Lightbridge Corp (LTBR) 2018 Q3 法說會逐字稿

Greetings, and welcome to the Lightbridge 2018 Third Quarter Earnings Call. (Operator Instructions As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Waldman with Crescendo Communications. Thank you, Mr. Waldman. You may begin.

Thank you, Doug. Good morning, and welcome to Lightbridge's Third Quarter 2018 Business Update Conference Call. The company's earnings release was distributed on November 12 and can be viewed on the Investor Relations page of the Lightbridge website at ltbridge.com. If anyone has questions after the call, you may contact Crescendo Communications, the Investor Relations firm for the company, at (855) 379-9900.

Seth Grae, our Chief Executive Officer, will lead today's call. In addition, the following executives are available to answer your questions: Larry Goldman, Chief Financial Officer; Jim Malone, Chief Nuclear Fuel Development Officer; Andrey Mushakov, Executive Vice President for Nuclear Operations; Jim Fornof, Vice President for Government Program Management; and Barbara Kanakry, Controller.

Today's presentation includes forward-looking statements about the company's competitive position and product and service offerings. During the course of today's call, words such as expect, anticipate, believe and intend will be used in our discussion of goals or events in the future. This presentation is based on our current expectations, involves certain risks and uncertainties that may cause actual results to differ significantly from such estimates. These and other risks are set forth in more detail in Lightbridge's filings with the Securities and Exchange Commission. Lightbridge does not assume any obligation to update or revise any such forward-looking statements, whether as a result of new developments or otherwise.

You could participate in today's call in 2 ways. First, you may submit questions for management in writing to ir@ltbridge.com. If you have already submitted a question, we thank you. You can also submit them at any time during the prepared remarks or during the Q&A period. Second, after the prepared remarks, telephone lines will be opened for live questions.

Now here at Lightbridge, CEO Seth Grae. Please go ahead, Seth.

Thank you, David, and good morning, everybody. I know many of you would like to discuss our U.S. Department of Energy, DOE, grant application. We'll go through a few other items first, some of which will be relevant for our resubmission to DOE in January, and then we'll do a deeper dive into the letter that we received from DOE.

This has been a productive quarter for Lightbridge and Enfission, our joint venture with Framatome. We'd like to provide a quick overview of specific activities we have undertaken at Enfission over the past calendar quarter.

Let's start with Andrey Mushakov, Executive VP of Nuclear Operations for Lightbridge, reviewing the work we're doing on the fabrication of our fuel. Andrey?

Thank you, Seth. First, we completed several studies on key fabrications steps, particularly relating to the co-extrusion process modeling, billet preparation conditions and material flows. Second, we established the purchasing process for equipment. Third, we continued further refinement of the fabrication process steps, material flows and equipment needs and specifications. And fourth, we researched material properties and prepared material to manual.

On the fuel design sites, first, we prepared the product requirements document and data sheet. Second, we initiated the next phase of neutronics code modifications to model Lightbridge Fuel geometry, which has a unique flow of geometry, as you know. Third, we developed a 3D model for Computational Fuel Dynamics analysis. And fourth, we developed a fuel assembly Computational Fuel Dynamics model to investigate Critical Heat Flux performance of our fuel.

Turning to regulatory licensing efforts. We established an open dialogue with the United States Nuclear Regulatory Commission, the NRC, with the first Enfission project kick-off meeting held in August 2018. I'll talk about this more in a moment since it particularly relates to the resubmission we'll make to DOE in January of next year. And second, we continued the development of fuel design limits in support of our regulatory licensing activities.

Also, during the quarter, we announced several key progress updates for Enfission. We announced that we began preparatory work at the Framatome fuel fabrication facility in Richland Washington. This state-of-the-art facility will be used to manufacture fuel assemblies for U.S. nuclear power plants based on our patented metallic fuel technology. Key activities are underway to finalize workflow and facility layout as well as to develop procurement specifications for manufacturing equipment. Engineers and technicians are also preparing the facility licensing package for review and approval by the NRC.

As I mentioned, on August 15th, we held our first meeting with representatives of the NRC and discussed the development and regulatory licensing of Lightbridge Fuel for the U.S. market. Presenting our Enfission joint venture to the NRC was an important milestone of the licensing process of our metallic fuel technology. We are pleased with our first formal interaction with the NRC staff on behalf of Enfission and look forward to working closely with the NRC staff throughout the licensing process of Lightbridge Fuel.

Back to you, Seth.

Well, thank you, Andrey. Now we'll turn to the DOE grant application. We had delayed this conference call until after we knew the results.

As we disclosed in our press release on Wednesday, we applied for a grant earlier this year. It was our first application. It was disappointing not to win. As is often the case with a first-time grant application, our application was not approved. We have received valuable feedback from DOE. And based on this feedback, we plan to apply for a DOE grant again in January. This time, we faced companies that have lost in the previous 2 rounds that were reapplying. Next time, other companies will be up against our reapplication.

Our initial instinct when we received the letter on Tuesday was to issue a press release with the DOE's letter attached. But as with all government-produced information in this process, we needed to check first with DOE. While we were waiting for a reply, we issued a press release announcing the decision and the time of this conference call. When DOE got back to us with an approval to release it, we filed the complete letter attached to a Form 8-K yesterday. We're not aware of any other company that lost that publicly released the letter from DOE in the 3 rounds of funding to date. We want to have transparency and disclosure to investors.

I'd like to read the letter and then discuss it, and we look forward to your questions. I'll mention that in addition to the text on the 8-K we filed yesterday, we're actually going to put a scan of the actual letter in PDF on our website today. We'll leave it there at least through Wednesday, before Thanksgiving for those who want to get it. I'll mention one difference between looking at the actual letter in front of me and the text of the 8-K. It's just the official DOE letterhead at the top and the official DOE logo. Other than that, there's no change other than redacting the names of individuals and their direct contact information, who were the points of contact at Lightbridge and at DOE for this process, because that's just for the 2 of them to communicate with each other. But other than their names and contact information, this is exactly what it says.

So it's from the United States Department of Energy, November 13, 2018. Subject: Application Review, Funding Opportunity Announcement, I'll leave out the code numbers, U.S. Industry Opportunities for Advanced Nuclear Technology Development: Development Demonstration and Licensing of Innovative, Safe and Cost-Efficient Lightbridge Fuel Technology for Existing and Commercial Reactors. Thank you for your interest and application submitted under the subject Funding Opportunity Announcement, FOA -- what they call FOA. The Department of Energy, Office of Nuclear Energy, has completed its review of the applications received in response to the FOA. Unfortunately, your application was not among those recommended for selection at this time. The consensus strengths and weaknesses identified by the Merit Review Panel and program policy factors applicable to your proposal are enclosed. We understand and very much appreciate that significant time and effort are required to prepare an application, and we sincerely appreciate your submittal. After consideration of this feedback, you are eligible to resubmit your application for future quarterly submittals under this FOA.

And then the enclosure. Consensus summary of strengths and weaknesses identified: Strengths: This approach proposed by the applicant is detailed, well thought-out and includes logical schedule sequences to achieve the goals and objectives of the project. The parallel approach of developing a commercial capability while conducting fundamental thermal hydraulic and irradiation thermal performance testing is an aggressive strategy, which can provide a significant schedule advantage if executed successfully. The proposed metallic fuel, with its enhanced heat transfer and load-following capabilities, addresses important technological gaps for improved fuel safety, performance and economics. Development of the high-temperature co-extrusion process proposed by the applicant would eliminate the potential for fabrication losses and waste disposal issues associated with sodium-bonded fuel.

Completion of the proposed work could also help begin the establishment and demonstration of domestic infrastructure and regulatory approach for high-assay low-enriched uranium, HALEU, nuclear fuels, which are intended to be used by many advanced reactor concepts. The applicant has implemented a Quality Assurance Program compliant with 10 CFR 50 Appendix B and ASME NQA-1 2008E/2009A, which will be instrumental during licensing process. The commercialization potential of this proposal is significantly increased through the engagement of an experienced fuel manufacturer, support of potential end users and the establishment of the utility advisory board. A team, which consists of industry, academia and national lab personnel, has extensive experience in the nuclear industry and in fuel development relevant to the proposed activities. The applicant provided examples of their ability to meet cost and schedule objectives for several relevant projects.

Weaknesses: While the proposal does a good job of outlining the scope of this proposed project, it does not provide sufficient information to determine what steps need to be taken, such as interaction with the U.S. Nuclear Regulatory Commission or subsequent technology development efforts to meet deployment of a lead test rod, LTR, by 2021 and the first lead test assembly, LTA, in a commercial reactor by the mid-2020s.

Policy Factor: The following policy -- the following program policy factor was also considered in the review and evaluation of this application: "The consistency and performance of the work proposed in the application with the current Office of Nuclear Energy Congressional appropriations." The proposal has merits, as documented in the above summary of strengths. However, it was determined that the proposal could not be supported within the current Office of Nuclear Energy program priorities and available resources.

And that's the end of the letter. So while we wish we won, we believe DOE's responses to our application are reasonable. We are already well along in addressing several of the issues DOE raised, including the interaction we've had with the NRC since we submitted the grant application and Andrey also went through some of the technical developments since we applied that help address these questions. We remain encouraged by our prospects to receive DOE grants, and we're very encouraged by our interaction with utilities, which we think will be helpful for receiving DOE grants. We understand that DOE must prioritize its resources within current Office of Nuclear Energy priorities. While we have not heard anything from DOE other than the text of the letter, I've always felt that DOE doesn't like to be put in the position of picking winners and tries to follow where they see industry putting resources and desiring technologies. And I think DOE likes to see a defined path to NRC licensing. I think the work we've been doing with utilities and the NRC since we filed this first application will be helpful for addressing these issues in our next application. We look forward to providing further updates as soon as practical.

While we expect to receive grants, the government will act in its independence, and we can't guarantee that our next application will be approved either. Let me be clear though that our business is not dependent on these grants, and we're moving forward aggressively with Framatome, and we expect to stay within our projected timelines. We had hoped for the grants to help accelerate timelines, and we're only a couple of months away from our next grant submission. I look forward to your questions relating to DOE grants. Right now, we'll go on to other matters, some of which, along with developments we mentioned earlier in this call, can show progress that will help address issues that DOE raised in the letter.

Turning to our patent portfolio. We recently announced that we have received Notices of Allowance for 2 key patents from the U.S. Patent and Trademark Office. The first patent covers an all-metal pressurized water reactor fuel assembly design, incorporating multi-lobe fuel rods arranged into a mixed grid pattern. This latest design incorporates major enhancements completed over the past several years in response to specific feedback from the Nuclear Utility Fuel Advisory Board, the utilities that are advising us. In particular, a mixed grid pattern configuration with a standard 17x17 pressurized water reactor fuel assembly envelope makes the entire fuel assembly all-metal. It replaces an outer row of conventional uranium dioxide fuel rods that had been included in the earlier designs with multi-lobe metallic fuel rods. We believe the new design improves overall performance and further enhances the appeal to utilities.

The second patent provides protection in the U.S. for a fuel assembly design incorporating multi-lobe fuel rods for using CANDU heavy water reactors. According to the World Nuclear Association, there are 49 CANDU-type pressurized heavy water reactors in use around the world.

We've also received a Notice of Intent to Grant from the European Patent Office for the patent application that covers our 4-lobe metallic fuel rod design and related manufacturing method. We will continue to expand its strength in our intellectual property portfolio worldwide. We are continually developing new intellectual property around all aspects of our fuel, including technological enhancements, modifications for different reactor types, improvements to manufacturing processes and more. We are driving forward on our path to commercialization, working side-by-side with Framatome, and we have built a strong patent portfolio globally.

We are also building our presence and gaining attention in the nuclear power industry. During the quarter, Enfission joined the Virginia Nuclear Energy Consortium, a premier advocacy organization for nuclear power, research and defense applications. Enfission was also named the 2018 Deal of Distinction for the chemicals, energy, environment and materials sector by the Licensing Executives Society.

Last month, Enfission was featured in the September edition of Nuclear Engineering International magazine. Aaron Totemeier, Project Director of Enfission, provided an overview of the Lightbridge Fuel technology and outlined our development plans. You can find a link to this article on the Lightbridge Corp. Twitter page.

And as for Tom Graham, Lightbridge's Chairman of the Board, was a featured speaker on a panel discussion at the future of multilateral disarmament process at the United Nations on October 9. The audience included numerous officials from national missions at the UN.

I'd also like to point out that earlier this month, Bob Freeman, Vice President of Fuel Contracts and Services at Framatome, was interviewed on the TITANS OF NUCLEAR podcast, where he talked about Enfission and the innovation as well as safety of Lightbridge Fuel. In Bob Freeman's own words, "Lightbridge is a substantial economic and safety game change for the nuclear industry, which is extremely promising and exciting to Framatome. All of our teams around the world are working towards bringing it to market." It was a spectacular interview, and we encourage everyone to listen. You can find the interview on our Twitter page.

Now I'd like to discuss current events regarding climate change. In the beginning of October, the UN Intergovernmental Panel on Climate Change issued a report that said the planet will reach the crucial threshold of 1.5 degrees Celsius or about 2.7 degrees Fahrenheit, above preindustrial levels as early as 2030, 12 years from now, precipitating the risk of extreme drought, wildfires, floods and food shortages for hundreds of millions of people. Atmosphere temperature is already 2/3 of the way there, with global temperatures having warmed about 1 degree C. Avoiding going even higher will require significant action in the next few years. Over the next 12 years, global net emissions of carbon dioxide would need to fall by 45% from 2010 levels and reach net 0 around 2050 in order to keep the warming around 1.5 degrees C.

Lowering emissions so dramatically, while technically possible, would require widespread changes in energy, industry, agriculture, buildings, transportation and cities. We cannot realistically lower emissions without significant growth in nuclear energy. We need nuclear energy more than ever in order to reduce emissions and avert the disastrous effects of climate change. Nuclear energy can also provide clean water, which is increasingly needed around the world.

The importance of nuclear energy was further validated by the Union of Concerned Scientists, which recently called for federal and state policies in the U.S. to help preserve safely operating nuclear power plants that are at risk of premature closure to ensure they're low carbon energy and not replaced by fossil fuels. This is a prominent NGO that historically has been reluctant to support nuclear power, and yet in their report, they recommend the adoption of a national carbon price or low-carbon electricity standard to avoid the potential early closure of nuclear power plants.

And towards that end, Lightbridge's metallic fuel technology will improve nuclear power plants' economics through increased power output and longer fuel cycles, enhanced reactor safety, improved proliferation-resistance of use fuel and reduced amounts of waste. Our goal is to produce more reliable, competitive and emission-free power from existing nuclear facilities as well as new reactors. We're making steady progress towards our commercialization efforts. We see major opportunities ahead with key milestones forthcoming that we believe will drive value for shareholders.

I'll now turn the call over to Larry Goldman, our Chief Financial Officer, to go over with you some select financial information from the third quarter. Larry?

Thank you, Seth, and good morning, everyone. For information regarding our third quarter financial results, please refer to our recently filed earnings release and Form 10-Q for all the financial details for the quarter. Our Controller, Barbara Kanakry, will also go over the selected financial information for you after my brief remarks.

To reiterate what Seth mentioned, this was our first grant application to DOE, and we received valuable feedback. We will find out more information from DOE and plan to resubmit our grant application in January 2019. We will keep you all updated on the results of the second application. DOE grants are just one of several options of financing available to us. We are working to create strategic alliances with other entities, which includes utilities, in order to receive future funding and cautionary contributions for our fuel development.

We still intend to meet 2 important upcoming corporate milestones: first, to begin irradiation testing of our fuel samples in the Advanced Test Reactor in 2020; and second, to demonstrate a lead test rod in the commercial U.S. nuclear power plant by 2021.

We currently anticipate our total spending for research and development to increase in the future. Total R&D is currently budgeted to be in the range of $15 million to $20 million for the next 12 to 15 months, and accordingly, our general and administrative expenses supporting this R&D activity will also increase. We anticipate this current R&D budget will enable us to reach our fuel milestones and is well within our financial mean, given our current balance sheet strength. We will continue to carefully monitor and manage all of our operating expenses now and in the future.

Now I'd like Barbara Kanakry, our Controller, to go over some select financial information from the third quarter. Barbara, over to you.

Thank you, Larry. We ended the quarter with $25.3 million in cash and cash equivalents compared to $4.5 million at December 31, 2017. We had a working capital surplus in Lightbridge of approximately $24.6 million and a working capital surplus of $1.5 million in Enfission, giving us a total working capital of $26.1 million in both entities at September 30, 2018. The $20.8 million increase in cash and cash equivalents for the 9 months ended September 30, 2018, was the result of receiving net proceeds from the sale of $27.6 million of common stock and proceeds of $3.9 million of Series B preferred stock, resulting in $31.5 million of total equity raises for the 9 months.

This cash inflow from financing activities was partially offset by net cash used in operating activities of approximately $5.3 million or approximately a monthly average of $600,000 of cash flow used in operating activities over the prior 9 months; and cash used in our investing activities, consisting of our investment in Enfission, of approximately $5.2 million.

During the 3 months ended September 30, 2018, Enfission incurred a reported net loss of $1.7 million, which consisted primarily of research and development expenses incurred for the design and fabrication of our metallic fuels. Under the equity method of accounting, we recorded our share of these expenses in Enfission as a single line item in our statement of operations, equity in loss from joint venture.

Now over to you, Seth.

Well, thank you very much, Barbara. We appreciate that update, and also thank you, Larry.

I'd like to open the call to your questions, while we pause for the operator Doug to -- well, first, pause for the operator Doug to review the procedure for asking live questions, and then we'll move immediately into questions that had been sent in advance and also the live questions by phone. Doug?

(Operator Instructions)

So while we're waiting for the live questions, David Waldman who you heard at the beginning of the call with Crescendo Communication, which handles our Investor Relations, will proceed with any questions that are coming in by email. David?

Thank you, Seth, and we appreciate all of the questions. We received a number of them in advance of the call. So our first question is, you mentioned that you'll be applying again for the next deadline, which is January 31. How many times can you reapply? And when will we know about the results?

This program is officially called DE-FOA-0001817. We have that number here. And under that, there is no limitation on how many times an applicant can apply or reapply. This FOA, as it's called for Funding Opportunity Announcement, is going to be opened continuously for the 5 years that started on December 7, 2017. And application deadlines are quarterly each year: on January 31, April 30, July 31, October 31. There's no obligation on DOE regarding the timing of their decision announcements after each of those application deadlines. But thus far, through these now 3 application cycles, the award announcements have ranged from about 10 to 15 weeks after the application deadline. This was the longest one at about 15 weeks. There's no guarantee that DOE won't continue that practice, but does seem to be about 10 to 15 weeks. There's a website we have. I can read it to you, but you could also just send a request to ir@ltbridge.com, and they could send you the link. But this is the entire rules of the program, if you want it. It's https://www.id.energy.gov/news/foa/foaopportunities/foa.htm. And again, if you want to see that and didn't get that, just send us through a request at ir@ltbridge.com. Next question?

Yes. Thanks, Seth. The next question is, why did the -- why did DOE reject the grant application? Was it a formality or technicality or a matter of potential ineligibility?

The DOE's consensus strengths and weaknesses of Lightbridge's initial FOA application are identified in the letter I read dated November 13, 2018. The letter's available as part of the 8-K filing from Lightbridge yesterday. We're also going to scan and post the actual original letter and attachment on our website in the Investor Relations part of the website as a PDF. If you scroll down -- I don't think it's there yet, but it will be today. If you scroll down on the Investor Relations page, you'll see some red PDFs. The first one is the Investor Presentation. I think it'll be the one right after that. We'll leave it there at least through Wednesday before Thanksgiving. For those of you who want the original, again, the only redacted thing will be the individuals' names and contact information in the letter. We understand that some companies basically are told not to bother to reapply. We have not received that message. The first page of the letter very clearly states, "After consideration of this feedback, you are eligible to resubmit your application." Generally, DOE's comments indicate that Lightbridge's proposed approach is well thought-out and would be conducted under proper quality assurance controls. DOE's comments indicate significant commercialization potential for Lightbridge Fuel and support for high-assay low-enriched uranium nuclear fuels. DOE indicated a desire for additional detail in the application relative to the proposed NRC licensing plans for both the Lightbridge lead test rod and lead test assembly deployment approach. While DOE stated that the application could not be supported within current priorities and available resources that they have, there's no indication that the application was ineligible. Given how much work the team there has to do each time they accept an application for review, I don't think they would've said we're eligible to reapply if they weren't serious about that. That's a lot of work for that team to get an application like this. It's a pretty substantial document. You could see they really dug into it in detail, and now we've got so much more to add. The total dollar amount that DOE granted this round was less than what was granted in the previous 2 rounds. And while the dollar amount we thought is confidential, it may have been too ambitious for this round, too high a percentage of the total amount the money they granted, and that might help explain the language about our application not being supported within the current Office of Nuclear Energy program priorities and available resources. But we think this is pretty clear where it said, yes, we can reapply. Next question?

Thanks. The next question, in what manners did the application not provide sufficient information to determine what steps need to be taken? And how will you address this for the next application in January 2019?

Well, Jim Fornof, who's in charge of our government relations work here for the program, will answer that.

Well, thank you, Seth. Just to point out, as we previously mentioned, at the time of our initial application, the Enfission joint venture team had not yet begun engagement with the NRC regarding the development and regulatory licensing of Lightbridge Fuel, particularly for the U.S. market. And as others have mentioned, the initial Enfission meeting with the NRC subsequently occurred in August, on August 15, and included some preliminary discussions on both the short- and long-term design and licensing activities for the lead test rod and lead test assembly deployment as well as the potential fabrication facilities for Lightbridge Fuel. With inputs from our utility partners, Lightbridge is continuing to develop these licensing approaches along with Framatome. And we believe that we can confidently say we can satisfy the DOE's request for additional detail on our next application.

Thanks. The next question. The Office of Nuclear Energy Congressional stated that, "The proposal could not be supported within the current Office of Nuclear Energy program priorities and available resources." Has Lightbridge sought clarification on this statement? And why do you think this comment was made?

We've had almost continuous engagement with DOE for years, and Lightbridge continues to engage with DOE, including regarding this grant process. And we will seek additional clarification regarding our application as appropriate and consistent with DOE rules. From the total size of the grants approved, we think DOE faced a limited budget for this third round of applications, which was our first. Evaluating these applications is a lot of work for DOE. As I mentioned, it's possible that there were limits on the numbers of dollars available. It's also possible, though, limits on the numbers of contracting officers. And with a bunch of previously denied applications coming back as resubmissions plus new ones, that could have been a constraint on resources of personnel there. But that's speculation on our part. We do not have that feedback from DOE or received feedback. It was disappointing to lose, but common for first-time applicants. So we'll seek clarification from DOE, but we don't take that language if the end of the document is overriding the clear language on the first page that says we're eligible to resubmit.

Thanks. We're going to pause with the prepared questions for a moment. Operator, if we can take one of the calls from the queue, then we'll read a couple of more questions that have been sent in, and then we'll open up for more live questions.

Certainly. Our first question comes from the line of Carter Driscoll with B. Riley FBR.

So obviously, the DOE grant's been a big focus. So just want to ask a couple of different questions that -- just have a follow-up, if I may. So you talked about potentially leveraging your relationships with the utilities, potentially to help you in this process. Could you drill down a little bit into what specifically they could help you with? Is it laying in their weight in terms of your technology advantages and/or may be addressing what would help you specifically address some of the concerns the DOE has? And then had a couple of follow-ups to that. Just talk about the typical type of back and forth for first-time application, as you mentioned, Seth, I think that it's not atypical to have it rejected, and then maybe the chances that you see of this may be potentially going beyond second application, if that's feasible, if you aren't fully addressed. So just trying to get a sense of the timeline, the probability for the success and the help utilities might be able to provide for you in the resubmission.

When we decided tendering to this Enfission joint venture with Framatome, this funding opportunity with DOE did not exist. It came along this year, and we jumped on it. And it's something that could have accelerated timelines and if we win next time, would accelerate timelines. But it doesn't preclude what we otherwise were planning to do when we launched this effort before this opportunity even existed from DOE. One thing I've always said is that, I think what DOE really needs to see in the end is what everyone needs to see. It's what I'll call the combination of supply and demand, and we just had tremendous success and progress on the supply side. We're partnered with the largest manufacturer and seller of nuclear fuel in the world. We're already working on the facility that will manufacture our commercial product in Richland in Washington state. In terms of providing this technology, we are really well along. The demand side, that comes down to the utilities. Now we're advised by 4 very large utilities that comprise half the U.S. market, and the U.S. market is 1/4 of the world market, so that's enormous. Our partner, Framatome, is ultimately majority-owned by EDF, which is the largest nuclear utility in the world and among other zones. EDF Energy in the U.K., which is called British Energy, and they're expanding internationally pretty aggressively, so that gives us other connections to utilities. And basically, what the utilities can do is, like you said, they can chime in certainly on technological advantages, they can address in letters to DOE as part of our next submission process, their feelings on addressing the concerns raised in this last letter and they certainly can do that as part of the process. I would expect that would happen. There were letters from utilities in this last round. They're very confidential between the utilities and DOE. But when we talk about a lead test rod program in 2021 and a commercial reactor powering a city in the United States, well, we don't have one of those. That's a utility. And I think a utility coming forward and saying we're taking that lead test rod program and we're putting it in our gigantic reactor that powers a major American city is going to be an enormous milestone, and that is coming up unchanged. We're actually just talking to that utility yesterday about that specific reactor and the program, and that's definitely moving forward. With that, let me just turn the question over to Jim Malone, who's really running our activities with utilities.

Well, thanks, Seth. I think you've captured the major highlights of what's happening regarding the aftereffects of the FOA application. I think the utilities are very strong supporters, especially with the attributes of our fuel becoming more and more recognized. They've seen the progress in the neutronic area, where we've completed modification of a Framatome code to be more specific regarding the dimension. So the original was one dimension. We're now completing the mods for a 2-dimensional model, and we will complete a 3-dimensional model next year. That's going to help with the work. It also helps with the Computational Fluid Dynamics aspect related to the way that heat is removed from the fuel and how the water moves through the assembly, staying in contact with the surface of the fuel to efficiently remove the heat. So I think we're well positioned to go back to DOE with direct responses to the concerns they expressed in their letter to us when they told us we have -- we're not successful in the first application. And I believe that the utility support will be there. As you mentioned, there are letters from each of the new fab members available to us that can be resubmitted, along with the second application. And I believe we've got a very good chance of success as we move forward with this process.

Is there -- Seth, is there -- it's just a follow-up. Is there a way to qualify the comments about the limited resources they have in terms of the competition for those dollars? I mean, do you know how to potentially benchmark your application versus what you may or -- you may know about some of the competing applications for those limited dollars and the potential for a second application to change their mind? I mean, is there a -- I guess I'm asking, is there a set day to deploy those funding dollars? Is it on a fiscal budget year and then those had to be replenished? Or -- so I guess it's not a 0-sum game. Or is it a 0-sum game? Or is there a potential within a specific time frame to know that you have jumped higher in the queue and potentially get some of those dollars?

Well, first of all, we don't know what the companies are that lost in the first, second or third round unless they won in the third round. We're the only company that has announced that we lost. From what we heard, there are a lot more that lost than won. So I can't really say what those other companies are. Secondly, all we could see is the aggregate numbers of what was awarded in each of the 3 rounds, and this was the least. We don't know why the amount, the dollars awarded in the program fell off so much this year. We do hear about other priorities of the Office of Nuclear Energy. We only know for sure when they act. But one of the things that we certainly hear a lot about and they mentioned in their letter to us is support for high-assay low-enriched uranium, and it won't surprise me if they're taking steps to prioritize getting that done and produced in large quantities, which would be fantastic for us. And if we do see developments from DOE in that area, I might take that over winning this application, actually, in terms of getting more quickly to large-scale commercial production of our fuel for utilities. In terms of the total dollar amounts they have for the year, they have a lot more than what they've given out in these 3 rounds. I think it's several times more. It's just what they're prioritizing within that to give to the applications and what they're prioritizing to give to 2 other activities that support nuclear energy. And that's in their discretion. But I don't think the constraint is in the dollars of the Office of Nuclear Energy has. I think it's within those dollars that they're allocating to the winners of this grant application process. And Jim Fornof, is there anything you want to add to that?

Well, no. I just would add, possibly, Seth, that we have gone back and looked at all the prior awards, not only in the absolute size, but in the trend of the awards, and just trying to stratify that between the -- there's 3 tiers in this program. There's a Tier 1, 2 and 3. We're in Tier 2 at this point. And this is, in fact, the lowest round that has been awarded. So why that is? We took guess, but we're not totally sure.

And is there a specific number that you applied for, a specific grant amount or was it just...

Yes. You have to apply for a specific amounts. We went big. It turned out to be, of the total amount they granted to all of the winners in the aggregate, what would have been a large majority of total amount that they got to be bringing out. And we were hoping that they were going to give out in the aggregate a lot more money this quarter, which they certainly have the budget for from Congress and in their office, but they just didn't. It could be that had we gone very small, we'd won, but that probably wouldn't been so impressive to you.

Okay. Just last one for me. If you're -- you've been generous with your time. So obviously, the UN proclamation of dire consequences certainly has more resonance in -- it seems to fall in deaf ears a lot of times in the U.S. or parts of the U.S. And I would always think that the DOE resiliency plan had kind of shaky legs, but it was potentially support for baseload energy, which clearly nuclear is and really the only clean baseload that's out there today. Can you just talk about the context of what you're hearing and thinking and seeing on the -- in the political dynamic domestically in terms of support for nuclear, leaving aside all the questions we've been going back and forth on the DOE side, in particular?

Yes. As we went through a few minutes ago with the Union of Concerned Scientists, they were NGOs, they were from traditionally antinuclear energy that are changing their mind, partly, if not largely, because of climate change reasons. About 60% of all non-emitting energy in the U.S. is from nuclear power, and it's pretty much that way worldwide. And there are some studies recently that basically show that renewables aren't going to help, it is that blunt, that for some time wind energy will net-net actually warm surface temperatures according to a new study from Harvard. And it basically, I think, has to do with pulling down warmer air and pushing up cooler air, and wind power will take too long before a net-net has a positive climate effect. And then solar, you could see in the cubic mile of oil study summary in our investor presentation, is just tiny in the amounts of energy it's going to produce compared to what the world needs. And both of these tend to be backed up with natural gas that operates at least 70% of the time, in most places, and only about maybe 30% of the time usually or less than that in most days of the wind or the solar providing energy. So every time you add renewables, you're actually adding emissions because most of the time it's natural gas emitting CO2 at half the rate a coal does, except there are other studies that show, well, it's worse than that because there are all these leaks along the gas pipelines and they might actually, in lot of areas, be emitting more CO2 than coal. So basically, nuclear power is necessary if we're going to have a shot at success on climate goals. There's not enough time to get to new kinds of reactors in the next decade or so to meet the goals. We have to get there with the current fleet of reactors by keeping them operating, by getting more power out of them, by getting longer fuel cycles to add non-emitting nuclear power and creating the economic case to build more. So I think that climate change is something that's becoming, clearly, with the Union of Concerned Scientists changing its position, really a driver in eliminating opposition to nuclear power and bringing about support for it. Why don't we go back, David? You said you had some other written questions and then we'll go back to more live questions.

Yes. Thank you. So we've largely answered this question, but in a little bit -- I think there's a little bit more specifics. You previously indicated utility commitment by the end of this year or early next year. Was that timeline dependent on the grant?

No. The time line for utility commitment for a lead test rod and lead test assembly program was not dependent on the DOE grant. We had hoped the grant would actually accelerate the timelines we've previously put out. As I mentioned yesterday, we actually were speaking with a utility -- with the utility that will host the test rod program, and that program is definitely continuing unchanged.

Okay, thank you. Our next question is, if you can address what dilution has occurred in the last quarter, why and how much you may need to further dilute?

Yes. And I'll ask the CFO, Larry, to take this.

Thanks, Seth. As you know, in our -- as we've stated in our past and current filings, we have an ATM facility with B. Riley FBR, and that facility allows us to issue and sell shares of our common stock. And we're very careful in how we use our ATM. And unlike other financing mechanisms, there's no discount to market and there's no warrants that the company needs to issue every time an issue shares with ATM. So this facility is important to us because it did allow us to put in that DOE grant application, and it allow us to resubmit the grant application in January of next year. So the ATM facility, we do use for those purposes. And I can't really comment on what levels we'll sell shares in the future. But I will note to our shareholders that we're very aware of the current stock price, and that weighs very heavily on our decision if and when we raise capital in the future through the ATM or other common stock financing vehicle. So that would be my answer there.

Okay, thank you.

Thank you. The next question is, will management be buying shares? And if so, when will this happen?

Well, members of the management team did purchase common shares in the open market during the last quarter. We don't announce when we're going to do it, but we do, do it periodically. I'll leave it at that.

Okay, thanks. Our next question is what will you do to avoid another reverse split?

There was also a question on last quarter's conference call on this subject. Our answer is the same. The answer is still no. We're not planning that. We disclosed last Friday in our 10-Q filing that we had received a deficiency notice from the NASDAQ because the closing bid was below $1 for 30 consecutive business days. We have 180 days, about half a year, to get back to $1 for 10 consecutive business days. And even after 180 days go by, we could appeal and show NASDAQ a plan to get the stock price over $1 of an additional 180 days. We're planning on hitting some important milestones that will do that. We'd also like to see these milestones get the stock price over $5 per share, which we think could help attract more institutional investors. It's what we hear from them.

Great. Thank you. Our next question is, are there any milestones that may be coming up in the quarter?

Well, let me just say, we continue to make significant progress on our fuel development activities at Enfission, and Andrey went through a lot of details on those at the beginning of the call. As we've done since the launch of Enfission in January of this year, we'll continue to provide detailed summaries of key accomplishments each quarter. These will be supplemented with press release as we do reach achieving milestones, and I'll just leave that at that. We're not going to announce in advance somethings, but we'll announce by press release when they happen.

Okay, thank you. If we could take a moment now, and we'll go to the next live question. Doug?

Our next question comes from the line of [James Anderson] with Lightbridge.

I have a comment and a question, kind of based on our discussion here. So I called the DOE about application rejections, and I was told those held applicants, they're ineligible and shouldn't reapply. The reasons would typically be due to requesting out of scope, like nuclear medicine or failure to prove your product will be commercially viable by the mid-2020s. Apparently, proving you're commercially viable is just as important as technical matters, and they said they want to keep the program moving and wouldn't waste their time or yours by encouraging ineligible applicants to reapply. So based on their reply, at a minimum, you're eligible for the grant assuming you can overcome their concerns. Now I would also argue while large dollar award would be helpful, even a small one, paired with the DOE seal of approval implicit in the grant, will be tremendous for shareholders. Now my question. So I frequently see GE, Westinghouse and Framatome, exclusive of Enfission, they have their own ATF concept headlining the DOE official accident tolerant fuel programs. They receive significant funds and resource from the DOE independent of the DOE gain and FOA programs. Is inclusion in this program an option for Lightbridge? And if not, why not? And I may have a follow-up question based on your reply.

Yes. Let me start and I'll ask Jim Malone to supplement, and then we'll get to your follow up. And just one quick comment. You were introduced as James Anderson with Lightbridge, I guess, being a stockholder. But there is no other affiliation. In -- we announced the initial concept of a metallic fuel for the power uprate for longer fuel cycle, the economic benefits, in 2010. And in March 2011, Fukushima happened, putting a tremendous focus on safety of reactors. And we knew there are tremendous safety benefits to this fuel that we were designing, that we were inventing, although at that point, we had only touted the economic benefits. And I think it was then in September of 2011 is -- there were hearings and discussions on Fukushima on Capitol Hill and a lot of focus on nuclear safety and concern for reactors. Senator Dianne Feinstein made a comment about, "Well, what about the fuels? Can't you just change the fuels so this kind of thing doesn't happen?" And as a powerful senator on relevant committees, her saying that helps spur the DOE to look into what I think her office helped comp with the term of accident-tolerant fuels. And only the marketing people in nuclear power would start the name of a new product with the word accident. But in any event, the accident-tolerant fuel concept started at DOE as an idea on how to basically avoid what's called steam-zirconium interaction in this loss of coolant accidents that result in free-floating hydrogen that turns the inside of your reactor into the Hindenburg with all this hydrogen that then blew up the 4 buildings at Fukushima. And we were not part of that program. We were actually designing a fuel-free economic benefits that went dramatically beyond that on the safety benefits. They did much more than what the accident-tolerant fuel program was looking for. And at that point, GE and Westinghouse and Framatome were not involved with this DOE accident-tolerant fuel program. Utilities were not involved. But then they later got involved when the DOE started providing funding, and they've been receiving funding, they've been testing. I've got to say that it hasn't really met the initial goals. They were hoping for 72 hours of what's called coping time when an accident is happening and you have 3 days to get the cavalry there, bring back a power, et cetera. But now, it looks like they maybe even get 3 hours, not 72. What we're doing is much more significant. We were not part of that program. Our focus adds load following, economics, power uprate, all sorts of things that accident-tolerant fuels don't. And we do a very serious utility support. So we were not part of that program. DOE, in some of its presentations, includes Lightbridge Fuel, sometimes as one word Lightbridge, sometimes as 2 words Light Bridge, included on slides about accident-tolerant fuels, and the NRC has done that as well. But we're not officially part of the program. We do not seek to officially be part of it. We are working on this separate program. But let me ask, Jim. Do you want to comment?

Thanks, Seth. I think it's important that we were actually presenting information about our design at an EPRI meeting in March 2011. The meeting was in Atlanta. And it was unfortunately or fortunately, however you want to look at it, simultaneous with the events at Fukushima. So there was a lot of emotion and concern in that meeting. And as a part of it, the idea of accident-tolerant fuels was kind of launched, and I think that influenced Senator Feinstein to pursue and fund the option. DOE formed a committee to downselect some designs with respect to the apparent promise of those designs to provide the kind of coping time that Seth just described. We were not selected on that. Any fuel that contains zirconium was rejected out of hand. So that's unfortunate, but that -- it is reality. As we've moved forward since the events at Fukushima and the initial setup of the accident-tolerant fuel program at DOE, we have been included in industry forums and participate actively with the NEI Accident-Tolerant Fuel Working Group. It's important because we are now recognized as a competitive source of fuel and are capable of surviving in a similar time frame. I think we can get it beyond that. We're doing some things in engineering space right now that should help us further the performance of our fuel in what are called beyond design-basis accidents, like the total station blackout at Fukushima. So I think we've got a good opportunity to continue to raise our profile. There are people within DOE who recognize the attributes of our fuel. And there are a substantial number of influential people at utilities beyond our new fab group who also recognize the value added of having the metallic fuel. So I think we're on the right trajectory, and I think we can continue to push forward, make our milestones and show the industry and our investors that there's really merit in this program.

So in contrary to what was stated, I'm not a Lightbridge employee, I'm not a nuclear engineer. But -- so -- but just understanding from a layman perspective. You're using zirconium. There might still be some lingering concerns. Why not you use chromium, like Framatome uses it. I just -- I don't know. Is that an option? Would it benefit you? And I'd like to slip in one other thing. You've been tweeting about DOE environmental assessment related to HALEU, (inaudible), obviously is something you're excited about. And could you talk a little bit about that? Like -- and it was mentioned here in one of the benefits of your letter, too. So you talked about chromium and maybe just kind of what's going on with HALEU and the industry.

Let me take the chromium piece first. The reason the chromium is being looked at by some of the people in the design process, at Enfission as well as at some of the other vendors, Framatome specifically, the chromium is intended to protect the zirconium from the attack by the steam that results in the release of hydrogen, the formation of zirconium oxide. So we are looking at that, though we ask the additional question, is chromium the right coding? Are there other things that can be successfully applied to the fuel that would perhaps provide the same protection from the steam-zirconium reaction? And we're looking -- we had meetings with MIT engineers a few weeks ago in Boston, and they listened carefully what we were saying, and we've now got their heads working kind of overtime to see if there's an alternative that might be more suitable. It could be something of a microstructure change, adding something like microdiamonds to the coding, maybe a better way to do it because that would put a moderator in the form of carbon from the diamonds into the solution, rather than a small penalty and enrichment that's required to support the chromium application.

Yes. I'll also say that, James, when you talk of chromium coding, you still talk of the same old fuel rod there's always been. It's uranium dioxide pellet inside a zirconium alloy tube, the same as it's been since basically the launch of the industry and with this SiN chromium coating on the outside of the rod. We could put a chromium coating on the outside of our rod, too. We bring what we think are superior benefits even without it. But as Jim said, we could, but we're also looking at other coatings that might be better than chromium coatings. We don't have to do sort of what the old people did, looking at it when they first jumped on this. We think there might be better technology. We have some pretty good fuel expertise we tap into here, some of which Jim mentioned. On the high-assay low-enriched uranium, HALEU, as some people are calling it, this current fuel, these uranium dioxide pellets in the zirconium alloy tubes, is at its limit. The industry needs what that fuel can't provide, take it what's called higher burnout, longer fuel cycles, more power output, better economics, can't do it. Accident-tolerant fuels won't do that. It won't make the fuel do that. Our fuel will. If high-assay low-enriched uranium can be used at a high enough assay up to almost 20% within current fuels, the utilities would be doing it already. They just can't. The fuel can't handle it. The rods would crack. Our fuel can handle it very well. There's also support at DOE for advanced reactors, what are called Generation IV reactors that hopefully will be coming out in droves decades from now. But until then, we've got these light water reactors and heavy water reactors. So DOE likes that our fuel can use this high-assay LEU that they want to be developing anyway for these advanced reactors, and they're very clear about that in the letter. So let me end it with that. I'll thank you for your questions. We'll go on to others.

Our next question comes from the line of [Maurice Green], a private investor.

Yes. With regards to the current state of the industry and the general gestalt or feeling on Lightbridge Fuel designs from the industry itself and other government agencies, may be increased safety or otherwise proliferation-resistance of Lightbridge Fuel provide leverage for grants over other applications; or otherwise accelerate product development and commercialization in some manner.

Well, we think so. We think the nuclear industry is already the safest industry in the history of the United States. And we're...

One sec. Sorry to interrupt. I don't want to backtalk here. But I know that's -- but that's not the general image that's projected for the layman.

No, absolutely. And look, so we're trying to take what's already the safest industry where nobody has ever been killed by radiation in the history of this industry and make it even safer. And the trick is how do you make these reactors much more powerful, run the fuel longer, do the kind of things that we're talking about while not only maintaining the current safety standards, but actually dramatically improving them. And that's what our fuel does. And in addition to that in terms of no Fukushima-like events, that is the issue you raised of proliferation-resistance or nonproliferations, whereas the paper published in the journal affiliated with the European Nuclear Society in April showed that this is the most proliferation-proof nuclear fuel that there is. There's nothing else they could identify. They called it useless plutonium in terms of making a bomb. So DOE and industry definitely do care a lot about safety. They definitely care about nonproliferation. But in the industry context, they put it in terms of, well, we want the economic benefits that we're paying for. And if you could bring us the safety and nonproliferation benefits too, that's great, we're certainly not going to take anything that slips on safety. But if you're making it even safer, all the better, absolutely. And you'll see in the DOE letter there, there was a lot of high praise for attributes to this fuel.

Well, my question was with regards to how does this provide you, this extra safety? How does this provide you with a competitive advantage over other applicants to get grounds or perhaps how does this provide you with a -- just any advantage over -- or any -- how does this provide you with a more competitive market position? That's my question.

Look, we've designed this fuel to bring greater safety advantages than anything ever has done or anything out there could, and we did that partly because we think that there's a market for that, if that helps. And certainly, when we look at the U.S. industry, it's very safety-conscious. That's very good. But in particular, as we're looking at countries that don't have reactors now, that are thinking of obtaining their first reactors, including countries that share that Eastern Coast along the Pacific that Fukushima earthquake and tsunami came from, that are very concerned about safety, that they're overseas markets where this issue really resonates very strongly. It's not just our domestic market. And there certainly is some contact we've had from some overseas markets that are following this. So we do think that there are always market advantages to having the best safety and having the best nonproliferation, which the Lightbridge Fuel does.

Okay. Last question before I'm going to give the mic to the next one. Is the -- does this open up a greater market in developing nations?

Well, we think so. I think that whether a developing nation chooses to obtain a nuclear power program for the first time has a lot of different reasons behind it. But definitely, for a population that has never before had nuclear power, especially in some small countries or an evacuation zone, it could be the entire country like Singapore, they're very concerned about it. So yes. And I'll say we worked tremendously in the United Arab Emirates with the people there that implemented a fantastic nuclear newbuild program. It's really world-leading what we're -- what they're doing there. We were very honored to be part of the program. And part of it, on transparency, was just so much of what we would call town hall meetings with the local population that the leaders of the nuclear program had there and continued to have, and really engage the population, don't hide from it, explain the safety benefits, explain the nonproliferation. They've really taken a lot of steps in the UAE to address these issues. And yes, we think our fuel will help in those kind of meetings with local populations. It's not just governments. It's governments making their populations feel comfortable, and we think this fuel will go a long way to that.

Thanks. And in the interest of time, I'm going to read one more question that's been sent in electronically, and then we'll turn the call back to management. Is there a quarterly budget set up to get the fuel tested in a commercial reactor?

Yes. Well, let me say that, first, we'll turn the call back to Doug for a couple of more live questions. I know we're over, but I suspect -- I don't see in the queue, but I suspect there are some more questions. We'll have to get at least 1 or 2 more in. But -- so is there a quarterly budget set up to get the fuel tested in a commercial reactor? What's typical in this industry is that we operate on an annual budget cycle. The budget's approved each calendar quarter in the industry, sort of, on the utilities side. Lightbridge does annual budgeting. And this detailed budget spending tie to specific R&D activities, project execution road map and associated milestones. So is there a quarterly budget set up to get the fuel testing at commercial reactor? That's more on the commercial utility side, and we're definitely working with a specific utility on that right now. That was part of a call we had with one yesterday. That's all we'll say about it. We're not going to disclose their details of their quarterly budgeting, their -- the dollar amounts, but let me say sufficient to do our lead test rod program. Why don't we go back to Doug, if there's another live question?

(Operator Instructions)

And David, did you have any more e-mail questions.

No, I think that, that completes the electronic questions that we've received at this time.

Okay, great. Well, look, everybody...

It looks -- so we do -- hold on one second. We have one more person that would like to ask a question. Doug?

Our next question comes from the line of [Kevin Nicholson], a private investor.

Yes. I wonder if you'd care to comment on the apparent disconnect between the amount of energy, the amount of patents, the amount of time, the amount of enthusiasm that is generated from the conference calls and the stock price for a common investor. To me, it seems that the message, for whatever reason, as diligently as you've been pursuing things, doesn't seem to resonate with people. And I wonder if you could comment on that.

Yes, it's a good question. And 2 of the things I'd mentioned during this call, I'll dive into a little deeper here. First of all, institutional investors. A lot of them tell us that we do talk to them when they talk to us. They need to see a $5 a share price, and we want to get there organically. They don't need us to get there organically, but we'd like to get there organically. And I think institutional investors would be -- more than we already have, would be a big, big part of it. The second is customers. As I was talking earlier about supply and demand, working with Framatome, Enfission, we have so much success and substance on the supply side of this product. But on the demand side, we clearly have a letter from utilities to the NRC showing their interest. We clearly have a lot of public support from utilities, but not really a contract with a real skin in the game, real resources from the utility. I think this is the kind of thing DOE might be looking for, where they stand up and say, "Here's the reactor, here's the schedule, here's the resources, here's our interaction with NRC and here's the date, and it's no later than 2021, and there's Lightbridge Fuels going in our commercial reactor." And wow, that combination of our partnership with Framatome producing it and a major utility powering a major American city putting that in, in a very public process. And by the way, we've talked with DOE about, maybe up to the very top, a public appearance to that kind of announcement that they love to see that kind of thing. That -- I think that would help. So I agree with you about a disconnect. And one thing I talked about in a call over a year ago was this notion that I think the stock prices almost looks like options pricing. The people might pay a certain amount for a lottery ticket where they might make a lot of money, but might lose all their money, but they're just not going to pay a whole lot of money for the lottery ticket. And I've kind of like how I think people have been viewing our stock without that customer over support. We're seeing more than you see, but I think that's going to change. Versus, instead of options pricing, what a stock price should reflect, discounted present values of future cash flows. Well, future cash flows from what? From utilities paying to buy this fuel billions of dollars of this fuel in large numbers of reactors. And I think as the investors start to see, wow, there are future cash flows, they are from Fortune 500 and Fortune 100 companies, these utilities, I think that will change. So I think we've got to deliver on getting the customers showing up and showing the market that the future cash flow from them is really there. I think that's kind of what DOE is saying, and we're well on the way to doing that. So let me ask for Doug or David, any last questions?

There are no other questions at this time. I'd like to hand the call back to you for closing comments.

Okay. Doug, thanks to you, and David, thanks to you, and thanks to everyone who's asked questions and listened in on this call or online. These were fantastic questions. We're always here to answer. Just contact us at ir@ltbridge.com or you can call 1 (855) 379-9900.

And again, thank you very much. Goodbye.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.