Lightbridge Corp (LTBR) 2018 Q4 法說會逐字稿

Greetings, and welcome to the Lightbridge 2018 Fourth Quarter Earnings Conference 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 2018 Year-End Business Update Conference Call.

The company's press release was distributed after the market closed yesterday and can be viewed on the Investor Relations page of the Lightbridge website at ltbridge.com. If anyone has any questions after the call, you can 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, Senior Vice President and 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 and involve certain risks and uncertainties that may cause actual results to differ significantly from such estimates. These and other risks are set forth in more detail in Lightbridge's filings with the Securities and Exchange Commission. Lightbridge does not assume any obligation to update or revise any such forward-looking statements, whether as a result of new developments or otherwise.

You can 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 submit them at any time during the prepared remarks or during the Q&A period. Third, after the prepared remarks, telephone lines will be open for live questions.

Now here is Lightbridge's CEO, Seth Grae. Please go ahead.

Well, thank you, David, and good morning, everybody. So while we've made significant progress particularly during 2018 towards commercialization of our metallic nuclear fuel, we share your concerns about the stock price. I think the market needs to see a contract with a major commercial nuclear power plant to show that customers will put real skin in the game and more importantly, put our fuel rods in their reactors. That's coming. We had hoped we'd have that contract early this year. It's taking a bit longer. We are working with the host utility to finalize the contract.

Today, Enfission announced hiring Jaime Zuloaga as Quality Assurance Manager. We're happy to have wooed him to the team with his tremendous experience from GE and Westinghouse. Jaime's work is now a key part of licensing the fuel with the U.S. Nuclear Regulatory Commission and selling it to utility customers.

On this call, we'll describe important recent progress and other major upcoming milestones.

I'd like to turn the call over to Andrey Mushakov, Executive VP for Nuclear Operations, who will review the work we're doing on the fabrication of our fuel and specific advantages we have recently undertaken at Enfission. Andrey?

Thank you, Seth. Let's start with 3 highlights of our fabrication activities. First, we obtained the initial quotations for long lead equipment items, which are currently under review. Second, we've undertaken pre-industrialization process development activities. And third, the first phase of work with the University of Lille in France has been completed.

Turning next to our fuel design activities. First, we have nearly completed the material test plant, both in-reactor and outside the reactor plants. Second, we have completed the preliminary computational fuel dynamics analysis for the lead test assembly. And third, we completed the initial study of burnable absorber material effectiveness in Lightbridge Fuel.

Turning to regulatory licensing activities. We continue the development of fuel design limits in support of licensing activities, and we have initiated the fabrication facility licensing activities.

Back to you, Seth.

Well, thank you, Andrey. At the end of January, we submitted a new grant application to the U.S. Department of Energy. We remain encouraged by our prospects to receive DOE grants and we are encouraged by our interaction with utilities, which we think will be helpful for receiving DOE grants. We expect to hear back from DOE in about late June.

While we are hopeful to receive grants, the government will act in its independence and we can't guarantee that our application will be approved. Our business is not dependent on these grants and we continue to make progress with Framatome on the Genesis Project. If the grant is awarded, it will help accelerate our projected time line. We look forward to providing further updates as soon as practical.

We continue to maintain a strong patent portfolio. During the fourth quarter, we received a Notice of Allowance from the Canadian Intellectual Property Office for our divisional patent application, which covers our four-lobe metallic fuel rod design and the related manufacturing method comprising co-extrusion of a single billet assembly through a die to form a four-lobe helically twisted metal fuel rod. Canada has 19 reactors currently in operation. Throughout the year, we have announced several other key patent awards. In the third quarter, we announced that we have received notices of allowance for 2 key patents from the U.S. Patent and Trademark Office. The first U.S. patent covers an all-metal pressurized water reactor fuel assembly design, incorporating multi-lobe fuel rods arranged in a mixed gridded pattern. This latest design incorporates major enhancements completed over the past several years in response to specific feedback from the utility members of the Nuclear Utility Fuel Advisory Board. In particular, a mixed grid pattern within a 17x17 pressurized water reactor fuel assembly envelope, which makes the entire fuel assembly all-metal. It replaces an outer row of conventional uranium fuel rods that we have included in an earlier design with multi-lobe metal fuel rods in this new design. 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 use in CANDU heavy water reactors. According to the World Nuclear Association, there are 49 CANDU-type pressurized heavy water reactors in use around the world, including the 19 in Canada that we mentioned.

In the second quarter, we were awarded a key patent relating to our metallic nuclear fuel assembly design. This patent extends Lightbridge's patent portfolio coverage in the United States to cover an entire metallic fuel assembly design for Western-type pressurized water reactors which comprise 2/3 of all reactors in operation worldwide. Similarly, in Japan, we received a Notice of Allowance for a new patent related to our innovative metallic fuel rod and fuel assembly design. Japan currently has 39 operable nuclear reactors with 9 of those reactors having been brought back online and a further 16 in the process of restarting. As a result, Japan represents an important market for our fuel.

We also received a Notice of Intent to Grant from the European Patent Office for our patent application which covers our four-lobe metallic fuel rod design and related manufacturing method. Expansion of our IP portfolio is central to our strategy as we advance toward commercialization. Overall, we believe we have built a very strong patent portfolio that will help establish and sustain our leadership in key global markets.

We continue to see increased governmental support for nuclear energy in the U.S. and around the world. That support includes funding for advanced technologies as well as production of high assay low enriched uranium for nuclear fuels, including ours. Last month, I was invited along with other nuclear power industry executives to meet with President Trump at the White House. During the meeting, one of the main topics of discussion was how the U.S. nuclear power industry helps bring the strongest nonproliferation, safety and security standards to global markets. We also discussed the strengths of nuclear suppliers from across the U.S. industry and how these strengths contribute to the domestic industrial base that is vital to American companies competing and winning overseas.

We appreciate the strong support from the President and his administration for the nuclear power industry and agree that a strong industrial base that is aligned with our national security and economic policies serves to advance innovative technology, modern infrastructure and high quality of life. We are grateful to have had the opportunity to state the exceptional benefits of Lightbridge Fuel directly to President Trump.

On Monday, I participated in a nuclear energy panel discussion at the U.S. Capitol building. We shared insights on the role of nuclear energy in geopolitics and the role that international nuclear energy cooperation plays in influencing global nuclear security, safety and nonproliferation as well as changes in social norms and governance.

Last month, I was honored to have been reappointed by the U.S. Secretary of Commerce, Wilbur Ross, to the Civil Nuclear Trade Advisory Committee or CINTAC as a representative from Lightbridge Corporation and the small business companies in the U.S. nuclear energy sector. We had our kickoff meeting at the Commerce Department in Washington on Tuesday. As a member of CINTAC, I am able to participate in the committee's duty to advise Secretary Ross on the development and administration of programs and policies designed to boost the global flow of U.S. civil nuclear products and services.

We're currently witnessing bipartisan congressional support for nuclear power as there is a growing need for reliable and sustainable baseload energy with low emissions. Importantly, Lightbridge Fuel enables an existing nuclear power plant to produce even more noncarbon energy than it can with current fuel.

In addition to the government support, we are garnering industry backing. As I mentioned, we are now engaged in substantive discussions to finalize our first commercial utility agreement. Given recent government actions, coupled with strong industry backing, we have more confidence than ever in the commercial potential of our fuel.

We are also pleased that Larry Goldman and Andrey Mushakov had the opportunity to present at the Gabelli & Company Fifth Annual Waste Conference on Tuesday in New York when I was at the CINTAC meeting in Washington, where they discussed the advantages of our technology. Gabelli & Company is a premier investment firm.

Our nuclear fuel designs are attracting attention at both the commercial and governmental levels since our technology holds significant promise to enhance reactor safety, improve nuclear power plants' economics through increased power output, improve proliferation resistance of spent fuel and reduce the amount of waste.

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

Thank you, Seth, and good morning, everyone. For information regarding our fourth quarter financial results, please refer to the earnings release we filed yesterday and our Form 10-K that we will file later today for all of the financial results and details for the year.

We ended the year with $24.6 million in cash and cash equivalents compared to $4.5 million at December 31, 2017. Our working capital at December 31, 2018 was $24.3 million. The $20.1 million increase in our cash and cash equivalents resulted from the net proceeds from the sale of approximately $29.5 million of common stock and net proceeds from the issuance of approximately $3.9 million of preferred stock during the year ended December 31, 2018. This cash inflow was partially offset by net cash used in operating activities of approximately $7.4 million and our capital contributions for our capital investment in Enfission of approximately $5.6 million. We used cash during the year ended December 31, 2018 primarily to fund our research and development expenses and general and administrative expenses. We did not have any consulting revenue for the year ended December 31, 2018 and presently, we do not expect to have consulting revenue for the next 12 months.

As I stated in the prior quarter, one of the key reasons we raised money in 2018 was to put ourselves in the financial position required to receive non-dilutive funding and support from DOE and to execute on our R&D milestones. We are financially able to meet DOE minimum cost-sharing requirements that recipients of DOE funding must satisfy in order to be eligible for DOE funding. In support of our long-term business plan and future financing with respect to our fuel development, we plan to create strategic alliances and cost-sharing contributions by obtaining additional funding from others in order to help meet all of our corporate R&D milestones.

Now I'd like Barbara Kanakry, our Controller, to go over some select P&L financial information from the year-end.

Thank you, Larry. Our research and development expenses for the year ended December 31, 2018 were $3.5 million compared to $2.3 million for 2017. This increase was driven by increases in payroll and consulting expenses in supporting the research and development activities conducted by Enfission.

General and administrative expenses for the year ended December 31, 2018 were $6.7 million compared to $4.4 million for the prior year. This increase was due to an increase in professional fees of $0.8 million, an increase in payroll and benefits of $0.7 million and an increase of $0.7 million in stock-based compensation, which was due to the accelerated vesting of performance-based stock options issued in 2017.

Other operating expenses were $4.8 million for the year ended December 31, 2018 related to the reported loss from the Enfission joint venture of $5.8 million under the equity method of accounting. This loss consisted primarily of research and development expenses, offset by $1 million in income from the research and development activities provided to Enfission.

Now over to you, Seth.

Well, thanks, Barbara and thanks, Larry. So I'd like to open the call for your questions. We'll pause while the operator, Doug, reviews the procedure for asking live questions and then we'll move immediately into questions being sent in by e-mail. Doug?

(Operator Instructions)

So while we're waiting for the live questions, David Waldman with Crescendo Communications, which handles our Investor Relations, will go ahead with questions coming in by e-mail. David?

Thanks, Seth. The first question we received was, since the beginning of 2019, there seems to be a Middle Eastern theme in several of the press releases and company announcements. Could you please elaborate on these efforts and comment on the short-term, long-term potential of the Middle Eastern market for Lightbridge and Enfission?

Yes. Well, first of all, the only operating commercial nuclear power plant in the Gulf region and the Middle East is in Iran at Bushehr. So we're not going to be doing any business there anytime soon and don't have any discussions with that one operating plant. Who knows, maybe in the distant future that will be possible, certainly not now. Lightbridge wrote the strategic plan for nuclear power for the United Arab Emirates and advised the UAE nuclear program for a decade. We're very close to the program, which is building 4 reactors at the Barakah site in Abu Dhabi. I was out there last in January at the site. And that's certainly a potential market for our fuel in the future as are all pressurized water reactors, like the reactors being built there. There are also reactors being built in Egypt and sort of the Greater MENA region as it's called, Middle East, North Africa. And those are potentially usable for our fuel as well as reactors being built in the more broad region in Turkey on the Mediterranean and Black Seas, and those are potential markets for our fuels.

But I'll say that when we look at Enfission, it's not just for these large pressurized water reactors and boiling water reactors, these gigawatt-plus giant reactors. Enfission, with our great partner, Framatome, is also for research reactors, and we're participating with a poster at a conference going on right now in Jordan and in that area, research reactors are a target for us. Particular for this question is small modular reactors. And around the Gulf region and the Middle East, we're seeing a ton of interest for small modular reactors, which can be a very important market for industrial sites, remote areas, water desalination. And I expect we'll probably see more small modular reactors around that region than large reactors. So that will be an area of focus for us, too, in the region as that proceeds. But right now these are only in what I'll call the discussion stages, but I think could possibly proceed pretty quickly.

We'll read one more question then we'll go to the live Q&A and then we'll come back to some of the pre-submitted questions. Do you feel the safety and nonproliferation characteristics of the Lightbridge Fuel design tipped the scale for President Trump's support of nuclear power in the Middle East?

No. I think I'll leave it to the President to speak -- to what he supports and doesn't in the Middle East and elsewhere. I don't know that the administration per se is supporting nuclear power in the Middle East. I think the administration is carefully looking into whether and how the U.S. industry can participate in international projects. And I think that the President and the administration's support is more for U.S. industry and supporting jobs here at home and yes, supporting safety and nonproliferation in the Middle East which can be brought better by American companies than by anyone else. But no, I will not go far to say that any opinion the President has is based on Lightbridge Fuel for the Middle East. That I think would go certainly beyond my purview to say that. So I'll leave that to the President to speak for himself.

Doug, let's go to our first live question.

Our first question comes from the line of [James Henderson], a private investor.

Seth, though the Enfission JV took longer than expected, you provided clarity why it was taking so long and proved it would complete. But with this contract, we're only getting vague, noncommittal language, like you're working closely with Framatome, and this raises substantial doubt anyone is willing to actually pay for your fuel. We have no way to benchmark or quantify your progress. Your reassurances aren't enough. Westinghouse, GNF, NuScale and X-energy have all publicly charted their respective progress in detail with numerous government and commercial victories along the way. The Enfission JV was seminal, but the absence of publicly demonstrable commercial or government commitment suggests obstacles exist for Lightbridge in spite of your best effort. You've spoken with NUFAB for years. You promised a contract is coming quarter-after-quarter. It's been long enough. What is taking so long? The stock price is at all-time lows. The market has lost faith in the commercial viability of your fuel and business plan. The fuel may be revolutionary but why can't you close a contract for it?

Well, James, you're saying that this contract isn't going to happen would be as accurate as you're saying the Enfission JV won't happen. That's inaccurate. Yes, the Enfission JV took longer to get done than we thought it would. We launched on January 25 of last year. But that wasn't really a delay because we and Framatome worked out ways to work together while that was going on. Similarly, we and utilities are working together. And in nuclear, there's just some things we can make public at times and there are things that we can't.

And to continue on your inaccurate statement, but to try to explain a little bit from our side. This is extraordinarily complex legally. These are very complicated transactions. We are talking about processes from producing nuclear fuel with utility buy-in to the quality assurance in producing that product, in transporting it in casks and packaging to a reactor site, in bringing that into the reactor site and then storing there and then at a refueling outage through the spent fuel into the active core of the reactor. And then leaving it in there for at least 18 months without that reactor being interrupted in its operations with that fuel in the reactor. And getting data from it, using it for our licensing. And as we announced today with Enfission's hiring of Jaime Zuloaga, that's part of this QA program. He's a leader from GE and Westinghouse in this area. That's important to this effort. We wouldn't have announced that if we didn't have work for him. Think about that for a second. We haven't announced anything. So just like we announced the Enfission JV, this contract will be coming, too.

Our next question comes from the line of [Peter Kent], a private investor.

I was wondering if you could just identify the specific steps that would need to be taken before the utility contract could be won.

Yes. The utility contract is in active negotiation right now in final stages. We are talking about a Fortune 500 company in a matter that will not just be news for Lightbridge but for the utility as well. The first time in the history of the commercial nuclear power industry, a metallic fuel being used in commercial reactors that have only ever used oxide fuel. A fuel bringing an ability to provide a power uprate that no reactor has ever seen before and transition to a new fuel. A fuel that, in this particular demonstration, will bring data and blended with demonstrations we'll do in a research reactor at a national laboratory under the quality assurance program that lets the utilities and the Nuclear Regulatory Commission accept the data, license then lead test assemblies, full commercial fuel bundles of our fuel in commercial cores of reactors for that final step before full - what's called batch reloads, a full commercial operation of our fuel.

So I'm not going to give you, Peter, too many specific steps in the negotiation, but I will say from a nondisclosure agreement and a set of terms like you've never seen before, to a lot of details before this company puts this fuel for 18 months, this utility in its reactor before it gets to touch the fuel again 18 months later in its multibillion-dollar plant, this is something very serious. The work is ongoing with the utility, between Enfission and the utility, the negotiations, the discussions very, very carefully. And this is getting done. And we do expect to meet our time lines.

(Operator Instructions) Our next question comes from the line of [Mark Peter], a private investor.

Needless to say, it was kind of addressed on some of the earlier questions. But our frustration is founded in the fact that many of us have lost tens of thousands investing while the economy is doing quite well and there's a lot of opportunity out there. So my question is more specifically related to, as you quote the discussions to finalize our first utility. So our concern is just that, have these begun? I mean, these discussions, substantive discussions have begun? Is that really -- can you just give a little clarity behind the timing because we do have a reverse split that's looming very closely.

No. We are not doing a reverse split. And we don't have it looming very closely. There will be a date in May that the NASDAQ notifies us of 6 months. And based on where we stand as a company, we expect a 6-month extension given right away by the NASDAQ. And we're already confident of that. And no, we're not coming up on or doing a reverse split.

On the stock price, you and everyone on this call has absolute sympathy, absolutely agrees and feels it exactly the same. And we're looking to turn that around.

In terms of the utility, we have met directly with the CEO of the parent company who is on board for this contract. We have met with all of the key players at the utility who are working on this contract. And we're dealing with a specific plant, with a specific reactor that the fuel will go into. This will be a contract between Enfission and that utility. I don't want to give an impression that these are sort of discussions, like we're talking to them and this is a good idea. This is a very, very detailed negotiation that we are way into. We are working with the best and most experienced lawyers on these contracts as is the utility. This is a very serious and important matter for the utility. And no, this is not just something that's sort of at the discussion level market. It's something that is way, way into the negotiation process.

I'll ask Jim Malone, our Chief Nuclear Fuel Development Officer, to chime in as well as Jim's heavily involved in the contract negotiations.

Thanks, Seth. I understand the concern that some folks have. And having been in the business of nuclear power now for 50 years, I've seen just about everything that you can imagine. And this fuel is a necessary and important contribution to the industry, not just for a specific reactor in a company. But in order to introduce it, we have to go through a very complicated contractual vehicle that Lightbridge and Enfission really have not done. The partners have. And we're fortunate to have our Framatome partners. That's playing a significant role here.

The utility has dedicated resources to the negotiation process. And that's a very strong signal. They do not do that if they're not serious about it. They don't have the people power, the time or the money to waste if they're not serious about it. And I can tell you for certain that this particular utility is very serious about this. They want it to succeed, but they have to make sure that their own interests are covered in the contractual arrangement. So that's part of why it takes such a long time to get through the negotiation process to everybody signing on the dotted line, put the contract into effect.

We'll go now to the next pre-submitted question. As far as the January DOE grant submission goes, today's press release stated that response is expected within the next several months. Have you received any communications from the DOE to explain why this time frame differs from the 10- to 15-week response for the first submission?

Let me start and I'll turn it over to Jim Fornof who's working on this. On Wednesday, the DOE announced $19 million or so of grants under the Funding Opportunity Announcement from companies that have applied by the October 31, 2018 deadline. We applied by the January 31, 2019 deadline, 3 months later. So if the timing continues, which it may or may not, we would expect roughly late June to hear on our application. DOE has very independent process. It's up to them what resources they're devoting to reviewing applications and to putting them on or off other projects. And some of these applications just take very long time to go through. These are very detailed, complex nuclear technology applications that, in many cases, require using DOE facilities that need to be checked if those are available, et cetera, or move around other projects. So it's possible that we'll hear sooner than late January. It's possible we'll hear later than late January, but I don't think it will be too much off that timing. Jim?

I think you meant to say June.

June, that's what I meant, June, yes.

Those would be my comments exactly, Seth. The last round took just under 5 months to get announced. If you apply that to ours, we'd expect to hear in the next couple of months, but they're under no obligation or schedule. They could be sooner or later just as you mentioned. But no, we have not had any formal feedback outside what we hear in the press.

I will state however that we -- I was just going to say, I do think we did a good job of addressing their concerns from the last round, had specific concerns that we met. Of course, it's a function of timing and their budget. So we believe we did a good job and we still have a strong expectation that we'll be successful.

Thank you. Doug, go ahead.

(Operator Instructions) Our next question comes from the line of [Ralph Thomas], a private investor.

In a previous conference call, you had mentioned that your stock price isn't tied to the uranium spot price. So I just want to know if you could explain some indicators that are most important to increase the urgency and usefulness of your technology. In other words, what will increase the demand and utilization of your technology, supply and demand drive growth in investor demand? I noticed, you had a joint venture with Framatome back in January you announced and the stock price is down now to $0.50. So I just want to know how all this is going to be tied in to better fix the stock price going forward.

Yes. And the Enfission joint venture with Framatome is on what I think sort of the supply side that we're going to manufacture and sell this fuel and what the market needs to see is on the demand side, utilities paying for, ordering and using the fuel. We expect this fuel will bring tremendous value to the nuclear power industry and that Enfission will capture a great deal of that value which will pass through to Lightbridge and Framatome, the owners of Enfission.

And while -- I won't say the uranium spot price has nothing to do with our fuel because investors will do what they do and algorithms will do what they do in trading stocks. And there could be people who are looking at uranium spot price. There could be people looking at number of reactor orders in the world. There could be people looking at all kinds of things. Generally, we believe that the existing fleet of reactors around the world, the hundreds of operating reactors, are the main part of our market. And we're starting with the United States with the Nuclear Regulatory Commission license partly because there are the most reactors here out of any country in the world, 98 large operating reactors plus 2 under construction, and partly because the NRC license is very marketable around the world. It doesn't get us approved in any other country, but it is the most highly valued license when other countries review where we are licensed and review our technologies and decide to license it themselves.

So we have about almost a quarter of the nuclear power in the world in the United States and about another quarter of it in Europe. And those are sort of where our project is centered. And then we're also, as you heard, patented and patenting all over the world in all of our major markets. So I'll say, Ralph, the bottom line to your question is when the demand side shows up, I don't expect that this first contract with a utility is suddenly going to be a silver bullet and then we're done. It's the first step and the first of many contracts and revenue that will grow from utilities. But thank you for the question.

We'll now turn to another question that was submitted. In general terms, can you comment on the compensation package for both the Enfission board members and employees and how the incentive package is structured?

Yes. I'll start with the board members. I'll turn it over to Andrey on the employees and incentive packages. On the Board of Directors, there's no compensation at all. I'm a member of the Board of Directors. Jim Malone is a member of the Board of Directors; Andrey Mushakov, a member of the Board of Directors, all from Lightbridge. We're compensated by Lightbridge, not from Enfission. And it's the same for the 3 members of the Board of Directors appointed by Framatome: Jean-Francois Marrot, Pierre Beaudoin and Bob Freeman. They are compensated by Framatome and not by Enfission. And we don't expect that, that will change. That we're paid by our respective companies that appointed us. Andrey?

Yes. Right now, Enfission does not have part-time or full-time employees. What it does have is basically a number of project engineers and project managers that are seconded from both Lightbridge and Framatome to kind of oversee and manage the project. So there is a kind of a PMO office that has several people. There's project director. There are some project leaders. And those positions are filled by people from both Lightbridge and Framatome. There are also some consultants, including the QA manager who was just appointed who is an independent contractor to Enfission. So in the future, Enfission may have part-time and full-time employees who are going to be paid directly by Enfission. And that is part of our long-term plan and strategy. But at this point, basically Enfission is staffed by personnel from both Framatome and Lightbridge. There's no additional compensation for board members by Enfission.

Right. And the PMO is the project management organization and that's headed by Jim Fornof, who's in the room here. And I'd say the incentives come from Lightbridge and from Framatome to their own employees who are working on Enfission.

Our next question comes from the line of [Sam Wright], a private investor.

Seth, would you mind giving us a brief overview of the costs and benefits that each party of the utility contract would expect to incur, both in terms of cash flow and expenses and noncash benefits and expenses?

The cost and benefits from each party, I think that's getting into a little more detail than we could reveal publicly right now. We certainly have in the negotiations a lot of information on that. We could speak a little more generally on that. I'll ask Jim Malone if you want to start on that.

Not an easy question to answer at the moment, as you say, in-depth. I would say that the costs of the current ongoing work are well-known and keep track or they march well and sync with the road map that we have that determines what needs to be done at what point in time and sequence is very important.

Also, I guess, you can look at the cost from the point of view of the people. And at the moment, that's one of the larger costs. That's an ongoing cost. We have costs related to procuring equipment, but equipment procurement is a onetime cost as opposed to the ongoing cost of the people engaged in doing the work here at Lightbridge, at Framatome in Lynchburg, Virginia and at Framatome in France and Germany. So there's a large contingent of people compensated by their current company working on the Enfission project.

The benefits -- and it's not clear to me how you are using the term benefits. If we're talking about benefits for the people working on it, those are dictated by the company policies of their direct employer. And I'm not in a position to address those. If we're looking at the benefit of the fuel, that's another topic, and that we've discussed that in the past with respect to the excellent nonproliferation credentials for the fuel, the excellent performance in upset conditions or off normal conditions that a power plant with a fuel performs very well, as even has been evaluated by a third party like EPRI to show that it does have superior performance in the what are called Chapter 15 transient events where the plant is upset, for example, loss of a coolant pump by either loss of power to the pump or loss of a rotor. So there's a lot of analytical work that goes on to determine the benefits of our fuel versus the standard uranium dioxide fuel.

We have another question that was submitted electronically. Are you still expecting income from the contract with the utility for the lead test rod assembly?

Yes.

Okay. Thanks. Doug, we can take the next live question.

Our next live question comes from the line of [Mark Lowes], a private investor.

I'm a long-term investor back from the days of Thorium. Seth, my question is specific to the optimism and tactics you're thinking about with regards to the stock price in relation to the NASDAQ because I have been part of those reverse splits. Right now the market cap actually is below your cash reserves that you have, which is quite surprising to me. So tactically, do you believe that it's the announcement of the contract that will sustain or increase the stock price to enable you to remain compliant or you're looking at other mechanisms to achieve that? And if you are, just curious to know what those might be.

Yes. And I'll turn this over to our CFO, Larry Goldman, who knows the specifics of NASDAQ listing. But if we think of a stock price as a discounted present value of future cash flows, people have to believe that there are future cash flows and be able to evaluate the risk of the timing and the likelihood of them coming in and the value of them, the costs of getting them. And so yes, that's why I say this first contract will be very important to get some confidence of those future cash flows and start to outline them. But then a series of contracts leading up to very, very large commercial agreements with full cores of reactors supplied by Enfission ultimately.

On the NASDAQ listing, there's a 6-month process that comes up in May for the stock price being under $1. And now Larry will go through why we expect there'll be 6 months beyond that and what progress we're making. During this current time, we don't expect the $1 will be a problem for us on this stock price, without a reverse split. Go ahead, Larry.

Yes. Thanks, Seth. So we need to have a closing bid price of $1 for 10 consecutive trading days to come back into compliance for the NASDAQ. So as Seth mentioned, we'll have up to November, the first week in November of 2019 to come back into NASDAQ compliance. And with the upcoming milestones that the company is working to achieve, we expect not to do a reverse stock split and to meet that $1 closing bid price for 10 consecutive days.

There are no other questions in the queue. I'd like to hand the call back to management for closing comments.

And David, any last questions sent in electronically?

No. We've covered everything. Thank you.

Good. Good. Well, thank you, everybody. We'd like to thank all the investors. We look forward to providing additional updates in the near future. In the meantime, our lines are always open at ir@ltbridge.com and at 1 (855) 379-9900. Thank you, everybody. 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.