-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gndizhrb0f2eR1saLAOGduuLcsTY5oZPlZEw/7EhHYU7HuFwrdYhKxNuQCSdQcj4 VFgRmNZ6pF4/f/tApODErQ== 0000912057-00-023436.txt : 20000512 0000912057-00-023436.hdr.sgml : 20000512 ACCESSION NUMBER: 0000912057-00-023436 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIGHTBRIDGE INC CENTRAL INDEX KEY: 0001017172 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 043065140 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21319 FILM NUMBER: 626736 BUSINESS ADDRESS: STREET 1: 67 S BEDFORD ST CITY: BURLINGTON STATE: MA ZIP: 01803 BUSINESS PHONE: 6173594000 MAIL ADDRESS: STREET 1: 67 SOUTH BEDFORD STREET CITY: BURLINGTON STATE: MA ZIP: 01803 10-Q 1 FORM 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to
Commission file number: 000-21319 LIGHTBRIDGE, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 04-3065140 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER) INCORPORATION OR ORGANIZATION)
67 SOUTH BEDFORD STREET BURLINGTON, MASSACHUSETTS 01803 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE) (781) 359-4000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes /X/ No / / As of May 5, 2000, there were 16,980,703 shares of the registrant's common stock, $.01 par value, outstanding. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- LIGHTBRIDGE, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000 TABLE OF CONTENTS
PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Balance Sheets as of March 31, 2000 and December 31, 1999... 3 Income Statements for the three months ended March 31, 2000 and March 31, 1999........................................ 4 Statements of Cash Flows for the three months ended March 31, 2000 and March 31, 1999........................................ 5 Notes to Unaudited Condensed Consolidated Financial Statements................................................ 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 8 Item 3. QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURES........ 14 PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 15 SIGNATURE............................................................ 16
2 PART I. FINANCIAL INFORMATION ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS LIGHTBRIDGE, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, 2000 1999 ----------- ------------ ASSETS Current assets: Cash and cash equivalents................................. $35,980,811 $35,477,909 Accounts receivable, net.................................. 22,592,947 16,785,873 Other current assets...................................... 2,035,943 1,970,393 ----------- ----------- Total current assets.................................... 60,609,701 54,234,175 Property and equipment, net................................. 18,164,510 17,367,173 Acquired intangible assets, net............................. 1,993,500 2,347,217 Other assets, net........................................... 1,854,746 1,908,165 ----------- ----------- Total assets........................................ $82,622,457 $75,856,730 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities.................. $16,159,046 $14,049,209 Short-term borrowings and current portion of notes payable................................................. 500,000 500,000 Deferred revenues......................................... 3,550,542 2,914,155 ----------- ----------- Total current liabilities............................... 20,209,588 17,463,364 Other long-term liabilities............................... 936,972 910,463 Notes payable............................................. 75,016 191,109 ----------- ----------- Total liabilities....................................... 21,221,576 18,564,936 ----------- ----------- Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares issued or outstanding at March 31, 2000 or December 31, 1999..................... -- -- Common stock, $.01 par value; 60,000,000 shares authorized; 17,751,141 and 17,510,661 shares issued and 16,859,236 and 16,618,756 shares outstanding at March 31, 2000 and December 31, 1999, respectively...... 177,510 175,105 Additional paid-in capital................................ 59,599,957 58,297,842 Warrants.................................................. 362,625 398,875 Retained earnings......................................... 4,005,172 1,164,355 ----------- ----------- Total................................................... 64,145,264 60,036,177 Less: treasury stock, at cost............................ (2,744,383) (2,744,383) ----------- ----------- Total stockholders' equity.............................. 61,400,881 57,291,794 ----------- ----------- Total liabilities and stockholders' equity.......... $82,622,457 $75,856,730 =========== ===========
See notes to unaudited condensed consolidated financial statements. 3 LIGHTBRIDGE, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
THREE MONTHS ENDED MARCH 31, ------------------------- 2000 1999 ----------- ----------- Revenues: Transaction............................................... $20,427,347 $14,080,360 Software licensing and maintenance........................ 3,150,469 1,850,301 Consulting services....................................... 2,700,557 3,412,475 ----------- ----------- Total revenues.......................................... 26,278,373 19,343,136 ----------- ----------- Cost of revenues: Transaction............................................... 9,063,211 6,617,030 Software licensing and maintenance........................ 1,705,407 950,548 Consulting services....................................... 1,651,382 1,634,925 ----------- ----------- Total cost of revenues.................................. 12,420,000 9,202,503 ----------- ----------- Gross profit................................................ 13,858,373 10,140,633 ----------- ----------- Operating expenses: Development costs......................................... 4,086,272 2,496,389 Sales and marketing....................................... 2,235,442 2,003,726 General and administrative................................ 2,924,217 2,610,084 Amortization of goodwill and acquired workforce........... 190,868 348,258 ----------- ----------- Total operating expenses................................ 9,436,799 7,458,457 ----------- ----------- Income from operations...................................... 4,421,574 2,682,176 Other income (expense): Interest income........................................... 270,098 154,678 Interest expense.......................................... (24,740) (41,721) Other non-operating income................................ 68,885 8,076 ----------- ----------- Income before provision for income taxes.................... 4,735,817 2,803,209 Provision for income taxes.................................. 1,895,000 1,374,000 ----------- ----------- Net income.................................................. $ 2,840,817 $ 1,429,209 =========== =========== Basic earnings per common share............................. $ 0.17 $ 0.09 =========== =========== Diluted earnings per common share........................... $ 0.15 $ 0.08 =========== ===========
See notes to unaudited condensed consolidated financial statements. 4 LIGHTBRIDGE, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, ----------------------------- 2000 1999 ------------- ------------- Cash Flows From Operating Activities: Net income................................................ $ 2,840,817 $ 1,429,209 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................... 2,442,574 2,149,002 Changes in assets and liabilities: Accounts receivable and other current assets.......... (5,872,624) (638,955) Other assets.......................................... (19,000) 227,497 Accounts payable and accrued liabilities.............. 2,109,837 (252,105) Deferred revenues..................................... 636,387 1,321,111 Other liabilities..................................... 26,508 21,723 ----------- ----------- Net cash provided by operating activities................. 2,164,499 4,257,482 ----------- ----------- Cash Flows From Investing Activities: Principal payment--note receivable from officer......... -- 5,328 Purchases of property and equipment..................... (2,804,868) (820,847) ----------- ----------- Net cash used in investing activities..................... (2,804,868) (815,519) ----------- ----------- Cash Flows From Financing Activities: Principal payments on notes payable..................... -- (201,301) Principal payments under capital lease obligations...... -- (32,093) Proceeds from issuance of common stock.................. 1,133,271 47,426 Proceeds from exercise of warrants...................... 10,000 125,000 ----------- ----------- Net cash provided by (used in) financing activities....... 1,143,271 (60,968) ----------- ----------- Net increase in cash and cash equivalents................... 502,902 3,380,995 Cash and cash equivalents, beginning of period.............. 35,477,909 16,436,995 ----------- ----------- Cash and cash equivalents, end of period.................... $35,980,811 $19,817,990 =========== ===========
See notes to unaudited condensed consolidated financial statements. 5 LIGHTBRIDGE, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION: The accompanying unaudited condensed consolidated financial statements include the accounts of Lightbridge, Inc. and its subsidiaries ("Lightbridge"). Lightbridge believes that the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of Lightbridge's financial position, results of operations and cash flows at the dates and for the periods indicated. Although certain information and disclosures normally included in Lightbridge's annual financial statements have been omitted, Lightbridge believes that the disclosures provided are adequate to make the information presented not misleading. Results of interim periods may not be indicative of results for the full year or any future periods. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in Lightbridge's Annual Report on Form 10-K for the year ended December 31, 1999. 2. SIGNIFICANT ACCOUNTING POLICIES: REVENUE RECOGNITION Lightbridge generates revenue from the processing of qualification and activation transactions; granting of software licenses; services (including maintenance, installation and training); development and consulting contracts; and certain hardware sold in conjunction with certain software licenses. Revenues from processing of qualification and activation transactions for wireless telecommunications carriers are recognized in the period when services are performed. Lightbridge's software license agreements have typically provided for an initial license fee and annual maintenance based on a defined number of subscribers, as well as additional license and maintenance fees for net subscriber additions. Lightbridge has entered into license agreements that provide for either a one-time license fee or a monthly license fee with no additional fees based on incremental subscriber growth. Revenue from software license sales is recognized when persuasive evidence of an arrangement exists, delivery of the product has been made, and a fixed fee and collectibility has been determined; to the extent that obligations exist for other services, Lightbridge allocates revenue between the license and the services based upon their relative fair value. Revenue from customer maintenance support agreements is deferred and recognized ratably over the term of the agreements. Revenue from consulting and training services is recognized as those services are rendered. Hardware is sold in conjunction with software licenses only when required by the customer and such revenue is deferred until the related license revenue is recognized. EARNINGS PER SHARE Basic earnings per share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if outstanding dilutive options and warrants were exercised and resulted in the issuance of common stock. 6 A reconciliation of the denominators of the basic and diluted earnings per share computations is shown below:
THREE MONTHS ENDED MARCH 31, ----------------------- 2000 1999 ---------- ---------- Shares for basic earnings per share.................. 16,593,483 16,054,778 Effect of dilutive options and warrants.............. 2,031,718 1,202,084 ---------- ---------- Shares for diluted earnings per share................ 18,625,201 17,256,862 ========== ==========
No adjustments were made to net income in computing diluted earnings per share. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board released Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes standards applicable to the manner in which Lightbridge accounts for derivative instruments in its annual financial statements commencing with the quarter beginning after June 15, 2000. Lightbridge has not yet determined the effect that adoption will have on its consolidated financial statements. Lightbridge has adopted Statement of Position No. 98-9 ("SOP 98-9") "Modification of SOP 97-2," Software Revenue Recognition," with Respect to Certain Transactions". SOP 98-9 amends SOP 97-2 to require that an entity recognize revenue for multiple element arrangements by means of the "residual method" when (1) there is vendor-specific objective evidence (VSOE) of the fair values of all the undelivered elements that are not accounted for by means of long-term contract accounting, (2) VSOE of fair value does not exist for one or more of the delivered elements, and (3) all revenue recognition criteria of SOP 97-2 (other than the requirement for VSOE of the fair value of each delivered element) are satisfied. The provisions of SOP 98-9 that extend the deferral of certain paragraphs of SOP 97-2 and SOP 98-9 will be effective for transactions that are entered into in fiscal years beginning after March 15, 1999. The adoption of SOP 98-9 did not have a material effect on the consolidated financial position or results of operations. RECLASSIFICATIONS Certain reclassifications have been made to the 1999 financial statements to conform with the 2000 presentation. 3. COMMITMENTS AND CONTINGENCIES LEASES--Lightbridge has noncancelable operating lease agreements for office space and certain equipment. 7 Future minimum payments under operating leases and subrental income relating to certain operating leases consisted of the following at March 31, 2000:
OPERATING SUBRENTAL LEASES INCOME ----------- ---------- 2000................................................ $ 4,242,824 $1,174,000 2001................................................ 4,132,239 298,100 2002................................................ 3,294,029 -- 2003................................................ 2,908,924 -- 2004................................................ 1,224,317 -- Thereafter.......................................... 230,453 -- ----------- ---------- Total minimum lease payments........................ $16,032,786 $1,472,100 =========== ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIS FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS, INCLUDING THE FACTORS SET FORTH UNDER "ITEM 1A. RISK FACTORS" IN THE ANNUAL REPORT ON FORM 10-K OF LIGHTBRIDGE, INC. FOR THE YEAR ENDED DECEMBER 31, 1999, THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS OF LIGHTBRIDGE, INC. TO DIFFER MATERIALLY FROM THOSE INDICATED BY THE FORWARD-LOOKING STATEMENTS. Information set forth under the heading "ITEM 1A. Risk Factors" in the Annual Report on Form 10-K of Lightbridge, Inc. for the year ended December 31, 1999 is incorporated as an exhibit to this Form 10-Q. Unless the context otherwise requires, "Lightbridge" and the "Company" refer collectively to Lightbridge and its subsidiaries. ALIAS, FRAUDBUSTER, FRAUD SENTINEL, LIGHTBRIDGE, the Lightbridge logo, PROFILE, and TELESTO are registered trademarks of Lightbridge, and @RISK, ALLEGRO, CUSTOMER ACQUISITION SYSTEM, CREDIT DECISION SYSTEM, FRAUD CENTURION, INSIGHT, POPS, and RETAIL MANAGEMENT SYSTEM are trademarks of Lightbridge. All other trademarks or trade names appearing in this Form 10-Q are the property of their respective owners. OVERVIEW Lightbridge develops, markets and supports a network of integrated products and services that enable telecommunications carriers to improve their customer acquisition, service provisioning, retention and fraud management processes. Lightbridge's transaction services revenues are derived primarily from the processing of applications for qualification of subscribers for telecommunications services and the activation of service for those subscribers. Lightbridge's offerings include credit evaluation services, screening for subscriber fraud, evaluating carriers' existing accounts, interfacing with carrier and third-party systems and providing call center services. These services are provided pursuant to contracts with carriers which specify the services to be utilized and the markets to be served. Lightbridge's clients are charged for these services on a per pransaction basis. Pricing varies depending primarily on the volume of transactions, the type and number of other products and services selected for integration with the services and the term of the contract under which services are provided. The volume of processed transactions varies depending on industry, seasonal and retail trends, the success of the carriers utilizing Lightbridge's services in attracting subscribers and the 8 markets served by Lightbridge's clients. Transaction services revenues are recognized in the period in which the services are performed. Lightbridge's software licensing and maintenance revenues consist of revenues attributable to the licensing of Lightbridge's Channel Solutions and Fraud Management software. Lightbridge's Channel Solutions products are designed to assist customers in interfacing with Lightbridge's transaction processing systems as well as to perform other point-of-sale and channel functionality. Lightbridge's Fraud Management products are designed to assist carriers in monitoring subscriber accounts to identify activity that may indicate fraud. While Lightbridge's software products are licensed as packaged software products, each of these products generally requires insignificant customization and integration with other products and systems to varying degrees. Software licensing revenues are recognized when persuasive evidence of an arrangement exists, delivery of the product has been made, and a fixed fee and collectibility has been determined. Revenues from software maintenance contracts are recognized ratably over the term of the maintenance agreement. Lightbridge's consulting services revenues are derived from solution development and deployment consulting and business advisory services in the areas of customer acquisition, retention and fraud management. Revenues from consulting services are generally recognized as the services are performed, using the percentage-of-completion method, measured by labor hours. During the first quarter of 2000, Lightbridge continued its efforts to complete development of in-process technology obtained through the acquisition of Coral Systems Inc. ("Coral") in November 1997. Lightbridge commenced beta testing of FraudBuster 5.0, which contains enhancements in performance, scalability and functionality and is currently scheduled to generally be released in the second quarter of 2000. Lightbridge is also continuing to develop Alias and @Risk, which are complimentary to FraudBuster and contain new subscription fraud detection tools. These products are being deployed in a phased introduction that began in the third quarter of 1999 and is expected to continue through the second quarter of 2000. If Lightbridge is unsuccessful in completing these projects, Lightbridge's business, financial condition, results of operations and cash flows could be materially adversely affected. Substantially all of Lightbridge's revenues historically have been derived from clients located in the United States, and Lightbridge expects that domestic sales will continue to account for a substantial portion of its revenues for the remainder of 2000. 9 RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, ------------------- 2000 1999 -------- -------- Revenues: Transaction............................................... 77.7% 72.8% Software licensing and maintenance........................ 12.0 9.6 Consulting services....................................... 10.3 17.6 ----- ----- Total revenues.......................................... 100.0 100.0 ----- ----- Cost of revenues: Transaction............................................... 34.5 34.2 Software licensing and maintenance........................ 6.5 4.9 Consulting services....................................... 6.3 8.5 ----- ----- Total cost of revenues.................................... 47.3 47.6 ----- ----- Gross profit................................................ 52.7 52.4 ----- ----- Operating expenses: Development costs......................................... 15.6 12.9 Sales and marketing....................................... 8.5 10.3 General and administrative................................ 11.1 13.5 Amortization of goodwill and acquired workforce........... 0.7 1.8 ----- ----- Total operating expenses................................ 35.9 38.5 ----- ----- Income from operations...................................... 16.8 13.9 Other income, net........................................... 1.2 0.6 ----- ----- Income before provision for income taxes.................... 18.0 14.5 Provision for income taxes.................................. 7.2 7.1 ----- ----- Net income.................................................. 10.8% 7.4% ===== =====
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED MARCH 31, 1999 REVENUES. Revenues increased by 35.9% to $26.3 million in the three months ended March 31, 2000 from $19.3 million in the three months ended March 31, 1999. Transaction revenues increased by 45.1% to $20.4 million in the three months ended March 31, 2000 from $14.1 million in the three months ended March 31, 1999, while increasing as a percentage of total revenues to 77.7% from 72.8%. The increase in transaction revenues for the three months ended March 31, 2000 was primarily due to increased volume of qualification and activation transactions processed for carrier clients and an increase in special program efforts through Lightbridge's TeleServices Call Center, which are generally not provided under a long-term contract. Lightbridge believes that its transaction-based activities benefited directly from client promotional activities generally attributable to the current competitive market for wireless services. Lightbridge anticipates that the volume of transaction-based activities during the quarters ended June 30, 2000 and September 30, 2000 will be consistent with the level of activity for the three months ended March 31, 2000. However, the volume of transaction-based activities may vary based on special program efforts through Lightbridge's TeleServices Call Center or other factors. Lightbridge's transaction revenues will continue to reflect in large part the industry's rate of growth of new subscribers and seasonal trends as well as the rate of switching among carriers by subscribers (subscriber churn). Lightbridge believes, based in part on reports of wireless telecommunication industry analysts, that the rate of 10 subscriber growth will slow in upcoming years and that the rate of subscriber churn will remain fairly constant. Software licensing and maintenance revenues increased by 70.3% to $3.2 million in the three months ended March 31, 2000 from $1.9 million in the three months ended March 31, 1999, while increasing as a percentage of total revenues to 12.0% from 9.6%. The increase in software licensing and maintenance revenues for the three months ended March 31, 2000 resulted from increases in both licensing and maintenance revenues. Lightbridge currently anticipates that its software licensing and maintenance revenues will experience modest growth for the remainder of 2000 when compared to 1999, as Lightbridge continues to integrate its Fraud Management products with its other offerings and to build its international sales capability. Actual results for 2000 will, however, be subject to a number of uncertainties, some of which are not within Lightbridge's control. In particular, Lightbridge believes that software licensing revenues at least through 2000 will be subject to fluctuation and will be more difficult to anticipate than Lightbridge's other types of revenues, principally due to the relatively large dollar magnitude and relatively long sales cycles of the software licenses. The sales cycles for domestic software licenses generally extend from three to six months and may extend as long as twelve months; sales cycles for software licenses sold to international clients often are longer. The predictability of software licensing revenue is further impeded because Lightbridge's licensed software is a discretionary purchase for most customers. As a result of the foregoing, a small number of licensing transactions may have a significant effect on Lightbridge's software licensing revenues within a given quarter. Consulting services revenues decreased by 20.9% to $2.7 million in the three months ended March 31, 2000 from $3.4 million in the three months ended March 31, 1999, while decreasing as a percentage of total revenues to 10.3% from 17.6%. The decrease in consulting services revenues for the three months ended March 31, 2000 was principally due to a decrease in backlog from the fourth quarter of the year ended December 31, 1999, as a result of Year 2000 concerns. Lightbridge currently anticipates that its consulting services revenue will grow at a slower rate in 2000 when compared to 1999 levels as Lightbridge continues to standardize its consulting services offerings and to build its consulting capabilities. COST OF REVENUES. Cost of revenues consists primarily of personnel costs, costs of purchasing and maintaining systems and networks used in processing qualification and activation transactions (including depreciation and amortization of systems and networks) and amortization of capitalized software and acquired technology. Cost of revenues may vary as a percentage of total revenues in the future as a result of a number of factors, including changes in the mix of transaction revenues between revenues from on-line transaction processing and revenues from processing transactions through Lightbridge's TeleServices Group and changes in the mix of total revenues among transaction revenues, software licensing revenues and consulting services revenues. Transaction cost of revenues increased by 37.0% to $9.1 million in the three months ended March 31, 2000 from $6.6 million in the three months ended March 31, 1999, while decreasing as a percentage of total transaction revenues to 44.4% from 47.0%. The increase in transaction cost of revenues for the three months ended March 31, 2000 resulted principally from increases in transaction volume and costs attributable to expansion of Lightbridge's staff and systems capacity. Software licensing and maintenance cost of revenues increased by 79.4% to $1.7 million in the three months ended March 31, 2000 from $1.0 million in the three months ended March 31, 1999, while increasing as a percentage of total software licensing and maintenance revenues to 54.1% from 51.4%. The increase in software licensing and maintenance cost of revenues for the three months ended March 31, 2000 were primarily due to an increase in personnel in connection with beta testing of Fraudbuster 5.0. Consulting services cost of revenues increased by 1.0% to $1.7 million in the three months ended March 31, 2000 from $1.6 million in the three months ended March 31, 1999, while increasing as a 11 percentage of total consulting services revenues to 61.1% from 47.9%. The increase in consulting services cost of revenues was attributable primarily to the increase in consulting staff due to the expansion of the consulting services group. Lightbridge expects fluctuations in gross profit may occur primarily due to fluctuations in revenue generated from Lightbridge's three revenue components, particularly revenues from software licensing and consulting services. DEVELOPMENT. Development expenses include software development costs consisting primarily of personnel and outside technical services costs related to developing new products and services, enhancing existing products and services, and implementing and maintaining new and existing products and services. Development expenses increased by 63.7% to $4.1 million in the three months ended March 31, 2000 from $2.5 million in the three months ended March 31, 1999, while increasing as a percentage of total revenues to 15.6% from 12.9%. The increase in costs for the three months ended March 31, 2000 resulted primarily from the addition of engineering personnel necessary to support Lightbridge's product development plans. Included in these development efforts was the development of enhanced versions of its Fraud Management software product, FraudBuster, the continued enhancement of its Customer Acquisition System and Retail Management System and development of its Fraud Management software products, Alias and @Risk. Lightbridge expects to continue to increase the dollar amount of its engineering and development efforts in order to continue enhancing its existing products and services, including its Channel Solutions and Fraud Management products and services, as well as to develop new products and services. As a result, Lightbridge expects that its development expenses, as a percentage of total revenues, will be higher during the last nine months of 2000 than in the last nine months of 1999. SALES AND MARKETING. Sales and marketing expenses consist primarily of salaries, commissions and travel expenses of direct sales and marketing personnel, as well as costs associated with advertising, trade shows and conferences. Sales and marketing expenses increased by 11.6% to $2.2 million for the three months ended March 31, 2000 from $2.0 million in the three months ended March 31, 1999, while decreasing as a percentage of total revenues to 8.5% from 10.3%. The increase in sales and marketing expenses for the three months ended March 31, 2000 was primarily due to various trade shows in which Lightbridge participated during the quarter. Lightbridge expects to continue to invest in sales and marketing efforts, both domestically and internationally, in order to increase its penetration of existing accounts and to add new clients and markets. GENERAL AND ADMINISTRATIVE. General and administrative expenses consist principally of salaries of executive, finance, human resources and administrative personnel and fees for outside professional services. General and administrative expenses increased by 12.0% to $2.9 million in the three months ended March 31, 2000 from $2.6 million in the three months ended March 31, 1999, while decreasing as a percentage of total revenues to 11.1% from 13.5%. The increase was primarily due to increases in general and administrative personnel and fees for professional services. Lightbridge expects that its general and administrative expenses as a percentage of total revenues will not significantly change for the remainder of 2000. AMORTIZATION OF GOODWILL AND ACQUIRED WORKFORCE. Amortization of goodwill and acquired workforce consists of amortization expense of certain acquired intangible assets from the acquisition of Coral Systems, Inc. Amortization of goodwill and acquired workforce expense decreased by 45.2% to $0.2 million in the three months ended March 31, 2000 from $0.3 million in the three months ended March 31, 1999 and also decreased as a percentage of total revenues to 0.7% from 1.8%. The decrease was due to the write-off 12 during the fourth quarter of 1999 of the remainder of the net goodwill balance and a portion of the acquired workforce asset to reflect the return of a portion of the shares escrowed at the time of the Coral acquisition in settlement of claims made by Lightbridge. As a result, Lightbridge expects that acquired workforce amortization expense will be approximately $0.1 million for the remainder of 2000. OTHER INCOME, NET. Other income, net in the three months ended March 31, 2000 consisted predominantly of interest income and expense. Interest expense consists of interest payable with respect to Lightbridge's subordinated notes. Interest income increased to $0.3 million in the quarter ended March 31, 2000 from $0.2 million in the quarter ended March 31, 1999 as a result of higher average cash balances during the quarter. PROVISION FOR INCOME TAXES. Lightbridge's effective tax rate was 40% and 49% for the three months ended March 31, 2000 and 1999, respectively. The relatively high effective tax rate for 1999 resulted from the amortization of goodwill related to Lightbridge's acquisition of Coral, which is recognized as an expense for accounting purposes, but is not deductible for tax purposes. Lightbridge anticipates that its effective tax rate for the year ending December 31, 2000 will be approximately 40%. The actual effective tax rate for 2000 may vary significantly from Lightbridge's estimates as the result of a number of factors, including any and all factors that cause Lightbridge's actual pretax book income for the year to vary from Lightbridge's internal estimates. Lightbridge has net operating loss carryforwards for federal income tax purposes which were acquired from Coral. These net operating loss carryforwards are limited in use and therefore a valuation allowance has been established against a portion of the deferred tax assets as their full realization is not assured. LIQUIDITY AND CAPITAL RESOURCES During the first three months of 2000 Lightbridge generated positive cash flows from operating and financing activities of $2.2 million and $1.1 million, respectively, and used cash of $2.8 million in investing activities. Lightbridge's capital expenditures in the three months ended March 31, 2000 and 1999 aggregated $2.8 million and $0.8 million, respectively. The capital expenditures during these periods consisted of an increase in purchases of fixed assets, principally for Lightbridge's services delivery infrastructure and computer equipment for development activities. Lightbridge currently estimates that its capital expenditures for the remainder of 2000 will total approximately $13.0 million to $15.0 million, although the actual amount of those expenditures may vary significantly, depending upon, among other things, the extent to which Lightbridge determines to update the capacity of its data center and to acquire additional computer equipment. Lightbridge leases its facilities and certain equipment under non-cancelable operating lease agreements that expire at various dates through December 2005. Lightbridge has a $5.0 million working capital line of credit and a $3.0 million equipment line of credit with a bank. The lines of credit are secured by all of Lightbridge's assets. Borrowing availability on the working capital line of credit is based on the amount of qualifying accounts receivable. Advances under the working capital line of credit and equipment line of credit bear interest at the bank's prime rate (9.0% at March 31, 2000). The working line of credit also provides for the issuance of letters of credit, which reduce the amount that may be borrowed under the line of credit and are limited to $1,250,000 in the aggregate. At March 31, 2000, there were no borrowings outstanding under the working capital line of credit or the equipment line of credit. Borrowing availability at March 31, 2000 was $4.0 million and $3.0 million for the working capital line of credit and equipment line of credit, respectively. Lightbridge's agreements with the bank contain covenants that, among other things, prohibit the declaration or payment of dividends and require Lightbridge to maintain certain financial ratios which Lightbridge believes are not restrictive to its business operations. The working capital line of credit expires in June 2000 and the equipment line of credit expires in June 2001. 13 Lightbridge considers earnings before interest, taxes, depreciation, and amortization ("EBITDA") to be meaningful given the impact on operating income from non-cash expenses such as depreciation of property and equipment and the amortization of intangible assets. EBITDA and after-tax cash flow should not be considered in isolation from, or as a substitute for, operating income, net income or cash flow and other consolidated income or cash flow statement data computed in accordance with generally accepted accounting principles or as a measure of Lightbridge's profitability or liquidity. Although these measures of performance are not calculated in accordance with generally accepted accounting principles, Lightbridge believes they are widely used in the telecommunications industry as a measure of a company's operating performance because they assist in comparing companies on a more consistent basis without regard to depreciation and amortization which can vary significantly depending on accounting methods (particularly when acquisitions are involved). EBITDA increased by 75.9% to $7.2 million in the three months ended March 31, 2000, from $4.1 million in the three months ended March 31, 1999. The increase for the three months ended March 31, 2000 resulted primarily from an increase in operating income. As of March 31, 2000, Lightbridge had cash and cash equivalents of $36.0 million and working capital of $40.4 million. Lightbridge believes that the current cash balances and funds available under existing lines of credit, together with cash flows provided by operations, will be sufficient to finance Lightbridge's operations and capital expenditures for at least the next twelve months. INFLATION Although certain of Lightbridge's expenses increase with general inflation in the economy, inflation has not had a material impact on Lightbridge's financial results to date. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board released Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes standards applicable to the manner in which Lightbridge accounts for derivative instruments in its annual financial statements commencing with the quarter beginning after June 15, 2000. Lightbridge has not yet determined the effect that adoption will have on its consolidated financial statements. Lightbridge has adopted Statement of Position No. 98-9 ("SOP 98-9") "Modification of SOP 97-2," Software Revenue Recognition," with Respect to Certain Transactions". SOP 98-9 amends SOP 97-2 to require that an entity recognize revenue for multiple element arrangements by means of the "residual method" when (1) there is vendor-specific objective evidence (VSOE) of the fair values of all the undelivered elements that are not accounted for by means of long-term contract accounting, (2) VSOE of fair value does not exist for one or more of the delivered elements, and (3) all revenue recognition criteria of SOP 97-2 (other than the requirement for VSOE of the fair value of each delivered element) are satisfied. The provisions of SOP 98-9 that extend the deferral of certain paragraphs of SOP 97-2 and SOP 98-9 will be effective for transactions that are entered into in fiscal years beginning after March 15, 1999. The adoption of SOP 98-9 did not have a material effect on the consolidated financial position or results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURES The market risk exposure inherent in Lightbridge's financial instruments and consolidated financial position represents the potential losses arising from adverse changes in interest rates. Lightbridge is exposed to such interest rate risk primarily in its significant investment in cash and cash equivalents and the use of fixed- and variable-rate debt to fund its acquisitions of property and equipment in past years. Market risk for cash and cash equivalents and fixed-rate borrowings is estimated as the potential change in the fair value of the assets or obligations resulting from a hypothetical ten percent adverse 14 change in interest rates, which would not have been significant to Lightbridge's financial position or results of operations during 2000. The effect of a similar hypothetical change in interest rates on Lightbridge's variable-rate debt also would have been insignificant due to the immaterial amounts of borrowings outstanding under Lightbridge's credit arrangements. For additional information about Lightbridge's financial instruments and debt obligations, see Notes to Consolidated Financial Statements in Lightbridge's Annual Report on Form 10-K for the year ended December 31, 1999. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
NO. DESCRIPTION - --------------------- ----------- 10.1 Fifth and Sixth Amendments dated March 10, 2000 to the office lease included as item 10.13 in the Annual Report on Form 10-K of the Company for the year ended December 31, 1999. 27.1 Financial Data Schedule for the three months ended March 31, 2000 99.1 Information set forth under the heading "ITEM 1A. Risk Factors" in the Annual Report on Form 10-K of the Company for the year ended December 31, 1999 is incorporated herein by reference
(b) Reports on Form 8-K Lightbridge did not file any Current Report on Form 8-K during the three months ended March 31, 2000. 15 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LIGHTBRIDGE, INC. BY: /S/ PAMELA D.A. REEVE ----------------------------------------- Pamela D.A. Reeve President and Chief Executive Officer (Principal Financial and Accounting Officer) Date: May 11, 2000
16 EX-10.1A 2 EXHIBIT 10.1A Exhibit 10.1A Burlington Business Center 67 South Bedford Street Burlington, Massachusetts ("the Building") SIXTH AMENDMENT March 10, 2000 LANDLORD: Gateway Rosewood, Inc., successor-in-interest to Sumitomo Life Realty (N.Y.), Inc. TENANT: Lightbridge, Inc. EXISTING PREMISES: An area on the first (1st) floor East Pod of the Building, containing 21,055 rentable square feet, substantially as shown on Lease Plan, Exhibit F, Sheet 1; an area on the second (2nd) floor East Pod of the Building, containing 21,892 rentable square feet, substantially as shown on Lease Plan, Exhibit F, Sheet 2; an area ("Third Amendment Premises") on the second (2nd) floor, Pod C of the Building, containing 220 square feet of Rentable Floor Area, substantially as shown on Exhibit A, Third Amendment; an area on the third (3rd) floor East Pod of the Building, containing 3,411 rentable square feet, substantially as shown on Lease Plan, Exhibit F, Sheet 3; and an area on the fourth (4th) floor West Lobby of the Building, containing 11,226 square feet of Rentable Floor Area, substantially as shown on Exhibit A, Second Amendment, dated October 6, 1997; an area, known as the Generator Premises, adjacent to the Building more particularly shown on Exhibit A, First Amendment dated July 22, 1997; an area on the third (3rd) floor, Pod C of the Building, containing 7,733 square feet of Rentable Area, substantially as shown on Exhibit A, Fourth Amendment, dated July 16, 1999 ("Fourth Amendment Premises"); and an area on the third (3rd) floor of Pod C of the Building, containing 3,982 square feet of Rentable Floor Area, substantially as shown on Exhibit A, Fifth Amendment -1- ORIGINAL LEASE LEASE EXECUTION DATA: DATE: March 5, 1997 TERMINATION DATE IN RESPECT OF EXISTING PREMISES (EXCEPT THIRD AMENDMENT PREMISES): May 31, 2004 TERMINATION DATE IN RESPECT OF THIRD AMENDMENT PREMISES: March 31, 2001 TERMINATION DATE IN RESPECT OF SIXTH AMENDMENT PREMISES: October 31, 2005 PREVIOUS LEASE AMENDMENTS: First Amendment dated July 22, 1997 Second Amendment dated October 6, 1997 Third Amendment dated as of March 15, 1999 Fourth Amendment dated July 16, 1999 Fifth Amendment dated March 10, 2000 SIXTH AMENDMENT PREMISES: Area A: An area on the second (2nd) floor, Center Pod of the Building, containing 7,320 square feet of Rentable Floor Area, substantially as shown on Exhibit A, Sixth Amendment, a copy of which is attached hereto and incorporated by reference herein -2- Area B: An area on the second (2nd) floor of Pod B of the Building, containing 8,431 square feet of Rentable Floor Area, substantially as shown on Exhibit A, Sixth Amendment, a copy of which is attached hereto and incorporated by reference herein Area C: An area on the second (2nd) floor, Pod B of the Building, containing 4,000 square feet of Rentable Floor Area, substantially as shown on Exhibit A, Sixth Amendment, a copy of which is attached hereto and incorporated by reference herein WHEREAS, Tenant desires to lease additional premises located in the Building, to wit, the Sixth Amendment Premises; WHEREAS, Landlord is willing to lease the Sixth Amendment Premises to Tenant upon the terms and conditions hereinafter set forth; NOW THEREFORE, the parties hereby agree that the above-described lease, as previously amended ("the Lease"), is hereby further amended as follows: 1. TERMINATION OF TEMPORARY PREMISES TENANCY AGREEMENT The parties acknowledge that Tenant has executed a Temporary Premises Tenancy Agreement ("Temporary Premises Tenancy Agreement"), in respect of Area B, dated February 1, 2000, by and between Landlord, as landlord and Tenant, as tenant. The parties hereby further acknowledge that the Temporary Premises Tenancy Agreement is superseded in all respects by this Sixth Amendment, and therefore that the Temporary Premises Tenancy Agreement is hereby deemed void and is of no further force or effect. 2. DEMISE OF THE SIXTH AMENDMENT PREMISES Landlord hereby leases and demises to Tenant, and Tenant hereby hires and takes from Landlord, the Sixth Amendment Premises. Said demise of the Sixth Amendment Premises shall be upon all of the terms and conditions of the Lease applicable to the Existing Premises except as follows: -3- I. AREA A A. The Term Commencement Date in respect of Area A shall be November 1, 2000 or, if later, the date Area A is delivered to Tenant by Landlord. B. The Rent Commencement Date in respect of Area A shall be the earlier of: (i) sixty (60) days after the Term Commencement Date in respect of Area A or (ii) the date Tenant or those claiming by, through or under Tenant start to use Area A for purposes permitted under the Lease. C. The Termination Date in respect of Area A shall be October 31, 2005. D. Annual Fixed Rent in respect of Area A shall be Two Hundred Twelve Thousand Two Hundred Eighty and 00/100 Dollars ($212,280.00) (i.e., a monthly payment of $17,690.00) (i.e., $29.00 per rentable square foot). E. Tenant's Operating Expense Base in respect of Area A shall be the actual amount of Operating Expenses Allocable to Area A for calendar year 2000. F. Tenant's Tax Base in respect of Area A shall be the actual amount of Tax Expenses Allocable to Area A for fiscal/tax year 2001. G. Tenant's Annual Electricity Charge in respect of Area A shall be Six Thousand Nine Hundred Fifty-Four and 00/100 Dollars ($6,954.00), based upon a charge of $.95 per square foot of Rentable Floor Area in respect of Area A (i.e., $579.50 per month). Tenant's obligation to commence paying the Annual Electricity Charge in respect of Area A shall commence as of the Rent Commencement Date in respect of Area A. II. AREA B A. The Term Commencement Date in respect of Area B shall be March 1, 2000. B. The Rent Commencement Date in respect of Area B shall be November 1, 2000. C. The Termination Date in respect of Area B shall be October 31, 2005. D. Annual Fixed Rent in respect of Area B shall be Two Hundred Forty-Four Thousand Four Hundred Ninety-Nine and 00/100 Dollars ($244,499.00) (i.e., a monthly payment of $20,374.92) (i.e., $29.00 per rentable square foot). -4- E. Commencing as of the Term Commencement Date in respect of Area B through the Rent Commencement Date in respect of Area B, the Operating Expenses in respect of Area B, payable by Tenant, shall be the actual amount of Operating Expenses Allocable to Area B for calendar year 2000 and shall be prorated for a portion of any calendar year. Commencing as of the Rent Commencement Date in respect of Area B, Tenant's Operating Expenses Base in respect of Area B shall be the actual amount of Operating Expenses Allocable to Area B for calendar year 2000. F. Commencing as of the Term Commencement Date in respect of Area B through the Rent Commencement Date in respect of Area B, the Taxes in respect of Area B, payable by Tenant, shall be the actual amount of Tax Expenses Allocable to Area B for fiscal/tax year 2001. Commencing as of the Rent Commencement Date in respect of Area B, Tenant's Tax Base in respect of Area B shall be the actual amount of Tax Expenses Allocable to Area B for calendar year 2000. G. Tenant's Annual Electricity Charge in respect of Area B shall be Eight Thousand Nine and 45/100 Dollars ($8,009.45), based upon a charge of $.95 per square foot of Rentable Floor Area in respect of Area B (i.e., $667.45 per month). Tenant's obligation to commence paying the Annual Electricity Charge in respect of Area B shall commence as of the Term Commencement Date in respect of Area B. III. AREA C A. The Term Commencement Date in respect of Area C shall be the Term Commencement Date in respect of Area A. B. The Rent Commencement Date in respect of Area C shall be the earliest of: (i) one hundred fifty (150) days after the Term Commencement Date in respect of Area C; (ii) ninety (90) days after Tenant or anyone claiming by, through or under Tenant commences construction in Area C, or (iii) sixty (60) days after Tenant or anyone claiming by, through or under Tenant first commences to use Area C for purposes permitted under the Lease. C. The Termination Date in respect of Area C shall be October 31, 2005. D. Annual Fixed Rent in respect of Area C shall be One Hundred Sixteen Thousand and 04/100 Dollars ($116,000.00) (i.e., a monthly payment of $9,666.67) (i.e., $29.00 per rentable square foot). E. Tenant's Operating Expense Base in respect of Area C shall be the actual amount of Operating Expenses Allocable to Area C for calendar year 2000. F. Tenant's Tax Base in respect of Area C shall be the actual amount of Tax Expenses Allocable to Area C for fiscal/tax year 2001. -5- G. Tenant's Annual Electricity Charge in respect of Area C shall be Three Thousand Eight Hundred and 00/100 Dollars ($3,800.00), based upon a charge of $.95 per square foot of Rentable Floor Area in respect of Area C (i.e., $316.67 per month). Tenant's obligation to commence paying the Annual Electricity Charge in respect of Area C shall commence as of the Rent Commencement Date in respect of Area C. IV. PROVISIONS APPLICABLE TO ALL PORTIONS OF THE SIXTH AMENDMENT PREMISES A. Article XI of the Lease shall have no applicability to the Sixth Amendment Premises. B. In the event of any conflict between the provisions of the Lease and the provisions of this Amendment, the provisions of this Amendment shall control. 3. CONDITION OF SIXTH AMENDMENT PREMISES Notwithstanding anything to the contrary herein or in the Lease contained, Tenant shall lease the Sixth Amendment Premises "as-is", in the condition in which the Sixth Amendment Premises are in as of the Term Commencement Date in respect of the Sixth Amendment Premises without any obligation on the part of Landlord to prepare or construct the Sixth Amendment Premises for Tenant's occupancy, and without any representation or warranty by Landlord as to the condition of the Sixth Amendment Premises. 4. LANDLORD'S CONTRIBUTION IN RESPECT OF SIXTH AMENDMENT PREMISES Landlord shall provide to Tenant up to Three Hundred Twenty-Five Thousand Eight Hundred Ninety-One and 50/100 ($325,891.50) Dollars ("Landlord's Sixth Amendment Contribution") towards the cost of leasehold improvements to be installed by Tenant in the Sixth Amendment Premises; including, without limitation, hard costs, architectural and engineering fees incurred by Tenant in preparing Tenant's plans, moving costs and computer wiring and cabling costs ("Tenant's Sixth Amendment Premises Work"). Landlord's Sixth Amendment Contribution shall be disbursed to Tenant in the same manner and subject to the same conditions and limitations as set forth on Exhibit B to the Lease, except: A. The first two (2) sentences of Paragraph B of Exhibit B to the Lease shall not apply to Tenant's Sixth Amendment Premises Work. B. For the purpose of clause (iii) of Paragraph D of Exhibit B to the Lease, wherever the date "September 30, 1997" is used, the date "six (6) months after the Term -6- Commencement Date in respect of Area A" shall be substituted therefor in respect of Area A. C. For the purpose of clause (iii) of Paragraph D of Exhibit B to the Lease, wherever the date "September 30, 1997" is used, the date "six (6) months after the Term Commencement Date in respect of Area B" shall be substituted therefor in respect of Area B. D. For the purpose of clause (iii) of Paragraph D of Exhibit B to the Lease, wherever the date "September 30, 1997" is used, the date "six (6) months after the Term Commencement Date in respect of Area C" shall be substituted therefor in respect of Area C. 5. BROKER Landlord and Tenant each warrant that they have had no dealings with any broker or agent, other than Meredith & Grew ("Broker"), in connection with this Sixth Amendment and covenant to defend, hold harmless and indemnify each other from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent, other than Broker, claiming by or through them with respect to dealings in connection with this Sixth Amendment or the negotiation thereof. 6. LETTER OF CREDIT The parties hereby acknowledge that Landlord is presently holding a Letter of Credit in an amount equal to One Million and 00/100 ($1,000,000.00) Dollars, pursuant to Article X of the Lease. The parties hereby further acknowledge that Landlord shall continue to hold said Letter of Credit during the term of the Lease. 7. TENANT'S OPTION TO EXTEND THE TERM OF THE LEASE IN RESPECT OF THE SIXTH AMENDMENT PREMISES Tenant shall have the following right to extend the term of the Lease in respect of the Sixth Amendment Premises. Tenant's extension option under this Paragraph 7 shall be independent of Tenant's extension option with respect to the Existing Premises as set forth in Article XI of the Lease. A. On the conditions, which conditions Landlord may waive, at its election, by written notice to Tenant at any time, that Tenant is not in default of its covenants and obligations under the Lease beyond any applicable period of notice and cure, and that Lightbridge, Inc., itself, is occupying the entirety of the Sixth Amendment Premises, both as of the time of option exercise and as of the commencement of the hereinafter described additional term, Tenant shall have the option to extend the term of the Lease in respect of -7- the Sixth Amendment Premises for one (1) additional five (5) year term, such additional term commencing as of November 1, 2005 and terminating as of October 31, 2010. Tenant may exercise such option to extend by giving Landlord written notice on or before February 1, 2005. Upon the timely giving of such notice, the term of the Lease in respect of the Sixth Amendment Premises shall be deemed extended upon all of the terms and conditions of the Lease, except that Landlord shall have no obligation to construct or renovate the Sixth Amendment Premises and that the Annual Fixed Rent, the Annual Electricity Charge, Tenant's Operating Expense Base, and Tenant's Tax Base during such additional term shall be as hereinafter set forth. If Tenant fails to give timely notice, as aforesaid, Tenant shall have no further right to extend the term of the Lease in respect of the Sixth Amendment Premises, time being of the essence of this Paragraph 7. B. Annual Fixed Rent The Annual Fixed Rent during the additional term of the Lease in respect of the Sixth Amendment Premises shall be based upon the Fair Market Rental Value, as defined in Article XIII of the Lease, as of the commencement of the additional term of the Lease in respect of the Sixth Amendment Premises, provided however, that in no event shall the sum of Annual Fixed Rent, the Annual Electricity Charge, Operating Expenses Allocable to the Premises and Tax Expenses Allocable to the Sixth Amendment Premises payable by Tenant for any twelve-(12)-month period during the additional term be less than the sum of Annual Fixed Rent, Annual Electricity Charge, Operating Expenses Allocable to the Premises and Tax Expenses Allocable to the Sixth Amendment Premises payable by Tenant during the immediately preceding twelve (12) month period. C. Tenant shall have no further option to extend the term of the Lease in respect of the Sixth Amendment Premises other than the one (1) additional five (5) year term herein provided. D. Notwithstanding the fact that upon Tenant's exercise of the herein option to extend the term of the Lease in respect of the Sixth Amendment Premises such extension shall be self-executing, as aforesaid, the parties shall promptly execute a lease amendment reflecting such additional term after Tenant exercises the herein option, except that the Annual Fixed Rent payable in respect of such additional term, the Annual Electricity Charge payable during the initial term, Tenant's Operating Expenses Base during such additional term, and Tenant's Tax Base during such additional term, may not be set forth in said amendment. Subsequently, after such Annual Fixed Rent, the Annual Electricity Charge, Tenant's Operating Expenses Base, and Tenant's Tax Base are determined, the parties shall execute a written agreement confirming the same. The execution of such lease amendment shall not be deemed to waive any of the conditions to Tenant's exercise of its rights under this Paragraph 7, unless otherwise specifically provided in such lease amendment. -8- 8. TENANT'S CANCELLATION RIGHT UPON LATE DELIVERY OF PORTIONS OF THE SIXTH AMENDMENT PREMISES If the Term Commencement Date in respect of any portion of the Sixth Amendment Premises has not occurred on or before March 1, 2001, then Tenant shall have the right to terminate the term of the Lease in respect of such portion of the Sixth Amendment Premises by giving Landlord a written thirty (30) day termination notice. If the Term Commencement Date in respect of such portion of the Sixth Amendment Premises does not occur on or before the thirtieth (3Oth) day after Landlord receives such termination notice, then the term of the Lease in respect of such portion of the Sixth Amendment Premises shall terminate as of said thirtieth (3Oth) day. If the Term Commencement Date in respect of such portion of the Sixth Amendment Premises occurs on or before the thirtieth (30th) day after Landlord receives such termination notice, then said termination notice shall be void and of no further force or effect and Tenant shall have no further right to terminate the Lease in respect of such portion of the Sixth Amendment Premises pursuant to this Paragraph 8. 9. As herein amended, the Lease is ratified, confirmed and approved in all respects. EXECUTED UNDER SEAL as of the date first above written. LANDLORD: TENANT: Invesco Realty Advisors LIGHTBRIDGE, INC. Division of Invesco, Inc. as Agent for: GATEWAY ROSEWOOD, INC. By: /s/ Michael Kirby Vice President By: /s/ Pamela A. Reeve CEO --------------------------------- ------------------------------ (Name) (Title) (Name) (Title) Hereunto Duly Authorized Hereunto Duly Authorized Date Signed: 4/28/2000 Date Signed: 4/28/2000 --------------------- --------------------- -9- EX-10.1B 3 EXHIBIT 10-1B Exhibit 10.1B Burlington Business Center 67 South Bedford Street Burlington, Massachusetts ("the Building") FIFTH AMENDMENT March 10, 2000 LANDLORD: Gateway Rosewood, Inc., successor-in-interest to Sumitomo Life Realty (N.Y.), Inc. TENANT: Lightbridge, Inc. EXISTING PREMISES: An area on the first (1st) floor East Pod of the Building, containing 21,055 rentable square feet, substantially as shown on Lease Plan, Exhibit F, Sheet 1; an area on the second (2nd) floor East Pod of the Building, containing 21,892 rentable square feet, substantially as shown on Lease Plan, Exhibit F, Sheet 2; an area ("Third Amendment Premises") on the second (2nd) floor, Pod C of the Building, containing 220 square feet of Rentable Floor Area, substantially as shown on Exhibit A, Third Amendment; an area on the third (3rd) floor East Pod of the Building, containing 3,411 rentable square feet, substantially as shown on Lease Plan, Exhibit F, Sheet 3; and an area on the fourth (4th) floor West Lobby of the Building, containing 11,226 square feet of Rentable Floor Area, substantially as shown on Exhibit A, Second Amendment, dated October 6, 1997; an area, known as the Generator Premises, adjacent to the Building more particularly shown on Exhibit A, First Amendment dated July 22, 1997; and an area on the third (3rd) floor, Pod C of the Building, containing 7,733 square feet of Rentable Area, substantially as shown on Exhibit A, Fourth Amendment, dated July 16, 1999 ("Fourth Amendment Premises") ORIGINAL LEASE LEASE EXECUTION DATA: DATE: March 5, 1997 -1- TERMINATION DATE IN RESPECT OF EXISTING PREMISES (EXCEPT THIRD AMENDMENT PREMISES) AND FIFTH AMENDMENT PREMISES: May 31, 2004 TERMINATION DATE IN RESPECT OF THIRD AMENDMENT PREMISES: March 14, 2000 PREVIOUS LEASE AMENDMENTS: First Amendment dated July 22, 1997 Second Amendment dated October 6, 1997 Third Amendment dated as of March 15, 1999 Fourth Amendment dated July 16, 1999 FIFTH AMENDMENT PREMISES: An area on the third (3rd) floor of Pod C of the Building, containing 3,982 square feet of Rentable Floor Area, substantially as shown on Exhibit A, Fifth Amendment, Sheet 1, a copy of which is attached hereto and incorporated by reference herein EXTENDED TERMINATION DATE IN RESPECT OF THIRD AMENDMENT PREMISES: March 31, 2001 WHEREAS, Tenant desires to: (i) extend the term of the lease in respect of the Third Amendment Premises; and (ii) lease additional premises located in the Building, to wit, the Fifth Amendment Premises; WHEREAS, Landlord is willing to: (i) extend the term of the lease in respect of the Third Amendment Premises for an additional term; and (ii) lease the Fifth Amendment Premises to Tenant upon the terms and conditions hereinafter set forth; -2- NOW THEREFORE, the parties hereby agree that the above-described lease, as previously amended ("the Lease"), is hereby further amended as follows: 1. EXTENSION OF TERM OF LEASE IN RESPECT OF THIRD AMENDMENT PREMISES The term of the Lease in respect of the Third Amendment Premises is hereby extended for an additional term commencing as of March 15, 2000 and terminating as of March 31, 2001. Said additional term shall be upon all of the same terms and conditions of the Lease in effect immediately preceding the commencement of such additional term (including, without limitation, Annual Fixed Rent, Operating Expense Base, Tax Base and Annual Electricity, all as set forth in Paragraph 1 of the Third Amendment). Tenant shall have no option to further extend the term of the Lease in respect of the Third Amendment Premises. In implementation of the foregoing, Article XI of the Lease shall have no applicability to the Third Amendment Premises. 2. DEMISE OF THE FIFTH AMENDMENT PREMISES Landlord hereby leases and demises to Tenant, and Tenant hereby hires and takes from Landlord, the Fifth Amendment Premises. Said demise of the Fifth Amendment Premises shall be upon all of the terms and conditions of the Lease applicable to the Existing Premises (including, without limitation, Tenant's Option to Extend the Term of the Lease, pursuant to Article XI of the Lease) except as follows: A. The Term Commencement Date in respect of the Fifth Amendment Premises shall be the day after the current tenant ("Current Tenant") in the Fifth Amendment Premises vacates the Fifth Amendment Premises. B. The Rent Commencement Date in respect of the Fifth Amendment Premises shall be the earlier to occur of (i) thirty (30) days after the Term Commencement Date in respect of the Fifth Amendment Premises, or (ii) the date that Tenant or those claiming by, through or under Tenant, commence to use the Fifth Amendment Premises for the purposes permitted under the Lease. C. The Termination Date in respect of the Fifth Amendment Premises shall be May 31, 2004. D. Annual Fixed Rent in respect of the Fifth Amendment Premises shall be One Hundred Thirteen Thousand Four Hundred Eighty-Seven and 00/100 Dollars ($113,487.00) (i.e., a monthly payment of $9,457.25) (i.e., $28.50 per rentable square foot). -3- E. Tenant's Operating Expense Base in respect of the Fifth Amendment Premises shall be the actual amount of Operating Expenses Allocable to the Fifth Amendment Premises for calendar year 2000. F. Tenant's Tax Base in respect of the Fifth Amendment Premises shall be the actual amount of Tax Expenses Allocable to the Fifth Amendment Premises for fiscal/tax year 2001. G. Tenant's Annual Electricity Charge in respect of the Fifth Amendment Premises shall be Three Thousand Seven Hundred Eighty-Two and 90/100 Dollars ($3,782.90), based upon a charge of $.95 per square foot of Rentable Floor Area in respect of the Fifth Amendment Premises (i.e., $315.24 per month). Tenant's obligation to commence paying the Annual Electricity Charge in respect of the Fifth Amendment Premises shall commence as of the Term Commencement Date in respect of the Fifth Amendment Premises. H. In the event of any conflict between the provisions of the Lease and the provisions of this Amendment, the provisions of this Amendment shall control. 3. CONDITION OF FIFTH AMENDMENT PREMISES Notwithstanding anything to the contrary herein or in the Lease contained, Tenant shall lease the Fifth Amendment Premises "as-is", in the condition in which the Fifth Amendment Premises are in as of the Term Commencement Date in respect of the Fifth Amendment Premises without any obligation on the part of Landlord to prepare or construct the Fifth Amendment Premises for Tenant's occupancy, and without any representation or warranty by Landlord as to the condition of the Fifth Amendment Premises. 4. LANDLORD'S CONTRIBUTION IN RESPECT OF FIFTH AMENDMENT PREMISES Landlord shall provide to Tenant up to Thirty-Nine Thousand Eight Hundred Twenty and 00/100 Dollars ($39,820.00) ("Landlord's Fifth Amendment Premises Contribution") towards the cost of leasehold improvements to be installed by Tenant in the Fifth Amendment Premises, including, without limitation, hard costs, architectural and engineering fees incurred by Tenant in preparing Tenant's plans, moving costs and computer wiring and cabling costs ("Tenant's Fifth Amendment Premises Work"). Landlord's Fifth Amendment Premises Contribution shall be disbursed to Tenant in the same manner and subject to the same conditions and limitations as set forth on Exhibit B to the Lease, except: A. The first two (2) sentences of Paragraph B of Exhibit B to the Lease shall not apply to Tenant's Fifth Amendment Premises Work. -4- B. For the purpose of clause (iii) of Paragraph D of Exhibit B to the Lease, wherever the date "September 30, 1997" is used, the date "six (6) months after the Term Commencement Date in respect of the Fifth Amendment Premises" shall be substituted therefor in respect of the Fifth Amendment Premises. 5. BROKER Landlord and Tenant each warrant that they have had no dealings with any broker or agent in connection with this Fifth Amendment, except for Meredith & Grew ("Broker") and covenant to defend, hold harmless and indemnify each other from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent, other than Broker, claiming by or through them with respect to dealings in connection with this Fifth Amendment or the negotiation thereof. 6. LETTER OF CREDIT The parties hereby acknowledge that Landlord is presently holding a Letter of Credit in an amount equal to One Million and 00/100 Dollars ($1,000,000.00), pursuant to Article X of the Lease. The parties hereby further acknowledge that Landlord shall continue to hold said Letter of Credit during the term of the Lease. 7. CANCELLATION RIGHT Landlord represents to Tenant that Landlord's lease with the Current Tenant ("Current Tenant Lease") expires as of May 31, 2005, but that Landlord has the right, pursuant to the provisions of the Current Tenant Lease, to relocate the Current Tenant from the Fifth Amendment Premises to other premises in the Building. Landlord agrees that, after both parties execute and deliver this Fifth Amendment, Landlord will promptly exercise such relocation right. If, despite the exercise of such relocation right, Landlord is unable, on or before October 1, 2000, to relocate the Current Tenant from the Fifth Amendment Premises to other premises in the Building, then either party shall have the right ("Cancellation Right") to cancel this Fifth Amendment and to render it void and without further force or effect. Either party may exercise such Cancellation Right by giving written notice to the other party after October 1, 2000 but prior to the date that the Current Tenant relocates from the Fifth Amendment Premises to other premises in the Building. -5- 8. As herein amended, the Lease is ratified, confirmed and approved in all respects. EXECUTED UNDER SEAL as of the date first above written. LANDLORD: TENANT: Invesco Realty Advisors LIGHTBRIDGE, INC. Division of Invesco, Inc. as Agent for: GATEWAY ROSEWOOD, INC. By: /s/ Michael Kirby Vice President By: /s/ Pamela A. Reeve CEO --------------------------------- ------------------------------ (Name) (Title) (Name) (Title) Hereunto Duly Authorized Hereunto Duly Authorized Date Signed: 4/28/2000 Date Signed: 4/28/2000 --------------------- --------------------- -6- EX-27 4 EXHIBIT 27
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 35,980,811 0 23,652,947 1,060,000 0 60,609,701 37,185,638 19,021,131 82,622,457 20,209,588 575,016 0 0 177,510 61,223,371 82,622,457 26,278,373 26,278,373 12,420,000 12,420,000 9,436,799 6,977 24,740 4,735,817 1,895,000 2,840,817 0 0 0 2,840,817 0.17 0.15
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