Lightbridge Corporation (LTBR) Q3 2018 Earnings Report, Transcript and Summary

Greetings, and welcome to Lightbridge 2018 Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation [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 business update conference call. The Company’s earnings release was distributed on November 12th and can be viewed on the Investor Relations page of the Lightbridge Web site 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 can participate in today’s call in two 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 is 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 would 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 fabrification of our fuel. Andrey?

Thank you, Seth. First, we completed several studies on key fabrication 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 fabrication process steps, material flows and equipment needs and specifications. And fourth, we researched material properties and prepare material data manual. On the fuel design side; first, we prepared product requirement documents and data sheet; second, we initiated next phase of neutronics code modifications to model Lightbridge Fuel geometry, which has a unique total of geometry as you know; third, we developed the 3D model for computational fuel dnamics analysis; and fourth, we developed the fuel assembly computational fuel dynamics model to investigate critical heat flux performance of our fuel. Turning to regulatory licensing efforts. We established an open dialog with the United States Nuclear Regulatory Commission, the NRC, with the first Enfission project kickoff meeting held in August 2018. I'll talk about this more in a moment since it particularly relates to various submissions we'll make to DoE in January of next year. And second, we continued the development of fuel design limits in support of 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 will be used to manufacture fuel assemblies for U.S. nuclear power plants based on our patented metallic fuel technology. The activity is underway to finalize work flow and facility of 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 presents us here an milestone under licensing process supplying the fuel technology. We are pleased with our first formal interaction with the NRC staff and because of Enfission and look forward to working closely with the NRC staff throughout the licensing process of Lightbridge fuel. Back to you, sir.

Thank you, Andrey. Now we will turn the DoE grants application. We had delayed this conference call until after we knew the result. As we disclosed in our press release on Wednesday, we applied for a grants 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 two 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 three rounds of funding to-date. We wanted 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 mentioned 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, a PDF on our Web site 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 is 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 two of them to communicate with each other. But than their names and contact information, this is exactly what it does. So it's from the United States Department of Energy, November 13, 2018: Subject, application, review funding opportunity announcement but we've code the numbers; U.S. industry opportunities for advanced nuclear technology development; development, demonstration and licensing of innovative saves 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, as 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 strength 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 the 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 applicants 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 radiation thermal performance testing is an aggressive strategy, which can provide a significant scheduled advantage if executed successfully. The proportion metallic fuel with its enhanced heats transfer and lobe 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 applicants has implemented a quality assurance program compliant with 10 CFR 50 Appendix B and ASME NQA-1-2018 2009 A, which will be instrumental during the 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 have 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 ride LTR by 2021, and the first lead test assembly, LTA in a commercial reactor by the mid 2020s. Policy factor, 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 documenting in the above summary of strengths. However, it was determined that the proposal cannot 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 firm to address these questions. We remain encouraged by our prospects to receive DoE grants, and were very encouraged by our interaction with utilities, which we think will be helpful for receiving DoE grants. We understand the 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 in the NRC since we filed its 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 timeline. We have hopes 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 the DoE raised in letter. Turning to our patent portfolio. We recently announced that we have received notices of allowance for two 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 there are advising us. In particular, a mixed grade 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 rod that has been included in earlier design with multimode 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 the 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 intents to grant from the European patent office for the patent application that covers our four lobe metallic fuel rod design and related manufacturing method. We will continue to expand and strength in our intellectual property portfolio worldwide. We are continually developing new intellectual property around all aspects of our fuel, including technological enhancements, modification 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 worldwide. We are also building our presence in 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 chemical, energy, environment and material sector by the licensing executives of 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. Ambassador 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 9th. The audience included numerous officials from national mission at the UN. I would also like to point out that earlier this month, Bob Freeman, Vice President of fuel contracting services at Framatome was interviewed on the titans of nuclear podcast, where he talked about Enfission and the innovation as well as safety at 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 would 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 Degree 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. Atmospheric temperature is already two thirds of the way there with global temperatures having warmed about 1°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 zero around 2050 in order to keep the warming around 1.5°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 their low carbon energy did not replaced by fossil fuels. This is a prominent NGL that historically has been reluctant to support nuclear power and yet, in their report, they recommend the adoption of the national carbon price or low carbon electricity standards, 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 with the used 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 effort. 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 of those 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. You'll 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 entity, which include utility in order to receive future funding and cautionary contributions for our fuel development. We still intend to meet two important upcoming corporate milestones; first to begin a radiation testing of our fuel samples in the events pass reactor in 2020; and second, to demonstrate elite test rod in a 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 recur fuel milestones and as well within our financial means, 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 in both entities at September 30, 2018. The $20.8 million in cash and cash equivalent for the nine months ended September 30 2018 was the results 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 nine 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 using operating activities over the prior nine months. And cash used in our investing activities consisting of our investment in Enfission of approximately $5.2 million. During the three 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 fuel. 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 and loss from joint venture. Now, over to you Seth.

Well, thank you very much, Barbara. We appreciate that update, and I also thank you, Larry. I would like to open the call to your questions. While we pause for the operator, Doug, to -- we will first pause for the operator, Doug, to review the procedure for asking live questions and then we will move immediately into questions that have been sent in the advance and also the live questions by phone. Doug?

Thank you. We will now be conducting a question-and-answer session [Operator Instructions].

So while we are waiting for the live questions, David Waldman, here at the beginning of the call with Crescendo Communications from Investor Relations, will proceed with any questions that are coming in by email. David?

Thank you, Seth and we appreciate all the questions. We received a number of them in advance of the call. So our first question is you mentioned that you will be applying again for the next deadline, which is January 31st. 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 at it's called for funding opportunity announcement is going to open continuously for the five years that started on December 7, 2017, and application deadlines are quarterly each year on January 31st, April 30th, July 31st, October 31st. There's no obligation on DoE regarding the timing of their decision announcements after reaching those application deadlines. But thus far, through these now three application cycles, the award announcements have ranged from about 10 weeks to 15 weeks after the application deadline. This was the longest one in about 15 weeks. There's no guarantee that DoE will continue that practice, but does seem to be about 10 to 15 weeks. There's an Web site we have, I can read it to you, but you could also just send a request to ir@ltbridge.com and they can 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?

Thanks Seth. The next question is why did DoE reject the grants application? Was it a formality or technicality, or a matter of potential in ineligibility?

The DoE's consensus strength and weaknesses of Lightbridge's initial FOA application are identified in the letter I read, David, November 13, 2018. The letter is available as part of the 8-K filings from Lightbridge yesterday. We are also going to scan and post the actual original letter and attachment on our Web site in the investor relations part of the Web site as a PDF. If you just scroll down -- I don’t think it's there yet, but it will be today. You just scroll down on the Investor Relations page, you'll see some red PDFs, the first one is investor presentation, I think it will be 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 it's in Company's 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 and would be conducted under the proper quality assurance control. DoE's comments indicate significant commercialization potential for Lightbridge Fuel and support or 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 being test rod and the test assembly deployment approach. While DoE stated that the application could not be supported within current priorities and available resources as they have, there's no indication that the application was ineligible. Given how much work the team there has to do when they except an application for review, I don’t think they would have said we're eligible to reapply if they weren’t serious about, that's at a lot of work for that team to get an application like this, it's pretty substantial document. You can see they really dug in detail and now we've got so much more to add. The total dollar amount the DoE granted this around was less than what was granted in the previous two rounds. And while the dollar amount we saw is confidential, it may have been too ambitious for this round too high a percentage of the total amount of money they granted. And that might help explain the language about our application not being supported within the current office for nuclear energy program priorities and available recourses, but we think this is pretty clear where it says, yes, we can reapply. Next question?

Next question. In what manner 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?

Jim Fornof, who is an 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 15th; and included some preliminary discussions on both the short and long-term design and licensing activities for a lead test rod and lead test assembly deployment, as well as the potential fabrication facilities for Lightbridge fuel. With input from our utility partners, Lightbridge is continuing to develop these licensing approaches along Framatome and we believe that we can confidently say we can satisfy the DOE's request for additional details on our next application.

The next. 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 the clarification on the statement and why do you think this comment was made?

We 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 application, which was our first. Evaluating these applications, a lot of work for DOE as I mentioned, it's possible. There were limits on the number of dollars available, it's also possible the limits on of the numbers contracting officers and was a bunch of a previously denied applications coming back as resubmissions plus new ones that could have been there constrained on resources of personnel there. But that’s speculation on our part we do not have that feedback from DOE. We see feedback. It was disappointing to lose but common for first time applicants. So we will seek clarification from DOE, but we don't take that language at the end of the document is overwriting the clear language on the first page that’s says we’re eligible to resubmit.

Thanks.

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 will read a couple more questions that have sent in, and then we will open up for more live questions.

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

So obviously, the DoE grant has been a big focus. So just going to ask couple of additional question and then just have a follow up, if I may. So you talked about potential 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 maybe addressing. Will they help you specifically address some of the concerns the DoE has? And then I have 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 a difficult to have it rejected and then maybe the chances that you see of this maybe potentially going beyond second application if that's feasible if you aren’t fully addressed. I'm just trying to get a sense of the timeline or probably for the success and then help utilities might be able to provide for you in the resubmission.

Yes, 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, we'd have accelerated 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 have always said is that I think what DoE really needs to see in the end is what everyone needs to see this. 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 are partnered with the largest manufacturer and seller of nuclear fuel in world. We are already working on the facility that will manufacture our commercial product at Richmond in Washington State. In terms of providing this technology, we really well along. The domain side, that comes down to the utilities. Now, we are advised by four very large utilities that comprise half the U.S. market and the U.S. market is a quarter 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 UK, which as we call 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't do that as part of the process I would expect that would happen. They were letters from utilities in this last round they are very confidential between the utilities and DOE. But what we talked about a lead test drive program in 2021 and a commercial reactor powering a city in the United States where we don’t have one of those. That’s a utility. And I think a utility coming forward and saying we are taking that we test drive program and we are putting it in our gigantic reactor that powers on 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 is really running our activities and utilities.

Thanks Seth. I think you have captured the major highlights of what's happening regarding the -- after effects of the full 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 dimensions. So the original was one dimension we are now completing the march for a two-dimensional model, and we will complete a three-dimensional model next year. That's going to help with the work. It also helps with the computation of fluid dynamics aspect related to the way the heat is removed from the fuel and how it -- 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 are 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 are not successful in the first application. And I believe that utilities' report 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.

Seth, 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? We do know how to potentially benchmark your application versus what you may know about some of the computing applications for those limited dollars and the potential for a second application to change their mind. I mean is there -- so I guess what I am asking, is there a set data deployed those funding dollars? Is it on fiscal budget year? And then will that be replenished? So I guess it's not a zero-sum game, or is it a zero-sum game? Or there is a potential within the timeframe to know that you have jumped higher in the queue and potentially to 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 announced that we lost. For what we referred, there's lot more of that lost than one. So I can't really say what those other companies are. Secondly, all we could see is the aggregate numbers of what we've awarded in each of the three rounds. And this was the least. We don’t know why the amount in dollars awarded in the programs 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 any they mentioned in their letter to us is support for high assay low and enriched uranium. And it's won't surprise me if they are taking steps to prioritize getting that done and produce in large quantities, which would be fantastic for us. And if we do see developments with 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 three round. I think it's several times more. It's just what they're prioritizing within that to give to these applications and what they're prioritizing to give to 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 have, I think it's within those dollars that they are allocating to the winners of this grant application process. I don’t know if, James Fornof, you have anything you want to add to that.

I would add possibly, Seth, that we’ve gone back and looked in all the prior awards, not only in the absolute size but in the trend of the awards and try to stratify that between -- there is three tiers in this program, there is 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 could 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?

You have to apply for a specific amount. We went big. It turned out to be of the total amount they granted to all of the winners in the aggregate would've been a large majority of total amount they would have given 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 have won but that probably went to being so impressive too, yes.

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

Yes, as we went through few minutes ago is the Union of concerned scientists, there are NGOs, traditionally anti-nuclear 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's some studies recently that basically show that renewable aren’t going to help at that point. That for some time wind energy will might 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 it 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 less than that on most days of the wind or solar providing energy. So when every time you add renewables, you’re actually addition emission, most of time its natural emitting CO2 at half the rate of the coal does except there're other studies that show, well, it's worse than that, because there are 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 have a shot at success on climate goals. There is not enough time to get the new 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 training the economic case to build more. So I think that climate change is something -- it's something that’s becoming clearly with the union of concerned scientists changing its position really a driver in eliminating oppositions in 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.

So we have largely answered this question, but I think there is 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 grants?

No, the timeline for utility commitment for lead test rod and lead test assembly program was not dependent on the DOE grant. We hope the grant would actually accelerate the timelines we previously put out. As I mentioned yesterday, we actually were speaking with the utility that will host the new test rod program and that program is definitely continuing unchanged.

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?

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

As you know as we stated in our past and current filings, we have an ATM facility with B. Riley FBR, and that facility allows us to issue some shares of our common stock. And we are very careful in how we use our ATM. And unlike other financing mechanisms, there's no discount to market and there is no warrant that the company needs to issue every time it issued shares it would take in. So this facility is important to us, because it did allow us to put in that DOE grant application and then 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 those shares in the future, but I'll note to our shareholders that we are 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 vehicles. So that would be my answer there.

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 are going to do it, but we do it periodically. I'll leave it at that.

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

Our next questions is that are there any milestones that maybe coming-up in the quarter?

Well, let me just we continue to make significant progress on our fuel developments activities in 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 summary with key accomplishments each quarter. These would be supplemented with press release as we do reach achieving milestones, and I'll just leave that as that. We are not going to announce in advance some things that we'll announce by press release when they happen.

If we can to take a moment now and we'll go to the next live question. Doug?

Next question comes from the line of James Anderson with Lightbridge. Please proceed with your question.

I have a comment and a question based on our discussion here. I called the DOE about application rejections and was told they’ll tell applicants if they’re ineligible and shouldn’t reapply. The reasons would typically be due to a request being out of scope like nuclear medicine or failure to prove your product will be commercially viable by the mid 2020s. Proving commercial viability is apparently just as important as your technical merits. They want to keep this 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 are eligible for the grant assuming you can overcome their concerns. I would also argue while a large dollar award would be helpful, even a small one paired with the DOE’s seal of approval implicit in the grant would be tremendous for shareholders. Now, my question. So I frequently see GE, Westinghouse and Framatome exclusive of Enfission, they have their own ATF concept in the DoEs official accident tolerant fuel program. They receive significant funds and resources from 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.

Let me start, and then I'll ask Jim Malone to supplement and then we'll get to your follow-up. And just one quick comment you introduced James Anderson with Lightbridge, I guess being so called [Multiple Speakers] there is no other affiliation. And we announced the initial concept of a metallic fuel for the power operating for longer fuel cycle, for 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 of fuel that we were designing and we were inventing although, at that point we not only counted the economic benefits. And I think it was then in September of 2011 is there were hearings and discussions on Fukushima and Capitol Hill and a lot of focus on nuclear safety and concern for reactors. The Senator, Dianne Feinstein made a comment about, well, what about the fuels. Can't you just change the fuel so this doesn’t happen. And as a powerful Senator on relevant committees, her saying that helps for the DOE to look into what I think her officer helped count with term of accident tolerant fuels. And only the marketing people in nuclear power would start the name of a new product with the word accidents. But in any event, the accident tolerant fuel counts have started at DOE as an idea on how to basically avoid what’s called steam zirconium interaction in these loss accrual and accidents that result in free-floating hydrogen that turned the inside of your reactor into the Hindenburg with all the hydrogen and then blew off four buildings at Fukushima. And we were not part of that program, we were actually designing a fuel for 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 fuels program, utilities were not involved. But then they later got involved when the DOE started providing funding and they have been receiving funding, they have 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 that’s happening in just three days to get the cavalry there, bring backup power, et cetera. But now it looks like there maybe get three 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 operates, all 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 just one Lightbridge, sometimes its two words, Light Bridge, included on slide 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’re working on this separate program. 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 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 launched and I think that influenced Senator Feinstein to pursue and fund the option. DOE formed the committee to down select some designs with respect to the apparent promise of those designs to provide the coping time that Seth just described. We were not selective on that. Any fuel that contains zirconium was rejected out of hand. So that's unfortunate but it is reality. As we have 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 timeframe. I think we can get beyond that. We've been 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, the station blackout at Fukushima. So I think we have 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 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 are on the right trajectory and I think we can continue to push forward, make our milestones and show the industry and our investors that this really merit in this program.

And contrary to what was stated, I am not a Lightbridge employee and not an eager engineer. But just understanding from Layman perspective, you're using zirconium, there might still be some lingering concerns. Why not you use chromium, like Framatome -- I don’t know. Is that an option? Would it benefit you? And I think I'll slip in one other thing. You've been tweeting about DOE environmental assessment related to HALEU, and obviously something you're excited about. And could you talk a little bit about that. And it was mentioned here in one of the benefits of your letter too. So can you talk about chromium and maybe just 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 sync that results in a release of hydrogen in the formation of the chromium oxide. So we are looking at that though. We asked 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 are looking -- we had meetings with MIT engineers two weeks ago in Boston. And they listened carefully of what we were saying and that we've now got their heads working overtime to see if there's an alternative that might be more suitable. It could be something of a micro structure change adding something like micro diamonds 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.

I'll just say that, James, when you talk about chromium coating, you are still talking of the same old fuel rods there's always been. If uranium dioxide pellet insiders are chromium alloy to the same as it's been since basically the launch of the industry and with the same chromium coating on the outside the rod. We could put chromium coating on the outside of our rod too, 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 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 have into here, some of which Jim mentioned. On the high assay low enriched uranium, HALEU, that some people are calling it. This is current fuel uranium dioxide pellet and these are chromium alloys too, is at its limit. The industry needs what that I can't provide, take it what's called, higher burn up, 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 to do that, our fuel will. If assay low enriched uranium could be used at a high enough assay up to almost 20% within current fuel, the utilities would be doing it already. They just can't. The fuel can't handle it but rods would crack. Our fuels can handle it very well. There is also support at DoE for advanced reactors, what are called generation four reactors, that we hopefully will be coming out in almost decades from now, but until then we got the light water reactors and heavy water reactors. So DoE likes that our fuel can use this high assay LAU that they want to be developing anyway for these advance reactors, and they are very clear about that in the letter. So let me end with that. Well, thank you your questions. We'll go on to others.

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

With regards to the current state of the industry, in general just stalled or feeling on Lightbridge fuel designs from the industry itself, and other government agencies. Maybe 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 nuclear industry is already the safest industry in the history of the United States…

I don’t want to back talk here. But I know this, 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 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 event that is the issue you raised a proliferation resistance or non-proliferation. 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 is nothing else they cloud 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 non-proliferation, but in the industry context, they put it in terms of what we want the economic benefits that we’re all paying for. And if it 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 will see in the DOE letter there that was a lot of high praise for attributes of this fuel.

Well, my question 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 grants or perhaps how does this provide with just any advantage over or any -- how does this provide you with a more competitive market position, That’s my question.

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 is market for that, does that help. And certainly when we look at the U.S industry, it is very safety conscious that’s very good. But in particular as we’re looking at countries that don't have reactors now, they're thinking of obtaining their first reactors, including countries that share that Eastern Coast along the Pacific, the Fukushima earthquake and tsunami came from they are very concerned about safety. There are overseas markets where this issue really resonates very strongly it’s not just our domestic market. And there certainly is some contact we 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 non-proliferation, which the Lightbridge fuel does.

And 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 in evacuation zones, entire country like Singapore, they are very concerned about. So, yes. And I will say we worked tremendously in the United Arab Emirates with the people there that implemented a fantastic nuclear new build program. It’s really world leading what they are 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 continue to have. And really engaged the population, don’t hide from it, explain the safety benefits, explain the non-proliferation. They have really taken a lot of steps in the UAE to address these issues. And yes, we think our fuel will help in those meetings with local populations if not just government, its governments making their populations feel comfortable and we think this fuel 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 will turn the call back to management. Is there a quarterly budget set up to get the fuel tested in a commercial reactor?

Yes, let me say that first -- so I'll turn the call back to Doug for a couple of more live questions. I know we are over, but I suspect -- I haven’t seen the queue, but I suspect there are some more questions left to get, at least one or two more in. 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, budgets approve each calendar quarter in the industry on the utility side. Lightbridge does annual budgeting. And this detailed budget spending ties specific R&D activities in the project execution roadmap and associated milestones. So is there a quarterly budget set up to get the fuel test in a commercial reactor? That’s more on the commercial utility side. And we are definitely working with a specific utility on that right now, that was part of a call we had with one yesterday. That’s all I will say about it, we are not going to disclose their details of their quarterly budgeting 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 is another live question.

[Operator Instructions]

And David, do you have any more email questions?

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

Great, well, look everybody…

It looks -- we do have…

Hold on one second, we have more question and would like to ask a question, Doug?

Our next question comes from the line of Kevin Nicholson, a Private Investor. Please proceed with your question.

I wonder if you care to comment on the apparent disconnect between the amount of energy, the amount the patents, the amount 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, is diligently as you have 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 two other things I have mentioned during this call, I'll dive into a little deeper. First of all, institutional investors. Now, lot of them tell us that we do talk to and they talk to us. They need to see $5 a share price. And we want to get there organically. They don’t need to us to get it organically but we would like to get there organically. And I think institutional investors would be, more than we already have, would be a big part of it. The second is customers. As I was talking earlier about supply and demand, working with Framatome and figuring, we have so much success in 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 for utilities, but not really a contract with the real skin in the game, real resources from utility. I think this is the thing DOE might be looking for where they stand-up and say, here is the reactor, here is the schedule, here is the resources, here is our interaction with NRC and here is the date. And it's no later than 2021 and this Lightbridge Fuel is going in our commercial reactor. And wow, that combination of our partnership with Framatome producing it, an 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 topic of public appearance so that announcement that they want to see that thing. I think that would help. So I agree with you about disconnect. And one thing I talked about it in the call over a year ago was this notion that I think the stock price is almost look likes the options pricing, the people might pay a certain amount for a lottery ticket where they might make a lot of money or they might lose all their money, but there are just not going to pay whole lot of money to the lottery ticket. And that's like how I think people have been viewing our stock without that customer over support. We're seeing more than you but I think that's going to change versus instead of options pricing what a stock price should reflect discounted present value of the future cash flow. Well, future cash flows from a lot from utilities paying to buy this fuel, billions of dollars of this fuel and 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. And 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 what DoE is saying. And we're well on the way to doing that. So let me ask 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've 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@libridge.com or you could call 1-855-379-9900. And again, thank you very much. Good bye.

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.