benefits including stock-based compensation and related allocable overhead costs for the research and development of our fuel and contributed services - research and development for the R&D work performed under the GAIN vouchers.

Total R&D expenses decreased by $0.7 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021. This decrease was primarily due to a decrease in outside R&D expenses of $0.3 million, a decrease in allocated employee compensation and employee benefits of $0.1 million and a decrease in other research and development expenses of $0.3 million.

We currently expect to invest a total of approximately $6.5 million in the research and development of our nuclear fuel over the next 12 to 15 months.

Due to the nature of our R&D expenditures, cost and schedule estimates are inherently uncertain and can vary significantly as new information and the outcome of these R&D activities become available. 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 Operating Income

Total other operating income decreased $0.2 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021. There was a decrease of $0.1 million in the distribution from joint venture due to the final cash distribution from the dissolved Enfission joint venture that occurred in 2021. There was contributed services - research and development from the GAIN program of $0.4 million and $0.5 million for the years ended December 31, 2022 and 2021, respectively, with a charge to R&D expenses and a corresponding amount recorded to contributed services - research and development.

Other Income

There was an increase in other income of $0.2 million due to an increase in interest income generated from the interest earned from the purchase of treasury bills and from our bank savings account for the year ended December 31, 2022, as compared to the year ended December 31, 2021.

Provision for Income Taxes

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss (NOL) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company has evaluated the impact of the CARES Act and does not expect that the NOL carryback provision of the CARES Act will result in a material cash benefit. We incurred a pre-tax net loss for both 2022 and 2021. We reviewed all sources of income for purposes of recognizing the deferred tax assets and concluded a full valuation allowance for 2022 and 2021 was necessary. Therefore, we did not have a provision for taxes for both years ended December 31, 2022 and 2021. Prior period ownership changes, coupled with the Company’s projections of taxable income for the foreseeable future, will substantially limit any future benefit to be derived from our NOLs.

See Note 7. Income Taxes of the Notes to our Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for information regarding our income taxes and the limitations on the utilization and amount of our net operating loss carry-forwards.

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 are currently projected to be an average of $10 million of outside R&D expenditures per year over the next 10-15 years. 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, will require us to receive government support in the future.

At December 31, 2022, we had cash and cash equivalents of $28.9 million, as compared to $24.7 million at December 31, 2021, an increase of $4.2 million. We raised $11.0 million from the sale of approximately 1.9 million shares of common stock during the year ended December 31, 2022. Our net cash used in operating activities for the year ended December 31, 2022 was $6.7 million and our cash flow projections indicate that we will have continued negative cash flows for the foreseeable future. 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 $28 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, for total expected expenditures of $13.1 million to $15.7 million for the next 12 to 15 months, respectively. Our R&D expenses are expected to increase over the next 12-15 months. Our cash balance at December 31, 2022 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 future required R&D or other expenditures in the future. Once other anticipated agreements are finalized or other future R&D agreements are entered into and the future R&D costs are known, we expect to forecast a significantly higher level of future required R&D expenses and higher negative monthly cash flows from operations in the future.

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 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 (as defined below) to finance our future R&D and corporate activities.

We will also need to receive substantial U.S. government support in the form of grants throughout our nuclear fuel R&D period in order to fund our R&D efforts in the future. If we are unable to obtain government funding 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.

The primary 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 from ATM equity offering sales agreement, as amended, with Stifel, Nicolaus & Company, Incorporated. The Company has 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 and declared effective on April 5, 2021. We may be limited on the amount of funding available under this Form S-3 shelf registration statement in the future. We filed a prospectus supplement dated April 9, 2021 with the SEC pursuant to which we offered and sold shares of common stock having an aggregate offering price of $9.0 million through the ATM. We filed a second prospectus supplement, dated November 19, 2021, with the SEC pursuant to which we offered and sold shares of common stock having an aggregate offering price of up to $20.0 million, through the ATM. We filed another prospectus supplement, dated November 9, 2022, with the SEC pursuant to which we may offer and sell shares of common stock having an aggregate offering price of up to $20.0 million from time to time, through the ATM. Under current SEC regulations, 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, our calculated public float is below $75.0 million and we will be subject to the baby shelf rules for any offerings conducted on our current shelf registration statement.

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

As discussed above, we will seek new financing bringing us additional sources of capital, depending on the capital market conditions of our common stock. There can be no assurance that these additional sources of capital will be made available to us. The primary potential sources of cash that may be available to us are as follows:

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

See Note 8. Stockholders’ Equity and Stock-Based Compensation of the Notes to the Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for information regarding our prior financings.

The following table provides detailed information about our net cash flows for the years ended December 31, 2022 and 2021:

Cash Flow

Operating Activities

Cash used in operating activities decreased by $4.3 million in 2022 as compared to 2021. This decrease was primarily due to an arbitration settlement payment of $4.2 million in 2021, and a decrease of $0.1 million in reported net loss, adjusted for non-cash charges such as stock-based compensation and changes in operating assets and liabilities.

In 2022 operating cash flows reflect our net loss of $7.5 million, adjusted for non-cash charges totaling $0.9 million (consisting of non-cash adjustments for stock-based compensation of $0.8 million and common stock issued to directors of $0.1 million) and a net increase in our operating assets and liabilities of $0.1 million. Decreases in operating cash flows due to the net increase in operating assets and liabilities include an increase in prepaid project costs of $0.3 million offset by a net increase in accounts payable and accrued expenses of $0.2 million.

Investing Activities

Net cash used in our investing activities was insignificant for the years ended December 31, 2022 and 2021.

Financing Activities

Cash provided by financing activities decreased by $3.3 million. This decrease was due to a decrease in cash provided by our ATM facility of $3.8 million, a decrease in cash provided by the exercise of stock options of $0.2 million, offset by decrease in net share settlement of equity awards for the payment of withholding taxes of $0.7 million.

Cash provided by our ATM facility was $11.0 million (sale of approximately 1.9 million common shares) and $14.8 million (sale of approximately 2.0 million common shares) for the years 2022 and 2021, respectively. Cash used during years 2022 and 2021 relating to the payment of withholding taxes on the net share settlement of equity awards was $0.1 million and $0.8 million, respectively.

Contractual Obligations and Commitments

On December 9, 2022, we entered into initial project task statements with BEA, the operating contractor of INL, in collaboration with the DOE, which releases set forth the initial scopes of work and funding commitments under the umbrella agreements, each dated September 27, 2022, between the Company and BEA. At December 31, 2022, we had approximately $3.4 million in outstanding project task statement obligations to BEA relating to the research and development being conducted under the SPP and CRADA at INL.

Critical Accounting Policies and Estimates

Patent Costs

Patent filing fees with patent granting agencies and legal fees directly relating to those filings, incurred to file patent applications are expensed as the Company believes that there is not a high likelihood that there will be a future economic benefit associated with the patents, due to the uncertainties in the current fuel development timelines and the patents being commercialized.

Contributed Services - Research and Development

The Company concluded that its government grants were not within the scope of ASC Topic 606 as they did not meet the definition of a contract with a customer. Additionally, the Company concluded that the grants met the definition of a contribution, as the grants were a non-reciprocal transaction. As such, the Company determined that Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition applies for these contributed services, even though the Company is a business entity, as guidance in the contributions received subsections of Subtopic 958-605 applies to all entities (NFPs and business entities).

The Company has adopted Accounting Standards Update 2020-07 which amends Subtopic 958-605 which further clarifies the presentation and disclosure about contributions.

Subtopic 958-605 requires that nonfinancial assets, which includes services, such as the research and development services provided under the GAIN vouchers described in Note 6. Research and Development Costs, should be shown on a gross method at the fair value of the services contributed, with the contributed services - research and development shown as other operating income and the related costs as a charge to research and development expense, rather than depicting the contributed services - research and development as a reduction of research and development expense. The fair value of contributed services was determined by the cost of professional time and materials which were charged by the subcontractor who fulfilled the services contributed under the grant award.

Accounting for Stock-Based Compensation, Stock Options and Stock Granted to Employees and Non-employees

We adopted the requirements for stock-based compensation, where all forms of share-based payments to employees or non-employees, including stock options and stock purchase plans, are treated the same as any other form of compensation by recognizing the related cost in the consolidated statement of operations.

Under these requirements, stock-based compensation expense for employees is measured at the grant date based on the fair value of the award, and the expense is recognized ratably over the award’s vesting period.

The stock-based compensation expense incurred in connection with our employees is based on the employee model of ASC 718. Under ASC 718 an employee is defined as “An individual over whom the grantor of a share-based compensation award exercises or has the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in case law and currently under U.S. tax regulations.” The stock-based compensation expense for our consultants is accounted for under ASU 2018-07, which allows us to account for options issued to consultants in the same manner as they are issued to our employees. For all service-based grants made, we recognize compensation cost under the straight-line method.

We measure the fair value of service-based stock options on the measurement date using the Black-Scholes option-pricing model, which requires the use of several estimates, including:

We use the historical volatility of our stock price over the number of years that matches the expected life of our stock option grants or we use the historical volatility of our stock price since January 5, 2006, the date we announced that we were becoming a public company, to estimate the future volatility of our stock. At this time, we do not believe that there is a better objective method to predict the future volatility of our stock. The expected life of options is based on internal studies of historical experience and projected exercise behavior. We estimate expected forfeitures of stock-based awards at the grant date and recognize compensation cost only for those awards expected to vest. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. Estimated forfeitures are reassessed in subsequent periods and may change based on new facts and circumstances. We utilize a risk-free interest rate, which is based on the yield of U.S. treasury securities with a maturity equal to the expected life of the options. We have not and do not expect to pay dividends on our common shares for the foreseeable future.

We use the Monte Carlo valuation model to determine the fair value of market-based and performance-based stock options at the date of grant, which requires us to make assumptions, including:

These assumptions are based on historical information and judgment regarding market factors and trends. If actual results differ from our assumptions and judgments used in estimating these factors, future adjustments to these estimates may be required.

Research and Development Costs

Research and development expenses are expensed when incurred. Research and development expenses consist primarily of wages and related payroll benefits, non-cash stock-based compensation, materials, testing, consulting and other outside research and development services, related to the development of the Company’s nuclear fuel.

Recent Accounting Standards and Pronouncements

Refer to Note 1. Basis of Presentation, Summary of Significant Accounting Policies, and Nature of Operations of the Notes to our Consolidated Financial Statements in Part II. Item 8. Financial Statements and Supplementary Data, of this Form 10-K for a discussion of recent accounting standards and pronouncements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is intended to help the reader understand Lightbridge Corporation, our operations, and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes thereto, which are contained in Part II. Item 8. Financial Statements and Supplementary Data, of this report. This discussion contains forward-looking statements that are based on our management’s current expectations, estimates, and projections for our business, which are subject to a number of risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Forward-Looking Statements” and Part I. Item 1A. Risk Factors.

This MD&A consists of the following sections:

Overview of Our Business and Recent Developments

Our Business

Our Company’s goal is to impact in a meaningful way the world’s climate and energy problems. We are developing and plan to 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 an early-stage technology company in the product development phase and are pre-revenue. Our ongoing operations are currently being financed primarily by raising new equity capital.

The Department of Energy’s (DOE) Office of Nuclear Energy has established the Gateway for Accelerated Innovation in Nuclear (GAIN) program to provide the nuclear community with access to the technical, regulatory, and financial support necessary to expedite moving new or advanced nuclear technologies toward commercialization, while ensuring the continued safe, reliable, and economic operation of the existing nuclear reactor fleet.

We were awarded a GAIN voucher in 2019 for the experiment design for irradiation of material samples of Lightbridge metallic fuel in the Advanced Test Reactor (ATR) at the Idaho National Laboratory (INL). On April 22, 2020, we entered into a Cooperative Research and Development Agreement (CRADA) with Battelle Energy Alliance, LLC, the DOE’s operating contractor at INL (see Recent Developments section below). The project commenced in the second quarter of 2020 and was originally expected to be completed in the second quarter of 2021. However, because of project staffing issues at INL related to the laboratory’s COVID-19 restrictions and U.S. export control matters, the project was completed during the third quarter of 2021. The total project amount recorded as contributed services – research and development was approximately $0.5 million. This experiment design forms the basis of our current and future efforts with the INL.

DOE awarded us a second GAIN voucher to support development of Lightbridge Fuel™ in collaboration with the Pacific Northwest National Laboratory (PNNL). The scope of the project is to demonstrate Lightbridge’s nuclear fuel casting process using depleted uranium, a key step in the manufacture of Lightbridge Fuel™. On July 14, 2021, the Company executed a CRADA with the Battelle Memorial Institute, Pacific Northwest Division, the operating contractor of the PNNL, in collaboration with the DOE. The project commenced in the third quarter of 2021 and we expect it to be completed by the third quarter of 2022. The total project value is approximately $0.7 million, with three-quarters of this amount provided by DOE for the scope performed by PNNL.

Our metallic fuel can be used in different types of water-cooled commercial power reactors, such as pressurized water reactors (PWRs), boiling-water reactors (BWRs), Russian-designed water-cooled, water-moderated energetic reactors (VVERs), CANDUs, water-cooled SMRs, and water-cooled research reactors.

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

We currently expect to invest a total of $4.0 million to $6.0 million in the research and development of our nuclear fuel over the next 12 to 15 months.

We have incurred net losses and negative cash flows from operations and expect this to continue for the foreseeable future. In 2022, we will continue to evaluate spending to reduce expenses with the overall goal of commercializing our nuclear fuel with the lowest research and development (R&D) cost, in order to maximize our shareholders’ value. Our only source of funding in 2021 was our at-the-market (ATM) financing arrangement with Stifel, Nicolaus & Company. Although we expect this ATM facility to continue to be a significant source of working capital for the Company in 2022, there is no assurance that an ATM financing arrangement will be available to us in the future (see liquidity outlook section below). Please also see Note 7. Stockholders’ Equity and Stock-Based Compensation of the Notes to the Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for information regarding our ATM and prior financings.

Fuel Development Strategy

Lightbridge originally focused on existing U.S. PWRs because they represented a large market segment for which Lightbridge Fuel™ could provide significant economic and safety benefits through a power uprate up to 10% along with an operating cycle extension from 18 to 24 months or a power uprate of 17% without extending the cycle length. However, with technological advances towards small modular reactors (SMRs), the escalating costs associated with new build reactors, along with the need to operate large reactors at a constant 24/7 pace to achieve profitability, we estimate that these older types of large reactors will decrease in utilization going forward. In fact, we expect the net worldwide growth in the number of large reactors between now and 2050 to be fewer than 200, compared with the approximately 440 operable reactors worldwide.

Emerging nuclear technologies that many in the nuclear power industry believe have the potential to generate significant amounts of power include potential deployment of large numbers of SMRs that are now in the development and licensing phase. We expect that Lightbridge Fuel™ may provide SMRs all the benefits our technology brings to large reactors, but the benefits may be more meaningful to the economic case for deploying SMRs. Lightbridge Fuel™ is expected to generate more power in SMRs than traditional nuclear fuels, which will help decarbonize sectors that are now powered by electricity. We also plan to explore using Lightbridge Fuel™ in new SMRs to produce hydrogen for liquid non-carbon fuels for use in other, hard-to-decarbonize sectors such as aviation and shipping. Our ongoing R&D initiatives are entirely compatible with Lightbridge Fuel™ powering SMRs for multiple purposes.

We believe we are seeing an overall shift in focus by government and the private sector from large PWRs to SMRs and other advanced reactor technologies. As a result, we intend to increase our focus on opportunities that are likely to attract financing, both currently and in the future. The first SMRs that could use our fuel are expected to begin operations in 2028.

Our fuel development strategy, which focuses on SMRs, includes several major development activities or key steps. In certain cases, it may be possible to conduct development work relating to multiple key steps in parallel, resulting in some overlap in timelines between two or more such major development activities. Additional government funding expected to be directed towards the development of SMRs has the potential to reduce the amount of funding Lightbridge would need to raise on its own for its fuel development efforts. We anticipate that the improved competitive position of Lightbridge Fuel™ versus Accident Tolerant Fuels (ATF) in the SMR market segment, with government support, would generate sustainable economic benefits, including the 30% potential power uprates that may be achieved with Lightbridge Fuel™.

For a typical power system, base load power is usually about 35-40 percent of the maximum load during the year. Demand spikes are handled by intermediate and then peak power plants. Base load power plants include coal and nuclear facilities due to low fuel costs and steady power production. In some regions, geothermal and hydroelectric can also be used as base load power. Intermediate plants include natural gas, and some peak plants run on light oil. We see the push for clean energy, particularly renewables, changing this structure fairly rapidly. The existing plant structure is being replaced by wind and solar power backed up by other power, usually natural gas, when the sun is not shining or the wind is not blowing. To replace the carbon-emitting natural gas plants with something non-emitting and economical, to balance with renewables, is one of the greatest challenges in decarbonizing the energy supply. We are designing Lightbridge Fuel™ for use in SMRs to combine with renewables globally to decarbonize the energy supply, with SMRs providing base load power with high interoperability with intermittent renewables. We believe that the potential 30% power uprate from Lightbridge Fuel™ will uniquely provide a lower levelized cost of electricity than uranium dioxide fuel (including ATF) and will allow SMRs to replace natural gas plants to balance with renewables. We believe Lightbridge Fuel™ in SMRs will align with the energy and climate strategy of the U.S. and other governments. We do not expect that economical grid-level battery storage or large-scale carbon capture will be available at large enough scale to help with climate change. We believe that large-scale SMR production in factories and shipyards can meet a significant portion of the global energy supply. The world is currently on a path towards having most of its energy in 2050 produced by fossil fuels without carbon capture. We believe our nuclear fuel in SMRs combined with renewables on the grid can change that future energy mix.

Below is a brief description of each key fuel development step leading up to a lead test assembly (LTA) operation in an SMR.

a. Fuel Fabrication

We expect the development of the fabrication processes for Lightbridge Fuel™ to be performed utilizing existing facilities and equipment within the DOE national laboratory complex and other facilities. Discussions are currently ongoing with the INL and PNNL to perform process development activities and establish the capability to manufacture development quantities of fuel rods for loop irradiation testing, and possibly an initial lead test assembly.

Fabrication of multiple LTAs and batch reload quantities of fuel will require a dedicated pilot-scale fuel fabrication facility. We estimate the major scopes of work to establish a manufacturing capability for LTAs would take 5-8 years to complete, with batch reload capability achieved within 8 years from the start of pilot-scale fuel fabrication facility design and construction work. These estimates assume sufficient funding availability and that the project receives prioritization by the DOE and U.S. Nuclear Regulatory Commission (US-NRC).

b. Nuclear Material/Coupon Sample Irradiation Test

Lightbridge’s irradiation testing program includes coupon irradiation of material samples of its uranium-zirconium fuel alloy which will allow characterization of the underlying thermophysical behavior of the fuel alloy. The design of this program is currently underway, and we expect it to yield results in approximately four years. The data obtained from this program will be a fundamental component of Lightbridge’s accelerated fuel qualification approach described below as it will be used to inform and develop the physics-based models and simulations of the fuel rod behaviors.

c. Loop Irradiation Testing

The purpose of the loop irradiation testing of Lightbridge’s metallic fuel rod is to demonstrate the performance and behavior of the fuel rod under prototypic commercial reactor operating conditions typical of PWRs at a power level and burnup accumulation higher than the fuel would experience in normal operation in a commercial power plant. This will provide a physical demonstration of the capabilities of the fuel rod in order to ensure reactor safety. Such testing is expected to provide information of sufficient detail to validate the performance of individual fuel rods such that their behavior in normal operating conditions of a regulated nuclear power plant would be sufficiently well understood to request a license amendment from the US-NRC for operation of a lead test assembly.

We expect execution of such a loop irradiation test to be performed in the ATR at INL. The ATR currently has limited irradiation loop test facilities and the performance of the above-mentioned test for Lightbridge Fuel™ may require installation of a new test loop with increased heat removal capability to enable the desired test conditions. Preliminary discussions with INL personnel have indicated that installation of such a loop would take approximately three years (one year for design and safety evaluation and two years for installation and startup). We assume an additional year of time is required, making the loop potentially available in four years.

We expect the performance of the irradiation test to take three years of in-reactor time plus an additional one year for post-irradiation examination (PIE), wherein analysis of the fuel rod performance and behavior is performed.

These estimates result in a total time for completion of the loop irradiation test of 7-8 years.

d. Preparation for Lead Test Assembly Operation

Insertion of an LTA with Lightbridge’s fuel rods in a nuclear power plant requires the power plant owner to obtain approval from the US-NRC based on a safety evaluation and justification that the LTA will not be detrimental to the plant’s licensed operations. This justification must address numerous technical areas (e.g. neutronics design, mechanical design, thermal hydraulic design, materials science, reactor operations, etc.) and include considerations of the performance of the LTA itself as well as its interaction with other fuel assemblies in the reactor core which may be impacted by the presence of the LTA. The safety evaluation must result in confirmation that the plant’s ability to ensure plant worker and public safety is not compromised due to the operation of the LTA. This safety justification will require cooperation between Lightbridge, the fuel manufacturer, and the power plant owner.

With historical approaches, the development and qualification of a nuclear fuel system can take 20-30 years as the approach has been driven largely by a cycle of physical testing and design changes based on the results of those physical tests. Computer modeling and simulation has increasingly been used in support of fuel qualification efforts, but the cyclical approach continues to be the default methodology.

In order to shorten the timeframe for fuel qualification, advanced nuclear fuel developers are now taking an approach that leverages significant improvements in computational capability in a methodology referred to as Accelerated Fuel Qualification (AFQ). The AFQ approach combines physics-informed modeling and simulation coupled with targeted physical testing such that the overall fuel qualification effort is reduced in terms of cost and time, with a goal of fuel qualification taking 10-15 years. Lightbridge intends to leverage the AFQ methodologies to qualify its advanced fuels.

Along with leveraging the AFQ approach, uranium-zirconium (U-Zr) fuel technology has the benefits of being previously demonstrated in operating icebreaker reactors and several aspects of the performance of the fuel have been demonstrated. This enables Lightbridge to begin designing an LTA and developing the necessary computer models of the fuel behavior, prior to obtaining the results of the loop irradiation testing of the fuel rod.

Along with the irradiation testing and computer simulations, some physical testing of the fuel assembly design will be required. Lightbridge anticipates that such ‘out-of-pile’ testing to justify the LTA performance will take no more than four years.

We expect that the LTA design effort, development of computer modeling and simulation capabilities, and performance of the LTA safety justification will take 8 years. The US-NRC review and approval of the license amendment for LTA insertion is expected to require two years after the license amendment is submitted.

Based on these activities and time estimates, Lightbridge expects to have LTAs of its fuel ready for insertion in a commercial reactor in the early 2030s.

The above fuel development strategy is based on the following key assumptions:

Recent Developments

GAIN Vouchers

Lightbridge demonstrated in 2021 the co-extrusion process for the three-lobed variant of its U-Zr fuel technology for use in certain SMRs by producing several SMR-length surrogate rods (i.e., non-uranium bearing).

We expanded our patent portfolio by successfully obtaining 7 new patents in 2021, in the United States and other key foreign countries. The new patents will help safeguard the Company’s intellectual property.

Operations Review

Consolidated Results of Operations

The following table presents our operating results as a percentage of revenues for the years indicated (rounded to millions):

Operating Expenses

General and Administrative Expenses

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

Total general and administrative expenses decreased by approximately $1.2 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. There was a decrease in professional fees of approximately $2.2 million primarily due to a decrease in the legal and professional fees relating to the settlement to terminate the Enfission joint venture, a decrease in amortization expense of approximately $0.1 million due to patents costs being expensed in 2021 and a decrease in business development expenses of approximately $0.1 million. These decreases were offset by an increase of approximately $0.6 million in stock-based compensation expense due to the acceleration of the vesting of the remaining unvested 2020 RSU grants in 2021, an increase of $0.2 million in various consulting fees, an increase of approximately $0.2 million in insurance expense, due to the increased premiums in directors’ and officers’ insurance, and an increase of approximately $0.2 million in Directors’ fees, due to the increase in the number of independent directors serving on our board of directors in 2021.

Total stock-based compensation included in general and administrative expenses was approximately $0.8 million and $0.1 million for the year ended December 31, 2021and 2020, respectively.

Research and Development

R&D 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 nuclear fuel, including work performed with the DOE’s national laboratories.

Total R&D expenses increased by approximately $0.5 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. There was an increase of approximately $0.5 million in outside research and development work with the DOE’s national laboratories related to the first GAIN voucher and an increase of approximately $0.2 million in patent expenses. These increases were offset by a decrease in allocated employee compensation and employee benefits to R&D of approximately $0.2 million. All other R&D expenses were primarily consistent period over period.

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

Legal settlement costs

On February 11, 2021, the Company entered into a settlement agreement with our former joint venture partner in Enfission resolving the pending claims and counterclaims between the parties in arbitration and judicial proceedings and the Company paid approximately $4.2 million in legal settlement costs on March 15, 2021. This amount was recorded in operating expenses as legal settlement costs for the year ended December 31, 2020. Under the terms of the settlement agreement, all joint venture agreements were terminated, and the joint venture was dissolved on March 23, 2021. (See Note 4. Commitments and Contingencies of the Notes to the Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for more information).

Patent write-off and impairment loss

As a result of a triggering event that required an impairment provision of the total carrying value of our patent costs, we recorded a total impairment loss and patent write-off of $1.2 million in the fourth quarter of 2020. All patent costs were expensed as incurred in 2021.

Other Operating Income

Total other operating income increased approximately $0.5 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. This increase was due to the final cash distribution from the dissolved Enfission joint venture of $0.1 million and an increase in contributed services – research and development from the GAIN voucher of approximately $0.4 million. Contributed services – research and development is recorded on a gross method with the contributed services – research and development shown as other operating income and the related costs as a charge to research and development expenses.

Other Income

Interest income generated from the interest earned from our treasury bills and from our bank savings account was not significant for both years ended December 31, 2021 and 2020.

Provision for Income Taxes

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss (NOL) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company has evaluated the impact of the CARES Act and does not expect that the NOL carryback provision of the CARES Act will result in a material cash benefit. We incurred a pre-tax net loss for both 2021 and 2020. We reviewed all sources of income for purposes of recognizing the deferred tax assets and concluded a full valuation allowance for 2021 and 2020 was necessary. Therefore, we did not have a provision for taxes for both years ended December 31, 2021 and 2020. Prior period ownership changes, coupled with the Company’s projections of taxable income for the foreseeable future, could substantially limit any future benefit to be derived from our NOLs.

See Note 6. Income Taxes of the Notes to our Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for information regarding our income taxes and the limitations on the utilization and amount of our net operating loss carry-forwards.

Liquidity, Capital Resources and Financial Position

Liquidity Outlook

Our cash requirements for the future planned operations to develop and commercialize our nuclear fuel, including any additional expenditures that may result from unexpected developments, requires us to raise significant additional capital and receive government support. Our cash requirements are approximately $10 million of outside R&D expenditures per year over the next 10-15 years. Our cash balance at December 31, 2021 and as of the date of this filing does not exceed our anticipated cash requirements for the next 12 months or through the first quarter of 2023.

At December 31, 2021, we had cash and cash equivalents of approximately $24.7 million, as compared to approximately $21.5 million at December 31, 2020, an increase of approximately $3.2 million. The Company raised approximately $14.8 million from the sale of approximately 2.0 million shares of common stock during the year ended December 31, 2021. The Company’s net cash used in operating activities for the year ended December 31, 2021 was approximately $11.0 million and current projections indicate that we will have continued negative cash flows for the foreseeable future. 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 $28.8 million of working capital as of the date of this filing. We currently project a negative cash flow from our current operations averaging approximately $1.0 to $1.2 million per month for our general and administrative and R&D expenses, for total expected expenditures of approximately $12 million to $18 million for the next 12 to 15 months. We believe, however, that our actual expenditures may exceed our current available working capital through the first quarter of 2023. There are inherent uncertainties in forecasting future required R&D or other expenditures, as we are currently working on establishing fuel development agreements with the DOE’s national laboratories and others. Once many of these anticipated agreements are finalized or other future R&D agreements are entered into and the future R&D costs are known, we expect to forecast a significantly higher level of future required R&D expenses and higher negative monthly cash flows from operations in the future.

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. COVID-19 may also affect costs and future operations by potentially delaying our work at the DOE’s national laboratories. The actual amount of cash we will need to operate is subject to many factors, including, but not limited to, the timing, design and conduct of the R&D work at the DOE’s national laboratories for our fuel along with cost to commercialize our nuclear fuel. Accordingly, there is high potential for budget variances in the current cost projections and fuel development timelines of our current planned operations over the fuel development period. We will continue to utilize our ATM to finance our future R&D and corporate activities.

We will also need to receive substantial U.S. government support throughout our nuclear fuel R&D period in order to fund our R&D efforts in the future. If we are unable to obtain this government funding that meets our future R&D cash requirements, we will need to seek other funding, 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.

Considering the above-mentioned uncertainties and lack of financial resources to fund our current and long-term fuel development costs and corporate overhead expenses, substantial doubt exists about the Company’s ability to continue as a going concern for the 12 months following the date of this filing. We have the ability to delay or reduce certain operating expenses, including R&D expenses in the next 12 to 15 months, which could reduce our cash flow shortfall. However, this delay would also extend our projected fuel development timeline discussed above.

The primary source of cash available to us for the next 12 months is the potential funding from equity issuances from our ATM equity offering sales agreement, as amended, with Stifel, Nicolaus & Company, Incorporated. The Company has an effective shelf registration statement on Form S-3 that was filed with the SEC on March 25, 2021, registering the sale of up to $75 million of the Company’s securities and declared effective on April 5, 2021. Due to the offering limitations currently applicable under General Instruction I.B.6. of Form S-3 and the market valuation of our current public float, we may be limited on the amount of funding available under this Form S-3 shelf registration statement in the future. We filed a prospectus supplement dated April 9, 2021, with the Securities and Exchange Commission pursuant to which we offered and sold shares of common stock having an aggregate offering price of up to $9.0 million through our ATM. We filed a second prospectus supplement, dated November 19, 2021, with the Securities and Exchange Commission pursuant to which we may offer and sell shares of common stock having an aggregate offering price of up to up to $20.0 million from time to time under this prospectus supplement, through the ATM.

We have no debt or lines of credit and we have financed our operations to date through the sale of our preferred stock and common stock. Management believes that public or private equity investments may be available in the future, however adverse market conditions in our common stock price and trading volume, as well as other factors like COVID-19 could substantially impair our ability to raise capital in the future and to continue the nuclear fuel development project.

Short-Term and Long-Term Liquidity Sources

As discussed above, we will seek new financing bringing us additional sources of capital, depending on the capital market conditions of our common stock. There can be no assurance that these additional sources of capital will be made available to us. The primary potential sources of cash that may be available to us are as follows:

In support of our long-term business 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 R&D activities that is required to further enhance and complete the development of our fuel products to a commercial stage. We may be unable to form such strategic alliances on terms acceptable to us or at all.

See Note 7. Stockholders’ Equity and Stock-Based Compensation of the Notes to the Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for information regarding our prior financings.

The following table provides detailed information about our net cash flows for the years ended December 31, 2021 and 2020:

Cash Flow

Operating Activities

Cash used in operating activities for the fiscal years 2021 and 2020 was $11.0 million and $8.6 million, an increase of $2.4 million. Fiscal year 2021 operating cash flows reflect our net loss of $7.8 million, noncash charges (stock-based compensation expense) of $1.1 million and a net decrease from changes in our working capital accounts of approximately $4.3 million. Decreases in operating cash flows caused by working capital changes include a net decrease in accounts payable and accrued expenses of $4.4 million, offset by a decrease in prepaid expenses and other current assets of $0.1 million. The decrease in accounts payable and accrued expenses is primarily related to the payment of the $4.2 million expense accrued in 2020 related to the arbitration settlement (see Note 4. Commitments and Contingencies of the Notes to the Consolidated Financial Statements included in Part II. Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K).

Investing Activities

Net cash used in our investing activities for the year ended December 31, 2021, as compared to net cash used in our investing activities in 2020, decreased by approximately $0.2 million. The decrease was due primarily to a decrease in trademark costs.

Financing Activities

Cash provided by financing activities was $14.2 million and $12.4 million for fiscal years 2021 and 2020, an increase of $1.8 million. Cash provided by our ATM facility was $14.8 million (sale of approximately 2 million common shares). Cash provided by the exercise of stock options was $0.2 million. Cash used during fiscal year 2021 relates to the payment of withholding taxes on net share settlement of equity awards of $0.8 million.

Critical Accounting Policies and Estimates

Patent Costs

Beginning January 1, 2021, patent filing fees with patent granting agencies and legal fees directly relating to those filings, incurred to file patent applications are expensed as the Company believes that there is not a high likelihood that there will be a future economic benefit associated with the patents, due to the uncertainties in the current fuel development timelines and the patents being commercialized.

Contributed services – research and development

The Company concluded that its government grants were not within the scope of ASC Topic 606 as they did not meet the definition of a contract with a customer. Additionally, the Company concluded that the grants met the definition of a contribution, as the grants were a non-reciprocal transaction. As such, the Company determined that Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition applies for these contributed services, even though the Company is a business entity, as guidance in the contributions received subsections of Subtopic 958-605 applies to all entities (NFPs and business entities).

The Company has early adopted Accounting Standards Update 2020-07 which amends Subtopic 958-605 which further clarifies the presentation and disclosure about contributions.

Subtopic 958-605 requires that nonfinancial assets, which includes services, such as the research and development services provided under the GAIN vouchers described in Note 5, should be shown on a gross method at the fair value of the services contributed, with the contributed services – research and development shown as other operating income and the related costs as a charge to research and development expense, rather than depicting the contributed services – research and development as a reduction of research and development expense. The fair value of contributed services was determined by the cost of professional time and materials which were charged by the subcontractor who fulfilled the services contributed under the grant award.

Accounting for Stock-Based Compensation, Stock Options and Stock Granted to Employees and Non-employees

We adopted the requirements for stock-based compensation, where all forms of share-based payments to employees or non-employees, including stock options and stock purchase plans, are treated the same as any other form of compensation by recognizing the related cost in the consolidated statement of operations.

Under these requirements, stock-based compensation expense for employees is measured at the grant date based on the fair value of the award, and the expense is recognized ratably over the award’s vesting period.

The stock-based compensation expense incurred in connection with our employees is based on the employee model of ASC 718. Under ASC 718 an employee is defined as “An individual over whom the grantor of a share-based compensation award exercises or has the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in case law and currently under U.S. tax regulations.” The stock-based compensation expense for our consultants is accounted for under ASU 2018-07, which allows us to account for options issued to consultants in the same manner as they are issued to our employees. For all service-based grants made, we recognize compensation cost under the straight-line method.

We measure the fair value of service-based stock options on the measurement date using the Black-Scholes option-pricing model, which requires the use of several estimates, including:

We use the historical volatility of our stock price over the number of years that matches the expected life of our stock option grants or we use the historical volatility of our stock price since January 5, 2006, the date we announced that we were becoming a public company, to estimate the future volatility of our stock. At this time, we do not believe that there is a better objective method to predict the future volatility of our stock. The expected life of options is based on internal studies of historical experience and projected exercise behavior. We estimate expected forfeitures of stock-based awards at the grant date and recognize compensation cost only for those awards expected to vest. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. Estimated forfeitures are reassessed in subsequent periods and may change based on new facts and circumstances. We utilize a risk-free interest rate, which is based on the yield of U.S. treasury securities with a maturity equal to the expected life of the options. We have not and do not expect to pay dividends on our common shares for the foreseeable future.

We use the Monte Carlo valuation model to determine the fair value of market-based and performance-based stock options at the date of grant, which requires us to make assumptions, including:

These assumptions are based on historical information and judgment regarding market factors and trends. If actual results differ from our assumptions and judgments used in estimating these factors, future adjustments to these estimates may be required.

Research and Development Expenses

Research expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date as of which it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This is generally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of our products, no development expenditures have yet been capitalized.

Recent Accounting Standards and Pronouncements

Refer to Note 1. Basis of Presentation, Summary of Significant Accounting Policies, and Nature of Operations of the Notes to our Consolidated Financial Statements in Part II. Item 8. Financial Statements and Supplementary Data, of this Form 10-K for a discussion of recent accounting standards and pronouncements.