Lightbridge Corporation (LTBR) Q3 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Lightbridge 2017 Third Quarter Earnings and Business Update Call. All lines have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host David Waldman with Crescendo Communications. Sir, the floor is yours.

Thank you, Mike. Good morning, and welcome to Lightbridge’s third quarter 2017 business update conference call. The Company’s third quarter business update 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 questions after the call, you may contact Crescendo Communications, 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. Linda Zwobota, Chief Financial Officer; Jim Malone, Chief Nuclear Fuel Development Officer; Andrey Mushakov, Executive Vice President for International Nuclear Operations; Jon Johnson, Senior Vice President and Nuclear Regulatory Expert; and Jonathan Baggett, Vice President and Deputy Nuclear Quality Assurance Manager. 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 the goals or events in the future. This presentation is based on our current expectations and involves certain risks and uncertainties that may cause actual results to differ significantly from such estimates. These and other risks are set forth in more detail in Lightbridge’s filings with the Securities and Exchange Commission. Lightbridge does not assume any obligation to update or revise any such forward-looking statements, whether as a results of new developments or otherwise. You can participate in today’s call in two ways: First, you may submit questions for management in writing to ir@ltbridge.com. If you’ve already submitted a question, we thank you. You can 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 is Lightbridge’s CEO, Seth Grae. Please go ahead, sir.

Thank you, David, and good morning, everybody. Today, we announced three binding agreements with AREVA NP. These contracts form the foundation for and are integral part of our joint venture arrangements with AREVA and represent a remarkable milestone for the company. As they enable us and AREVA to immediately advance development of our metallic fuel, and represent a concrete step towards monetization of our intellectual property. In AREVA’s own words, in today’s joint press release, these agreements will help accelerate the design, licensing and fabrication work. Both companies teams and experts from fuel design, manufacturing, regulatory licensing are already mobilized as we speak, and excited about this project. The agreements include: a research and development services agreement, a co-ownership agreement and an intellectual property annex. These agreements are an integral part of the upcoming joint venture and document the final agreement on intellectual property rights, joint fuel development and regulatory licensing activities to bring the fuel to market. The three agreements govern ownership of intellectual property, including a grant of royalty-based rights to use existing intellectual property and co-ownership on a 50-50 basis of new intellectual property, resulting from future joint fuel development activities. With the royalty bearing exclusive license to the co-owned new intellectual property to be granted to the joint venture company once it is illegally formed. As a result, the joint venture arrangement with AREVA creates two future income stream for Lightbridge: first, royalty fees paid by the joint venture from future sales of fuel assemblies based on Lightbridge metallic fuel rod technology; and second, dividends or other income from a 50% equity stake in the joint venture company with AREVA. The strong support, we have witnessed from AREVA is further validation of our technology and the need to make existing reactors significantly more competitive with other sources of energy. This is especially evident now more than ever, as we witness well-run U.S. nuclear plants closed early due to new construction – or new construction projects even canceled for economic reasons. These agreements follow an earlier contract, we announced in September of a binding head of terms agreement with AREVA Inc., which will form the basis of the joint venture operating agreement. The joint venture operating agreement is the last of remaining agreement that needs to be signed to complete our joint venture arrangement with AREVA Inc. We expect to sign the joint venture operating agreement before year end, and then, formally, launch the joint venture company in the first quarter of 2018. We would like to thank that the team at AREVA for their commitment to commercializing our innovative fuel technology. Partnerships like this are vital to ensure that today’s nuclear energy facilities have the technologies they need to operate safely and efficiently for decades to come and can continue to provide low carbon and reliable electricity. We’re also making progress towards radiation testing of our fuel samples under commercial reactor operating conditions at the Halden research reactor in Norway. Towards this end, Lightbridge and ISA recently signed additional test orders for design and fabrication of a second radiation rig that will host another four low bundle of Lightbridge fuel rods. On the customer side, we continue to work closely with four of leading U.S. nuclear utilities to gain valuable feedback from development of our fuel technology. In particular, we are working towards formalizing an end-user agreement with one of these utilities for a demonstration of Lightbridge-designed nuclear fuel in a U.S. commercial nuclear power plant. The timing of finalizing these arrangements is contingent on first signing the JV operating agreement with AREVA, so the utilities will know, a nuclear fuel manufacturer is contractually committed to providing the fuel. Given our progress, we remain confident in our ability to demonstrate operation of the first Lightbridge fuel rod in a commercial reactor in the United States as early as 2021. We also continue to expand our intellectual property protection. Most recently, we received a notice of allowance in the People’s Republic of China for another key patent relating to our innovative metallic fuel design, which represents the Company’s fourth patent in China, as we prepare for full scale deployment of our fuel designs in Asia and around the world. This follows a Notice of Allowance in South Korea from the Korean Intellectual Property Office for key divisional patent covering our fuel assembly design for Western-type pressurized water reactors. In Europe, we received a Notice of Allowance from the European patent office for an additional patent relating to Lightbridge’s innovative metallic fuel design that covers an alternative embodiment of a multi-low fuel rod design. To-date, we have received numerous patents covering our metallic fuel rod design, and now have very broad intellectual property protection in our key markets, including the United States, Canada, China, Japan, South Korea, Russia, European Union member countries and elsewhere around the world. Turning to developments outside Lightbridge, there is several positive announcements from the U.S. nuclear industry. These announcements include, first, the U.S. Department of Energy granted loan guarantee for the two Westinghouse AP1000 reactors that are under construction at the Mobile site in Georgia. Second, Secretary of Energy, Rick Perry issued a notice of proposed rule-making to the Federal Energy Regulatory Commission to improve resiliency of the electric grid, which would result in higher pricing for nuclear-generated electricity. And third, Connecticut Governor, Malloy signed a legislation allowing state officials to change the rules for how electricity generated by the Millstone Nuclear Plant can be sold effectively competing with renewables. Worldwide, we’re seeing growing support for nuclear power. South Korean President, Moon Jae-in accepted the findings of the government panel to complete two KEPCO APR1400 reactors at the Shin Kori site, the construction was to be permanently suspended. American Environmentalist, Michael Shellenberger of the Breakthrough Institute in San Francisco has been traveling the world attracting much press attention in his speeches supporting nuclear power, including recent talks in the UAE and Australia, and stressing the importance of nuclear power in preventing climate change. There’s also been a renewed push for small modular reactors. British Ministers are preparing to revive the UK’s efforts to create a new generation of small scale nuclear power plants. Our metallic fuel will be well-suited for the water-cooled small scale reactors. The need for clean carbon-free baseload energy is more pressing now than ever. This was highlighted by a recent BBC report that pollution levels in India’s capital have reached 30 times, the World Health Organization’s recommended safety limit. And United Airlines have suspended flights to New Delhi due to such unhealthy air. Also, as reported recently by The Associated Press and others, France’s Environment Minister is backing down on promises to sharply reduce nuclear power production, so that the government can concentrate on reducing fossil fuels instead. Even in the U.S., as the House of Representatives plans to trim wind tax credits, the latest bill unveiled by House DOP leaders extended an additional estimated $6 billion tax credit for the nuclear industry. And interestingly, the New York Times read an article about how renewables are not bringing the world much closer to achieving climate goals. The article points out that over the past 10 years, governments and private investors have collectively spent $2 trillion on infrastructure to drive electricity from the wind and the sun. As pointed out in the article, environmental progress says that a $2 trillion figure exceeds the total cost of all nuclear plants built today or under construction adjusted for inflation. And despite this, nuclear still accounts for almost 20% of all energy produced in the U.S., exceeding all sources of renewable energy combined, and nuclear provides about 60% of all carbon-free non-emitting energy in the United States. I’d like to congratulate, Ambassador Graham, Chairman of Lightbridge’s Board of Directors, and Scott Montgomery, a prominent Physicist on their new book, which makes a compelling case for nuclear power. The book is called, Seeing the Light: The Case for Nuclear Power. Cambridge University Press in England just published the book. If you have an opportunity to read the book or hear Tom Graham at a book event, I think, it will help you understand why it is important for United States and to the world that there be substantial growth of nuclear-generated electricity. We appreciate your patience as we continue to progress towards commercialization of our technology into an improving and growing global nuclear power industry. We look forward to announcing significant milestones in the months ahead. Now I’ll turn the call over to Lightbridge’s Chief Financial Officer, Linda Zwobota, to summarize the company’s financial results for the quarter.

Thank you, Seth. The September 30, 2017, we had cash and cash equivalents of approximately $4.2 million, as compared to approximately $3.6 million at December 31, 2016. The $0.6 million increase in cash and cash equivalents resulted from the sale of approximately $4.4 million of common stock during the nine months ended September 30, 2017, partially offset by net cash used in operating activities of approximately $3.6 million, and cash used in investing activities of approximately $0.2 million. We used cash during the nine months ended September 30, 2017, primarily to fund our general and administrative expenses and for research and development. We had approximately $3.6 million in working capital at September 30, 2017 as compared to working capital of approximately $3.4 million at December 31, 2016. Stockholders’ equity at September 30, 2017 was approximately $5.5 million compared to stockholders’ equity of approximately $5.6 million at December 31, 2016. For the third quarter ended September 30, 2017, net loss attributable to common shareholders was approximately $1.8 million, or a loss of $0.16 per share. In the same quarter of 2016, the net loss attributable to common shareholders was $2.1 million, or loss of $0.44 per share. Revenues were not significant in the quarter’s ended September 30, 2017 or 2016, as we have shifted our focus from our consulting business to our nuclear fuel. Stock-based compensation expense was $0.6 million for the nine months ended September 30, 2017 compared to $0.9 million for the nine months ended September 30, 2016. For the nine months ended September 30, 2017, the Company’s cash flows used in operating activities were $3.6 million versus $3.9 million used in operating activities for the same period of 2016. The cash was used primarily to fund general and administrative expenses and for research and development. I will be available for your questions during the next segment of today’s presentation. With that, back to you.

Thank you, Linda. So let’s open the call to your questions. In addition to asking live questions by telephone, you can also submit questions in writing to ir@ltbridge.com. We will pause, while the operator reviews the procedure for asking live questions.

Thank you. The floor is now open for questions. [Operator Instructions]

So while we wait for live questions, David Waldman, who you heard from before who’s with Crescendo Communications, which handles our Investor Relations, will proceed with any questions by e-mail. David?

Thank you, Seth. Our first question submitted in advance was the following. In regard to the fact that due to many in Exelon and Southern Company are advising Lightbridge, is this an ongoing relationship or is it a one-time guidance, when you received when you first developed your fuel. If the advisory relationship is ongoing, what is the nature and need for it to recur?

Let me start and then I’ll turn it over to Jim, who runs that activity for Lightbridge. Jim Malone, our Chief Nuclear Fuel Development Officer has approximately monthly calls with each of the members of the nuclear utility fuel advisory board. So it’s definitely an ongoing relationship. It’s a very, very important ongoing relationship to the company. Secondly, several times per year, there are calls or meetings with specific subject matter experts, in particular, licensing experts and our fee experts in addition to the nuclear fuel experts, but also other experts from the utilities. And finally, at least annually, there’s a full formal meeting of all the members in the same room that sometimes at our office. The recent meeting, the last one was at the headquarters of one of the utilities. But let me turn it over to Jim to describe in a little more detail the interaction with the utility.

Thanks, Seth. The relationship between Lightbridge and the Nuclear Utility Fuel Advisory is an ongoing one, as you indicated. It’s very important to us. Because it gives us two things that we really need to have as we continue to develop fuel. It gives us the voice of the customer as to what are their needs and desires and how can the fuel will be designed to meet those desires and it also helps us in the licensing arena. The utilities have been really supportive with regard to conversations with the Nuclear Regulatory Commission and helping us to prepare the Lightbridge documentation. And now, we also have the participation of our joint venture partner AREVA supporting that. So we’ve got a very strong relationship in all those areas, but the most important thing is that new fab continues to dedicate time and efforts to the fuel, and they’re really enthusiastic about it.

Thanks, Jim. And I’ll mention, a year ago, in November, last year, we filed a document with the SEC on Form 8-K indicating that we’re signed the Letter of Intent with a major utility is actually one of these four lead test assembly contract for the first commercial-type lead test assembly’s of Lightbridge fuel in one of their reactors in the U.S. With that, I’ll let’s David go on to any other questions by e-mail, and then we’ll ask for any live questions.

Yes. We actually have some live questions teeing up, right now. So Mike, if you can open up to the live questions. We’ll come back to the pre-submitted questions.

Our first question comes from Peter. Please state your question.

How are you doing Seth?

Hello, great. How are you doing?

Good. Question, with is AREVA, when you – what type of money are you going to get from them, so you don’t have to dilute the stock anymore?

Right, great question. Well, let me start with AREVA’s contributions thus far and now going forward in our joint work that started today, it’s tremendous and bring massive capabilities beyond the capacity of Lightbridge. And the person from the business side, running this at the Company’s Andrey Mushakov, of our EVP for International Nuclear Operations. I’m going to ask Andrey to address that question.

Yes. Absolutely. Seth, as you previously pointed out, AREVA really brings a lot of very important and a very significant nuclear fuel expertise. They also have obviously existing customers in The United States and across the globe to whom they’ve been supplying conventional fuel for many, many years and decades. So they have tremendous relationships and they have existing intellectual property that they’re going to make available to us. In particular, I want to point out certain key elements of intellectual property that they bring to the table to our joint venture that Lightbridge and Lightbridge’s shareholders are going to benefit tremendously from its analytical models that are certified by the U.S. Nuclear Regulatory Commission as well as other regulators in other countries in Europe and Asia, et cetera. Analytical models they used by regulators as well as fuel lenders as well as utilities to stimulate an model how the fuel behaves inside of the core of the nuclear reactor. And it’s an extremely important elements and part of the safety analysis and every single aspect of regulatory licensing of the reactor itself as well as new types of fuel. Typically, it takes hundreds of millions of dollars over 10-plus years to develop analytical models and license them by regulators. It’s very costly and time-consuming process and AREVA is going to make those analytical models available to us. And they already run some analysis and simulations, and good in neutronic, thermal-hydraulic, fuel performance, some other simulations and modeling relating to our fuel to confirm that’s basically their models can handle certain, sort of, minor modifications our particular fuel rod design and fuel rod geometry. So that’s an important element that they bring to the table. And in addition to that, obviously they have thousands of employees and they have real experts. They’ve existing sort of fuel assembly design what we have at Lightbridge is really our focus and our key expertise has been on the fuel rod design itself. The fuel assembly design had a conceptual fuel assembly design that now, AREVA, working with us can take and really make into complete fuel assembly product that’s going to be ready for commercial deployment. There are a lot of different tests and experiments and simulations that’s going to basically supporting the complete fuel assembly design and support in a regulatory license application and documentation that utilities are going to submit to the U.S. Nuclear Regulatory Commission. So we can benefit from their tremendous knowledge and different types of experiments that they’ve previously designs and performed in support of conventional uranium fuel assemblies and they can apply all that knowledge to our fuel assembly design. And have the fuel assembly that the utility customers have full and complete confidence that is going to perform as advertised and AREVA is also going to provide manufacturer warranties for those assemblies. So really benefit tremendously from the intellectual property, the expertise as well as, so additional cash resources that they’re going to bring to the table as well. So it’s going to be combination of both in-kind and cash contributions the joint venture. As we previously disclosed, it’s a 50-50 joint venture and the both cash and in-kind contributions from both entities are going to be balanced. So that’s an important element and part of this joint venture arrangements with AREVA.

So you don’t see any more dilution right now?

Well, in terms of dilution, if Lightbridge is going to continue raising additional equity through equity, sort of capital raise efforts. There may be some dilution, but in terms of dilution by herein AREVA as part of the joint venture, the dilution is going to go down tremendously because obviously, AREVA is going to contribute a significant amount of both cash and in-kind services and intellectual property.

All right. So AREVA is going to pump a lot of money into the company?

They said, yes, it’s a combination of both cash and non-cash and it’s a 50-50 split.

Okay.

Okay. Thank you, Peter. And next live question operator?

Okay. Our next question comes from [indiscernible] of Frederick Capital. Please state your question.

Yes. I have a few questions. First, congratulations guys.

Thank you.

And it was answered by the last question, but I still don’t – I think investors would benefit from natural time line and actual costs. What are the estimated costs to get this into Halden for example? What are they?

Okay. This is Andrey Mushakov. I can try to address your question. So we’ve been working with our team at AREVA on specific detail cost estimates and timeline estimates. As we previously discussed, some of those cost estimates as well as schedule estimates needs sort of additional validation in terms of some scoping studies that we’re beginning to do right now. At this point, what we have is in terms of equipment, what goes into manufacturing of fuel samples is obviously, a lot of different pieces. So we need equipment piece, make sure we have the right equipment. Number two is facility. Make sure that we have the right facility that’s going to manufacture the fuel and the facility’s license and then, there’s also, obviously, some labor and material costs that are involved. So what we’ve been doing with AREVA over the past six months to nine months is really going through each and every single one of those elements and trying to estimate and make sure that we have a very good estimate for each of – and every one of them. So depending on which particular sort of facility is going to manufacture of a Halden fuel samples and the type of equipment facility already has and the type of equipments we may have to procure in addition to what’s available. The cost estimates can be from several million up to probably $5 million – to maybe $5 million, something like that.

Well, I was under the impression I thought, I heard on the previous call that it was $70 million?

No, not for the Halden fuel samples. You’re probably talking about the lead test assemblies, the entire fuel development program that to bringing this fuel to commercial reactor.

That’s the entire joint venture with AREVA, and that will include contributions from the utilities towards that, that will be paying for lead test assemblies toward that as well.

Right, right. It’s completely different scope of work that you’re referring to versus the Halden samples. Because Halden samples are going to be an important element to generate initial data for how our fuel is going to perform, that we can use to justify commercial size fuel samples that we’re going to be putting in the commercial U.S. reactor afterwards. So…

So then, theoretically, if it is $5 million, let’s say, just to get the fuel samples. And you guys have $4 million in cash. And it’s 50-50 with AREVA, theoretically, you’re not that far?

Correct.

Yes, we have in the bank what we need to do that.

And when would you anticipate this being ready for implementation at Halden. Is there a timeline or…

Well, let me start by saying that what’s been done in Halden already include that they’ve made mark up samples of the fuels. They’ve been handling with our machinery as we discussed today, there is second irradiation they’ve been preparing for even additional testing there. And before I turn it over to Andrea for more detailed answer, I’ll say, this is now being blending into a much larger testing program. We are looking at other places too, including getting data from the first rod in a commercial reactor in the U.S. as soon as 2021 and now that we are planning on that, there are some things we had planned at Halden that we don’t need. It’s better to get the data from an actual commercial reactor powering a city the U.S. So it’s not just race to Halden. It’s the race to commercialization as fast as possible that we’re optimizing.

If I could just add another question and then I’ll just get back into the queue. And why – I don’t quite understand, why utility would pay you prior to licensing?

Well, Jim used to be the Head of the Nuclear Fuel for the largest nuclear utility in the U.S., Exelon and the successor is on the Nuclear Fuel Advisory Board, will people around the table I mentioned here, I used to the word energy that they’re going to get energy out of this fuel assembly that they’re going to sell. But Jim, let me turn it over to you why utilities will pay us for this.

It’s absolutely correct that the utilities will pay and I think we put my utility had back on for a second. They may negotiate from a position of strength that they do not want to put any money and we should go find the money, but they realize that their participation is a signal to the market support that’s not only technical, but also from the financial side, there is financial merit as well as the technical merit in the field. And that’s a message they want to get out, because the utilities have a vested interest in broader acceptance of nuclear power in getting that kind of commitment from them indicates to the markets under the nuclear regulatory commission and to the Department of Energy that this is something that’s what interesting and they’re willing to do it and willing to help to advance the cost of fuel to get it into their reactors at a commercial level.

Even if it’s not been proven to be viable?

Well, I would suggest that subsequent question. I was going to address that. But we are very confident that the fuel is viable. We have database information from the Russian Icebreaker utilization of similar fuel with over 3,000 fuel assemblies consumed by that program and it performed very well. It did some things that no one would expect it to be able to do with regard to surviving upset conditions. So that is significant from the nuclear regulatory position – nuclear regulatory commission’s point of view, but it’s also important to remember that there are, as Andrey mentioned, a lot of people at AREVA and they did a lot of work, technically evaluating the fuel prior to being willing to make the commitment to us. So they have use their computers and their finite element models to validate the performance of the fuels under various conditions and they believe that they’ve bettered it thoroughly in technical space. So between ourselves and AREVA, we’re quite confident that the fuel is going to work.

That’s actually very, very encouraging. Would there be a time you might suggest when our utility would make this offer or proposal?

I hate to commit to a timeframe on their behalf, but let me put it this way. We are discussing with them even as we speak.

I’m going to get back in line, let you answer some more question, but that would be I think the biggest milestone in the company’s history. Thank you.

Thank you. And operator next live question please.

Sure. Our next question comes from Jonathan Ariel. Please state your question.

Good morning. So follow-up on what Peter and Fred were asking about. If I understand correctly, your expenses to bring Lightbridge to the finish line with the fuel will be approximately $40 million. Is that correct? And two, how you plan to meet those expenses?

Okay, thank you, Jon. This is Andrey Mushakov again. As I pointed out earlier right now, we’re scoping out with AREVA a specific cost estimate. There is a lot of uncertainty associated with certain aspects, such as Nuclear Regulatory Commission’s time lines for review and applications. Obviously, NOC regulatory licensing experts at AREVA, and they’ve a team of those experts, who will work with U.S. Nuclear Regulatory Commission on a day-to-day basis, have been extremely valuable and important and their contribution and feedback have been tremendous, trying to narrow down what those timelines look like as well as cost estimates look like, because obviously, cost estimate also depend on the time lines. So to answer your question, if you look at what’s been done in the past with respect to new types of fuel designs and changes to existing fuel designs, you would typically have roughly $100 million program overall. There is some plus and minus a range of maybe 20% or something like that depending on the specifics and specific changes, et cetera. So with respect to our program, the total cost is probably going to be in the same ballpark. The final number is going to, again, depend on how – how much risk there is and how much uncertainty there is, but roughly, they said, typically, those programs are around $100 million, plus or minus 20%. Now Lightbridge is not going to be the one of the entity that’s going to be funding this program. As I said, this JV with AREVA is a 50-50 joint venture company. So we will be getting a combination of cash and noncash contributions from AREVA as Jim Malone pointed out earlier, U.S. utilities future customers of our joint venture are also going to be expected to contribute significant amount of cash towards this program. So there is scheme and the game for everyone involved. We also intend to work with the U.S. Department of Energy and it’s national laboratories to perform some work at those facilities and we can benefit from DOE funding as part of that effort. So we have a combination of different sources of funding and it’s not going to just Lightbridge that has to put in all of that funding.

But it seems that there will be a considerable amount of funding that will still be needed from Lightbridge, say about $20 million?

Depends on how much funding we can raise from other sources. As I mentioned, utility funding as well as DOE funding as well as combination of leverage and AREVA funding. So yes, I mean, at this point, I wouldn’t be willing to give you a specific number because there are so many variables and we’ll just have to see how successful they are in getting funding from utilities and from DOE and other sources. Because as Jim pointed out, utilities are really excited and willing to take on some risks to make sure we can accelerate this program and get the fuel to the reactors as soon as possible. And we also believe that there will be interest from the U.S. Department of Energy in getting collaborating with our joint venture and becoming a part of this program. So depending on what those entities are going to contribute both in-kind and in cash, the fundings that would be required from Lightbridge is a function of that.

Okay. Thank you.

Thank you. And David, why don’t we go back, so we don’t ignore any sent in by e-mail. And then we’ll go back to live questions. What’s the next one you have from e-mail?

Okay. Thank you. The NRC may take long time before it provides final approval has Lightbridge or it’s partners considered pursuing regulatory approval with the fuel overseas to speak commercialization and gain footholds in areas where nuclear power is growing rapidly, such as Asia?

I think that the news some people have read about slowness of NRC, it relates more to what people are calling advanced reactors, whole new kinds of reactors that other companies are developing. I think the NRC part is a light water nuclear regulatory agency, pressurized water reactor and boiling water reactor, nuclear regulatory agency. That’s exactly what our fuel is for. Our experience with the NRC have not us to believe that there will be any kind of significant delay and we’re certainly with utilizes and AREVA working with some of the most experience invest in our sea exports here – that there are. And in this room Jon Johnson who was a Head Nuclear Regulator at the NRC. The quality assurance program that we have and that AREVA has is designed to meet the NRC standards and we are, again, very well familiar with that by people who have been on both the NRC side and industry side. The United States has the largest nuclear fleet in the world. We are intending to hit this one first. We have about a quarter of all of the worlds reactors and the NRC license is the single best thing we could get to bring overseas to expedite licensing from other agencies. So we’re not planning to start with other nuclear regulatory agencies, we’re planning to get these licensed by the NRC and everything that is now happening with AREVA and with their licensing experts gives us a lot of confidence that we will. But as Jon Johnson just briefly describe a little bit of your background and your position now.

Okay, Seth. Yes, I was the Deputy Director of Nuclear Reactor Regulation for the NRC. And from my experience, the NRC, the testing that we’re planning to do in Halden and the analysis that Andrey Mushakov mentioned that the modeling that AREVA has basically will probably be needed to be done in any country that would license this. So I don’t really think that it would help us in terms of a time line to try to get this licensed in another country because the NRC would probably want to see the same kind of testing that we already plan to be doing. So I think, it would actually maybe even slow things down because our primary market as Seth indicates is here. So the NRC will – is fairly experienced that reviewing license amendments for lead test assembly’s, the demand by utilities for license amendments of this kind is fairly well known. And as Seth indicates, the recent concerns about long licensing, times and reviews of new plant designs are primarily for like faster reactors, [indiscernible] reactors, these kind of high temperature gas reactors and tyre reactor plants. So the licensing time line for a lead test assembly to be inserted in the same reactor in the same location is going to be much less complex.

Okay, great. And why don’t we go to the next live question.

Our next question comes from James Anderson. Please state your question.

Hello, Seth. I have two questions today. Your recent SEC filing indicates a commitment that Lightbridge purchase $3.3 million R&D services from AREVA. Can you explain why this purchase commitment exists? Though AREVA brings a lot to the table and we hear about 50-50 sharing. The price continues to languish. And there is concern on various investor forums that this indicates, the JV is more of customer relationship on behalf of Lightbridge with AREVA than a shared path to commercialization. My second question, your recent SEC filing introduced new milestone requirements for performance-based option holders. One is that Lightbridge secures at least $2 million investment from a nuclear industry entity other than AREVA by December 31, 2019? Why not get this investment from AREVA, which would further solidify your partnership and offer additional validation for the fuel? And if not from AREVA, what might change that'd introduce new lines of investment interest that haven’t existed to date in spite of your large stated potential compared with your low market cap? Thank you.

Let me take one quick point on your second question. I’ll turn it over to Andre for the first and Linda for the second question. But that the compensation committee of independent directors of Lightbridge working with independent compensation consultant came up with the milestone. And I understand deliberately it didn’t include AREVA as part of the milestone because it would show more industry buy-in, if it came from someone other than AREVA and it came from AREVA, that would be great, but that won’t rise to the level of milestone board wanted to see of additional major industry in the game of support for Lightbridge. But for your first question, we’ll turn it over to Andre.

Thank you, Seth. Yes. So there is a commitment of contributing $3.3 million for services that are going to be formed by AREVA and its engineers as well as subcontractors. Lightbridge is going to be services under that R&D services agreement. And there is also going to be basically AREVA’s contribution both in terms of cash as well as non-cash. So when you look at $3.25 million, this is just Lightbridge’s share of what we are committing too. In reality, the scope of work is going to be significantly higher because, as I said, this plate here is a 50-50 joint venture between Lightbridge and AREVA. So they’ll be doing jointly with AREVA more than the Halden samples as we discussed here, they’ll be a lot of regulatory licensing work that needs to be done quite quickly in the near term. So we can basically go and meet with the U.S. nuclear regulatory commission as soon as possible early in the next year. We expect some support from U.S. nuclear utilities, who are going to basically work with us and AREVA in preparation for meeting with NRC as well as some of those utility experts will probably be present at that meeting with the U.S. Nuclear Regulatory Commission. There will be a lot of fuel assembly, design works of that needs to be done and that’s what’s going to be also performed by AREVA and the subcontractors. They’ll be a lot of public-related works particularly focused on the Holdren fuel samples and making sure that we can manufacture those fuel samples as soon as possible as well as in preparation for the lead test rods based on the commercial reactor as Seth pointed out, as early as in 2021. So in reality, the scope of work is going to be a lot higher than $3.3 million that Lightbridge expects to contributed over the next 15 months.

And Linda, you’re answering the second question?

Sure, sure. Yes. I wanted to address the design of these performance-based grants and provide some background is to how the analysis would perform, and why these milestones were selected. Our Compensation Committee, by the way, is only comprised of Independent Directors, who in turn engaged a major independent compensation consulting firm to analyze all of the compensation plans of our officers, directors and employees and consultants. Comparing our pay plans to our peer group determined by the consulting firm to have attributes that were similar to us. Our Compensation Committee following the recommendations of that compensation consulting firm recommended these grants to our Board of Directors, who in turn approved these grants. All of the details, by the way, are available on the form force that we filed to disclose all of the details to officers and directors. And I would like to add that most of these grants are performance-based grants and we will only have value if the company reaches these important company milestones and have been designed specifically to an line with the interest of our shareholders, and must be achieved by these specified dates. Also half of the bonuses in prior officers, employees and consultants will be played in option. Specifically to preserve the cash that we need to carry out our business plans.

Operator, how many live questioners do you have in queue.

I have two remaining.

Two remaining. And David, how many e-mail questions do you have remaining.

Three to go. So I would recommended…

Well, why don’t we do this and your phone is breaking up a little bit. Why don’t we take both of the two remaining questions, one after the other and then answer them. And then the remaining e-mail questions and answer them. So operator, if we can get to the two remaining live questions?

Sure. I apologize. Looks like there’s only one left on the phone.

Okay, great.

So our next question comes from the Russell Fryer from Baobab Asset Management.

Thank you for having the call. I’ve got a question for you and Andrey. And I actually viewed the previous President spoke about the slowness of NRC in the last two, I mean that kind of even get the commissioners through Congress. But my question was there China and the rest of the world and they’re actually really slow to rollout, although we see the dynamics on reactor builds, my question really is – is there listed GEN 4 reactors and thorium reactors. If they come into the forefront of our generation, will this make life difficult for Lightbridge?

I don’t think So. First of all, our market is the existing fleet in the world of hundreds of reactors, most of which are going to operate for decades. Just today, one of our nuclear utility fuel advisory board members dominion announced that it’s going to and deploying to NRC to extend the life of it license on a reactor here in Virginia from 40 years to 60 years and expected to get back from NRC. I don’t think there is generation four reactor that’s going to knock that out, sorry. From 60 years to 80 years, John. 60 years to 80 years. I don’t think there is a GEN 4 reactor that will knock that out. And so there are no GEN 4 reactors operating commercially in the world. There is no market for that. I think the most likely leading wave of new types of reactors will be the small modular reactors that are actually new kind of pressurized water reactors by NuScale. And that’s within the scope of our JV with AREVA and our fuel is designed to work in them. I think by the time we get to liquid fluoride thorium reactors or fast reactors or other types of GEN 4 reactors commercially, we will be way beyond the time frame of Lightbridge investors. We’re going to be seeing the fuel of what we expect in 2021 in a commercial reactor in the U.S. I don’t think we’re going to see a demonstration of GEN 4 reactor, very long after that commercially. Now I wish them luck. I’d like to see that happen eventually, but I just don’t see our market of hundreds of existing reactors plus all the under construction on order in planned light water reactors in the world being impingent fact, the World Nuclear Association shows that over the coming decades, the worst-case scenario for the current type of reactors is basically having as much generation as we have today. And the higher growth scenario is triple that and higher. So we’ll see, but I just don’t see it going down.

Andrey, what do you think? Is thorium it’s good?

Well, I think, Seth is right. In terms of thorium, well, there are certain applications of thorium that may make that fuel, kind of, economically viable. If the price of natural uranium skyrockets and becomes $200 or more per pound, than certain aspects of the thorium-based fuel cycle may be economically attractive to utilities, but in terms of all those other very conceptual reactor designs and that they’re currently being studied and analyzed by the time, the infrastructure is going to be in place and thus to support those types of reactors, it will take several decades. Because really, to have an infrastructure that we currently have around the world that is really geared towards solid fuel rods with shipping containers, transportation, handling, spent fuel storage, spent fuel disposal, fabrication, all of those aspects are really the infrastructure really supports solid fuel where is to develop from scratch completely infrastructure requires tremendous amount of investment probably tens of millions of dollars as well as a long period of time. Regulatory authorities would also have to develop completely new acceptance criteria, regulatory licensing guidelines, and all that takes a lot of time. So I agree with Seth that really, our current focus is existing fleets of reactors as well as new build of light water reactors that is what’s happening right now with the market. And I don’t see – I agree with Seth, I don’t see those futuristic types of reactors coming in large numbers anywhere in the world in the near future.

And Russell I would just add, we have thorium fuel design ourselves started out that way, and we switched to this metallic of thorium or uranium fuel for power upgrades for longer fuel cycles for her hand safety because utilities were telling us, those were the benefits they wanted. Those are the benefits that will keep their reactors running and get new reactors built and they just didn’t have another way to get it done. And this fuel, we believe will prove out. The thorium fuel, as Andrey said has certain advantages, but it’s not those advantageous. It’s not with the utilities are saying they want and none of the utilities are actually ordering advance to reactors. So that today welcome, but based on what the market, what the customers are telling us, this is what we are doing.

That’s – that’s the infrastructure that they’re invested in, CapEx, they needed extended. So they wouldn’t go from GEN 3 to GEN 3 to 4. But I get your point. Thank you. There is a movie, then you fire talks about the new GEN 4 reactors, made down in Washington, DC to get a chance to so. Thank you for having the call.

Thank you, Russell. David, why don’t we just I want you to read the rest of the question you have and I’ll answer them.

[Indiscernible]

Your phone is not working well. Go ahead.

Sorry about that. Can you give some additional background as to the overall market Lightbridge is targeting? And as Lightbridge has an estimated – estimation of the profit margin that it would expect for the fuel. And there’s a follow-on to that. Could Lightbridge become a potential acquisition target?

Okay. So Andrey, why don’t you take the first and I’ll take the second.

So in terms of overall market opportunity, as Seth pointed out earlier, our initial target market is in the U.S. The U.S. has the largest number of existing reactors in the world right now. And that’s the market, where there is tremendous opportunity right now that they are targeting to our joint venture with AREVA. We have several prospective utilities that are really interested in having this fuel in their reactors as soon as possible. They’re willing to take on some risks, get some securing to gain, and that’s the market we’re targeting right now. In addition, to the U.S. market, obviously, there are other markets, there is some new build deployments going on in other parts of the world, in Asia, in particular, and China is obviously perhaps the largest number of reactors under construction. So overall, if you look at the global markets, and so the initial target market which defined is really large pressurized water reactors that have at least 20 years of life left in 2025. So we’re looking by 2025, we are looking at roughly 250 over 250 gigawatts of electric power projected from those reactors by 2025. And then, that number is going to continue to grow as new build reactors are getting deployed throughout the world. So the market is the significant. The market potential is tremendous. We previously discussed the fact that in terms of potential opportunity per reactor, we’re talking about several million dollars per reactor in royalty fees as well as potential profit margins and here, I’m talking about – even if we were able to penetrate on the 10 or 20 reactors, we’re talking about tens of millions and hundreds of millions of dollars to penetrate the larger percentage of the market. Down 25% of the global market, we’re talking about 25 to 50 or 60 reactors around the world and that would represent tremendous revenue opportunity for our joint venture with AREVA.

And I’ll take the second question that we are in no discussion about an acquisition. Now as a publicly traded company. Of course, it could happen. It would be the future that we can become the acquiring company, but certainly not the direction that we’re heading in now planning to be acquired. What we’ve done is, we have started work today with the dominant company in the world in our industry, in nuclear fuel manufacturing and sales and that company is about to get stronger as it merges into EDF, the largest nuclear utility in the world it will basically be the largest nuclear company by any metric in the world, and our JV partner will be incredibly strong entity. And so our plan is within this joint venture to commercialize the fuel within the four areas of exclusivity to the JV of the western pressurized water reactors, the western-type boiling water reactors that research reactors that are light water cool, water cooled and the small and modular reactors that are water cooled. And then eventually, outside the JV, we could develop on our own or with other partners or potentially with AREVA, the Russian-type VVER fuel applications of our fuel and can do type pressurized water reactor fuel for Canadian and some Indian and China and other places that can do type reactors. So that’s our plan to go forward first in the JV and potentially, on our own in other areas. And we may all sit about other technologies we go too, so just as Microsoft need to be acquired by IBM. We can work with IBM. We can work with AREVA. We can work with other companies potentially, and that’s the plan. What the future holds, we’ll see. But based on what the utilities are telling us, and based on what we are seeing in the development of our fuel, we’re expecting to bring tremendous value to the nuclear power industry. And we’re expecting to capture that through this JV and grow as a company and that’s the plan.

So with that, I know we’ve gone a little over, but I wanted to get everyone’s question in. I want to thank everyone, who has called in. We look forward to providing additional update to the near future. In the mean time, our lines are always open at IR at ltbridge.com and at 1- 855-379-9900. So thank you very much. These are excellent question today and goodbye. Thank you.

Thank you. That does conclude today’s call. We thank you for your participation. You may disconnect your lines at this time. And have a great day.