-----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, Oqzk8iSf1PJ5Xi/uTtKZYoKso1tALMU67PPOGW8p9EzJaAHhGI61TykBKaIvAR0h +q/G6OnZd416+1nUukcCWw== 0000927016-98-003146.txt : 19980817 0000927016-98-003146.hdr.sgml : 19980817 ACCESSION NUMBER: 0000927016-98-003146 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD 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: 98691536 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 QUARTER REPORT 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 June 30, 1998 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 August 6, 1998, there were 15,871,347 shares of the registrant's common stock, $.01 par value, outstanding. LIGHTBRIDGE, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998 TABLE OF CONTENTS
PAGE NO. PART I. FINANCIAL INFORMATION Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Balance Sheets as of December 31, 1997 and June 30, 1998........................... 3 Income Statements for the three months ended June 30, 1997 and June 30, 1998....... 4 Income Statements for the six months ended June 30, 1997 and June 30, 1998......... 5 Statements of Cash Flows for the six months ended June 30, 1997 and June 30, 1998.. 6 Notes to Unaudited Condensed Consolidated Financial Statements..................... 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................... 8 PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................ 18 Item 5. OTHER INFORMATION.................................................................. 18 Item 6. EXHIBITS AND REPORTS ON FORM 8-K................................................... 18 SIGNATURE.................................................................................. 19
-2- PART I. FINANCIAL INFORMATION Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS LIGHTBRIDGE, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30, 1997 1998 ------------ ------------- ASSETS Current assets: Cash and cash equivalents $ 15,715,726 $ 13,381,604 Accounts receivable - net 13,213,052 14,733,672 Other current assets 2,885,583 2,950,379 ------------ ------------ Total current assets 31,814,361 31,065,655 Property and equipment - net 11,763,013 11,459,062 Goodwill - net 6,286,931 5,179,557 Other assets 2,087,676 2,529,416 ------------ ------------ Total assets $ 51,951,981 $ 50,233,690 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 8,164,817 $ 5,743,441 Short-term borrowings and current portion of notes payable 805,205 805,205 Deferred revenues 1,658,406 1,948,811 ------------ ------------ Total current liabilities 10,628,428 8,497,457 Other long-term liabilities 823,346 1,057,367 Notes payable 1,397,614 888,823 ------------ ------------ Total liabilities 12,849,388 10,443,647 ------------ ------------ Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares issued or outstanding at December 31, 1997 and June 30, 1998, respectively -- -- Common stock, $.01 par value; 60,000,000 shares authorized; 16,492,954 and 16,665,166 shares issued and 15,665,662 and 15,837,874 shares outstanding at December 31, 1997 and June 30, 1998, respectively 164,929 166,651 Additional paid-in capital 53,660,991 53,975,646 Warrants 598,875 598,875 Accumulated deficit (13,697,239) (13,326,166) ------------ ------------ Total 40,727,556 41,415,006 Less: treasury stock, at cost (1,624,963) (1,624,963) ------------ ------------ Total stockholders' equity 39,102,593 39,790,043 ------------ ------------ Total liabilities and stockholders' equity $ 51,951,981 $ 50,233,690 ============ ============
See notes to unaudited condensed consolidated financial statements. -3- LIGHTBRIDGE, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
Three months ended June 30, ------------------------------ 1997 1998 ---------- ----------- Revenues: Transaction services $5,972,765 $ 9,125,612 Software licensing 975,916 3,410,130 Consulting services 2,059,168 2,609,740 ---------- ----------- Total revenues 9,007,849 15,145,482 ---------- ----------- Cost of revenues: Transaction services 3,434,131 5,122,507 Software licensing 295,257 895,907 Consulting services 422,146 1,684,528 ---------- ----------- Total cost of revenues 4,151,534 7,702,942 ---------- ----------- Gross profit 4,856,315 7,442,540 ---------- ----------- Operating expenses: Development 1,350,474 2,429,574 Sales and marketing 1,348,837 1,715,305 General and administrative 976,991 2,968,051 ---------- ----------- Total operating expenses 3,676,302 7,112,930 ---------- ----------- Income from operations 1,180,013 329,610 Other income (expense): Interest income 327,425 170,214 Interest expense (83,687) (33,772) Other non-operating income 24,803 84,311 ---------- ----------- Income before provision for income taxes 1,448,554 550,363 Provision for income taxes 550,430 272,100 ---------- ----------- Net income $ 898,124 $ 278,263 ========== =========== Basic and diluted earnings per common share $0.06 $0.02 ============== ==============
See notes to unaudited condensed consolidated financial statements. -4- LIGHTBRIDGE, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
Six months ended June 30, ------------------------- 1997 1998 ---- ---- Revenues: Transaction services $12,001,921 $16,985,333 Software licensing 1,745,265 7,521,062 Consulting services 4,083,502 3,941,903 ----------- ----------- Total revenues 17,830,688 28,448,298 ----------- ----------- Cost of revenues: Transaction services 6,920,862 10,119,915 Software licensing 425,935 1,432,313 Consulting services 973,294 2,450,422 ----------- ----------- Total cost of revenues 8,320,091 14,002,651 ----------- ----------- Gross profit 9,510,597 14,445,647 ----------- ----------- Operating expenses: Development 2,682,213 4,721,671 Sales and marketing 2,604,549 3,671,242 General and administrative 2,122,617 5,775,563 ----------- ----------- Total operating expenses 7,409,379 14,168,476 ----------- ----------- Income from operations 2,101,218 277,171 Other income (expense): Interest income 647,241 399,181 Interest expense (191,542) (99,612) Other non-operating income 15,524 123,333 ----------- ----------- Income before provision for (benefit from) income taxes 2,572,441 700,073 Provision for (benefit from) income taxes (93,509) 329,000 Net income $ 2,665,950 $ 371,073 =========== =========== Basic earnings per common share $ 0.18 $ 0.02 =========== =========== Diluted earnings per common share $ 0.16 $ 0.02 =========== ===========
See notes to unaudited condensed consolidated financial statements. -5- LIGHTBRIDGE, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, ------------------------- 1997 1998 ----------- ------------ Cash Flows From Operating Activities: Net income $ 2,665,950 $ 371,073 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 1,696,167 3,951,868 Amortization of discount on notes 9,484 18,812 Deferred taxes (863,406) - Changes in assets and liabilities: Accounts receivable and other current assets (1,632,744) (1,605,417) Other assets 93,006 (1,048,621) Accounts payable and accrued liabilities (1,032,424) (2,421,376) Deferred revenues 83,528 290,405 Other liabilities - 408,436 ------------ ------------ Net cash provided by (used in) operating activities 1,019,561 (34,820) ------------ ------------ Cash Flows From Investing Activities: Principal payment received for note from officer - 20,000 Purchases of property and equipment (3,494,550) (1,933,661) Purchase of investments (2,069,323) - Redemption of investments 1,031,133 - ------------ ------------ Net cash used in investing activities (4,532,740) (1,913,661) ------------ ------------ Cash Flows From Financing Activities: Payments on notes payable (252,437) (527,603) Principal payments under capital lease obligations (883,029) (174,415) Proceeds from issuance of common stock 46,747 316,377 ------------ ------------ Net cash used in financing activities (1,088,719) (385,641) ------------ ------------ Net decrease in cash and cash equivalents (4,601,898) (2,334,122) Cash and cash equivalents, beginning of period 27,900,802 15,715,726 ------------ ------------ Cash and cash equivalents, end of period $ 23,298,904 $ 13,381,604 ============ ============
See notes to unaudited condensed consolidated financial statements. -6- 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 (the "Company"). The Company believes that the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Company'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 the Company's annual financial statements have been omitted, the Company believes that the disclosures 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 the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 2. SIGNIFICANT ACCOUNTING POLICIES: Software Revenue Recognition Effective January 1, 1998, the Company adopted the provisions of Statement of Position 97-2, "Software Revenue Recognition"("SOP 97-2"), which provides guidance on recognizing revenue on software transactions. The Company's revenue recognition practices were substantially in compliance with SOP 97-2 at the time of adoption. 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 securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock. A reconciliation of the denominators of the basic and diluted earnings per share computations for income (loss) from continuing operations is shown below:
Three months ended June 30, Six months ended June 30, --------------------------- ------------------------- 1997 1998 1997 1998 ---------- ---------- ---------- ---------- Shares for basic earnings per share..... 14,629,937 15,798,486 14,620,421 15,752,223 Effect of options and warrants.......... 1,675,038 1,817,393 1,720,780 1,956,880 ---------- ---------- ---------- ---------- Shares for diluted earnings per share... 16,304,975 17,615,879 16,341,201 17,709,103 ========== ========== ========== ==========
No adjustments have been made to net income in computing diluted income per share. Comprehensive Income Effective January 1, 1998, the Company adopted the provisions of Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." No items, other than net income, are currently considered elements of comprehensive income, and accordingly net income and comprehensive income are the same for all periods presented. -7- Reclassifications Certain reclassifications have been made to the 1997 financial statements to conform with the 1998 presentation. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE DISCUSSION IN 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. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS CONTEMPLATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF A NUMBER OF FACTORS, INCLUDING (A) THE UNPREDICTABILITY OF FUTURE REVENUES AND POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS, (B) CONTINUING RAPID CHANGE IN THE TELECOMMUNICATIONS INDUSTRY THAT MAY AFFECT BOTH LIGHTBRIDGE, INC. AND ITS CUSTOMERS, (C) CUSTOMER CONCENTRATION, (D) UNCERTAINTIES ASSOCIATED WITH THE ABILITY OF LIGHTBRIDGE, INC. TO DEVELOP NEW PRODUCTS AND TECHNOLOGIES, (E) MARKET ACCEPTANCE OF NEW PRODUCTS OF LIGHTBRIDGE, INC. AND CONTINUING DEMAND FOR PRODUCTS OF LIGHTBRIDGE, INC. BY TELECOMMUNICATIONS COMPANIES, (F) THE IMPACT OF COMPETITIVE PRODUCTS AND PRICING ON BOTH LIGHTBRIDGE, INC. AND ITS CUSTOMERS AND (G) THE OTHER 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, 1997. 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, 1997 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. CHURNALERT and FRAUDBUSTER are registered trademarks of the Company, and CUSTOMER ACQUISITION SYSTEM, LIGHTBRIDGE and POPS are trademarks of the Company. All other trademarks or trade names referred to 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 and retention processes. In November 1997, the Company acquired all of the outstanding stock of Coral Systems, Inc. ("Coral") pursuant to an Agreement and Plan of Reorganization dated as of September 9, 1997 (the "Reorganization Agreement"). The acquisition was effected through a reverse triangular merger (the "Merger") in which a newly formed subsidiary of Lightbridge was merged with and into Coral and the surviving corporation became a wholly owned subsidiary of the Company. Pursuant to the Merger, each of the outstanding shares of Coral's stock was converted into a fraction of a share of Lightbridge's common stock, determined as set forth in the Reorganization Agreement. In addition, as a result of the Merger, all options and warrants to purchase shares of Coral's stock became exercisable, when vested, to purchase shares of Lightbridge's common stock. As a result of the Merger, Lightbridge issued 892,073 shares of its common stock for all of the outstanding shares of Coral's common stock and reserved 114,399 shares of its common stock for Coral's options and warrants. The Merger has been accounted for using the purchase method, which combines the -8- results of Coral from the date of acquisition with those of the Company. As a result, the Company's results of operations include Coral's results for the three and six months ended June 30, 1998, but not for the three and six months ended June 30, 1997. During the three months ended June 30, 1998, the Company incurred expenses in connection with moving Coral's facilities from Longmont, Colorado to 320 Interlocken Parkway, Broomfield, Colorado; the move is expected to be completed in August 1998. The Company historically has reported its software licensing and consulting services revenues as a single line item in its income statements. Because software licensing and consulting services revenues have become more significant, the Company is, commencing with this Form 10-Q, reporting revenues and costs of revenues in three components: transaction services, software licensing and consulting services. See "--Revenues and Costs of Revenues for Three Months Ended September 30, 1997 and December 31, 1997" below for a table of revenues and costs of revenues for the last two quarters of the year ended December 31, 1997 presented on the basis of these three components. Lightbridge's transaction services revenues are derived primarily from the processing of applications for qualification of subscribers for wireless telecommunications services and the activation of service for those subscribers. Over time, the Company has expanded its offerings from credit evaluation services to include 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. The Company's clients are charged on a per transaction 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 seasonal and retail trends, the success of the carriers utilizing the Company's services in attracting subscribers and the markets served by the Company for its clients. Revenues are recognized in the period when the services are performed. The Company's software licensing revenues consist of revenues attributable to the licensing of Company's Channel Solutions, Customer Management and Fraud Management software. The Company began licensing its Channel Solutions software with the introduction of its POPS product in fiscal 1995. Lightbridge's Channel Solutions products are designed to assist customers in interfacing with the Company's systems as well as to perform other point-of-sale and channel functionality. The Company's Customer Management products are designed to help carriers analyze their marketplace to improve their business operations. While the Company's software products are licensed as packaged software products, each of these products requires customization and integration with other products and systems to varying degrees. Revenues are recognized when delivery has occurred and no further significant obligations to the customer for the software exist. Revenues from software maintenance contracts are recognized ratably over the term of the maintenance agreement and are included in software licensing revenue. The Company's consulting services revenues have been derived principally from providing consulting for customer acquisition and retention. During the three months ended June 30, 1998, the Company launched Lightbridge Consulting Services, which provides business advisory, customization and integration, deployment, and optimization services in the areas of customer acquisition and retention, fraud prevention and distribution 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 second quarter of 1998, the Company continued its efforts to complete development of in-process technology acquired from Coral. In June 1998, the Company released FraudBuster 4.2.5, a new version of FraudBuster that provides certain performance and functional enhancements. As of June 30, 1998, the Company was continuing to develop two new versions of FraudBuster, one of which is expected to contain additional performance and functional enhancements and is currently scheduled to be released in the fourth quarter of 1998, and the other of which is expected to contain substantial enhancements in performance, scalability and functionality and is currently scheduled to be released in 1999. The Company was also continuing to develop a product that is expected to be complementary to FraudBuster and to contain new subscription fraud detection tools. This product is currently scheduled to be available in the first quarter of 1999. Finally, the Company continued its development efforts with respect to two versions of ChurnAlert, which are currently scheduled to be released in the third quarter of 1998 and in 1999. The Company has not changed its original estimates of the costs expected to -9- be incurred to complete these projects, although the estimated completion dates have been delayed. If the Company is unsuccessful in completing these projects, the Company's business, financial condition, results of operations and cash flows could be materially adversely affected. During the three months ended June 30, 1998, Lightbridge hired a senior vice president of worldwide sales and marketing, consolidated its consulting services group and named a vice president to head the newly formed group, and hired a new senior vice president and chief financial officer who has responsibility for matters such as the Company's financial reporting systems, business measures and analyses, and relationships with public market analysts and investors. RESULTS OF OPERATIONS
Three months ended June 30, Six months ended June 30, --------------------------- ------------------------- 1997 1998 1997 1998 ---- ---- ---- ---- Revenues: Transaction services....................... 66.3% 60.3% 67.3% 59.7% Software licensing......................... 10.8 22.5 9.8 26.4 Consulting services........................ 22.9 17.2 22.9 13.9 ----- ----- ----- ----- Total revenues............................ 100.0 100.0 100.0 100.0 ----- ----- ----- ----- Cost of revenues:............................. Transaction services....................... 38.1 33.8 38.8 35.6 Software licensing......................... 3.3 5.9 2.4 5.0 Consulting services........................ 4.7 11.1 5.5 20.3 ----- ----- ----- ----- Total cost of revenues.................... 46.1 50.9 46.7 49.2 ----- ----- ----- ----- Gross profit.................................. 53.9 49.1 53.3 50.8 ----- ----- ----- ----- Operating expenses: Development................................ 15.0 16.0 15.0 16.6 Sales and marketing........................ 15.0 11.3 14.6 12.9 General and administrative................. 10.8 19.6 11.9 8.6 ----- ----- ----- ----- Total operating expenses.................. 40.8 47.0 41.6 49.8 ----- ----- ----- ----- Income from operations........................ 13.1 2.2 11.8 1.0 Other income, net............................. 3.0 1.5 2.6 1.5 ----- ----- ----- ----- Income before provision for (benefit from) income taxes............................... 16.1 3.6 14.4 2.5 Provision for (benefit from) income taxes..... 6.1 1.8 (0.1) 1.2 ----- ----- ----- ----- Net income.................................... 10.0% 1.8% 15.0% 1.3% ===== ===== ===== =====
-10- THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1997 REVENUES. Revenues increased by 68.1% to $15.1 million in the three months ended June 30, 1998 from $9.0 million in the three months ended June 30, 1997. Transaction services revenues increased by 52.8% to $9.1 million in the three months ended June 30, 1998 from $6.0 million in the three months ended June 30, 1997, while decreasing as a percentage of total revenues to 60.3% from 66.3%. The dollar increase in transaction services revenues for the three months ended June 30, 1998 was primarily due to increased volume of qualification and activation transactions processed for carrier clients. The decrease in transaction services revenues as a percentage of total revenues for the three month period ended June 30, 1998 principally resulted from a greater increase in software licensing revenues than transaction services revenues for the same period. Software licensing revenues increased by 249.4% to $3.4 million in the three months ended June 30, 1998 from $1.0 million in the three months ended June 30, 1997, while increasing as a percentage of total revenues to 22.5% from 10.8%. Both the dollar increase and the increase as a percentage of total revenues in software licensing revenues for the three months ended June 30, 1998 was principally a result of the increase in revenues attributable to the Company's Channel Solutions and Fraud Management products and services. The Company's software licensing revenues during the three months ended June 30, 1998 included revenues from its Fraud Management software that was installed for a new international client but had not been fully accepted by the client as of March 31, 1998 and therefore, as described in Item 2 of the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 1998, was not recognizable during the three months ended March 31, 1998. The Company believes that software licensing revenues for the next several fiscal quarters will be subject to fluctuation and more difficult to anticipate than the Company's other types of revenues, principally due to the relatively large dollar costs and relatively lengthy 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 typically are longer. The predictability of software licensing revenue is further impeded because the Company'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 the Company's software licensing revenues for a fiscal quarter. Consulting services revenues increased by 26.8% to $2.6 million in the three months ended June 30, 1998 from $2.1 million in the three months ended June 30, 1997, while decreasing as a percentage of total revenues to 17.2% from 22.9%. The dollar increase in consulting services revenues for the three months ended June 30, 1998 was principally due to increased demand for the consulting services offered by the Company. The decrease in consulting services revenue as a percentage of total revenues for the three months ended June 30, 1998 principally resulted from a greater increase in software licensing revenues than consulting services revenues for the same period. In the year ended December 31, 1997, one customer accounted for 29% of the Company's total revenues. While Lightbridge believes that its relationship with this customer is good, the Company currently expects that the percentage of the Company's total revenues for the year ended December 31, 1998 will be significantly less than for the preceding year, as a result of growth in the Company's total revenues, the Company's efforts to diversify its customer base and a decrease in the consulting services utilized by the customer. -11- COST OF REVENUES. Cost of revenues consists primarily of personnel costs, costs of maintaining systems and networks used in processing qualification and activation transactions (including depreciation and amortization of systems and networks) and amortization of capitalized software. 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 services revenues between revenues from on-line transaction processing and revenues from processing transactions services through the Company's Teleservices Group and changes in the mix of total revenues between transaction services revenues, software licensing revenues and consulting services revenues. Transaction services cost of revenues increased by 49.2% to $5.1 million in the three months ended June 30, 1998 from $3.4 million in the three months ended June 30, 1997, while decreasing as a percentage of total revenues to 33.8% from 38.1%. The increase in transaction services cost of revenues for the three months ended June 30, 1998 resulted principally from increases in transaction volume and costs attributable to expansion of the Company's staff and systems capacity. The decrease in transaction services cost of revenues as a percentage of total revenues for the three months ended June 30, 1998 principally resulted from an increase in the number of transactions processed through on-line processing as opposed to through the teleservices group. Software licensing cost of revenues increased by 203.4% to $0.9 million in the three months ended June 30, 1998 from $0.3 million in the three months ended June 30, 1997, while increasing as a percentage of total revenues to 5.9% from 3.3%. Both the dollar increase and the increase as a percentage of total revenues in software licensing cost of revenues for the three months ended June 30, 1998 was primarily due to the increased cost of revenues for Fraud Management products. Consulting services cost of revenues increased by 299.0% to $1.7 million in the three months ended June 30, 1998 from $0.4 million in the three months ended June 30, 1997, while increasing as a percentage of total revenues to 11.1% from 4.7%. Both the dollar increase and the increase as a percentage of total revenues in consulting services cost of revenues was primarily due to the increase in consulting staff due to the expansion of the consulting services group, including both newly hired personnel and personnel reallocated from other areas of the Company's operations, including sales and marketing, as part of the establishment of Lightbridge Consulting Services. The Company expects to continue hiring consulting staff during the three months ending September 30, 1998 and, to a lesser extent, the three months ending December 31, 1998. The Company expects fluctuations in gross profit may occur primarily due to fluctuations in revenue generated from the Company's three revenue components, particularly revenues from software licensing which have historically generated higher gross profit margins. DEVELOPMENT. Development expenses include all internal software development costs and consist 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 80.0% to $2.4 million in the three months ended June 30, 1998 from $1.4 million in the three months ended June 30, 1997. The increase in costs for the three months ended June 30, 1998 resulted primarily from the addition of engineering personnel necessary to support the Company's product development plans in connection with the development and deployment of its fraud management software product, FraudBuster. The Company expects to continue to increase its engineering and development efforts in order to continue enhancing its existing products and services, including its -12- Channel Solutions, Churn and Fraud Management products and services, as well as to develop new products and services. 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 27.1% to $1.7 million in the three months ended June 30, 1998 from $1.3 million in the three months ended June 30, 1997. The increase for the three months ended June 30, 1998 was due to the addition of direct sales and product marketing personnel, increased commissions resulting from the higher level of revenues and increased use of marketing programs. This increase was offset in part by the reallocation of certain personnel to Lightbridge Consulting Services as well as the allocation of certain related expenses to consulting services cost of revenues. The Company expects to continue to invest in sales and marketing efforts in order to increase its penetration of existing accounts and to add new clients and markets. The Company currently estimates that sales and marketing expenses will account for approximately 11% to 12% of the Company's total revenues during the latter half of 1998, although the actual percentage may vary significantly as the result of unanticipated fluctuations in the Company's revenues during the period. GENERAL AND ADMINISTRATIVE. General and administrative expenses consist principally of salaries of administrative, executive, finance and human resources personnel, fees for outside professional services, and amortization of goodwill incurred pursuant to the acquisition of Coral. General and administrative expenses increased by 203.8% to $3.0 million in the three months ended June 30, 1998 from $1.0 million in the three months ended June 30, 1997. The increase reflected the amortization of $0.6 million of goodwill attributable to the Company's acquisition of Coral, certain costs associated with the integration of Coral and the addition of finance personnel. The increase also reflected a one-time write-off during the three months ended June 30, 1998 of approximately $0.1 million relating to fixed assets, including leasehold improvements and telephone systems, used at Coral's existing facilities in Longmont, Colorado, that will not deployed at its new facilities in Broomfield, Colorado, as well as approximately $0.3 million of accruals relating to various matters, including sales taxes, the allowance for doubtful accounts and costs attributable to the establishment of foreign subsidiaries in Asia and the United Kingdom. The Company expects that its general and administrative costs will decrease on a quarterly basis during the latter half of 1998 due to the nonrecurring nature of certain of the expenses recorded by the Company during the three months ended June 30, 1998. The Company will continue, however, to recognize approximately $0.6 million of goodwill amortization each quarter through the three months ended December 31, 2001 as a result of the Coral acquisition. OTHER INCOME, NET. Other income, net in the three months ended June 30, 1998 consisted predominantly of interest income and expense. Interest expense consists of interest, commitment fees and other similar fees payable with respect to the Company's bank lines of credit, subordinated notes and capital leases. Interest expense remained the same at $0.1 million in the three months ended June 30, 1998 and 1997. Interest income decreased to $0.2 million in the three months ended June 30, 1998 from $0.3 million in the three months ended June 30, 1997 as a result of lower cash balances. The interest income for the three months ended June 30, 1998 reflected an average rate of return of approximately 5.6%. PROVISION FOR (BENEFIT FROM) INCOME TAXES. The Company's effective tax rate was 49.4% and 38.0% for the three months ended June 30, 1998 and 1997, respectively. The Company anticipates its effective tax rate to be 47.0% for the year ended December 31, 1998. The relatively high effective tax rate for 1998 results in part from goodwill attributable to the Company's acquisition of Coral; the amortization of this goodwill is recognized as an expense for accounting purposes, but is not deductible for tax purposes. Since the goodwill attributable to the Coral acquisition will continue to be -13- amortized through the three months ending December 31, 2001, the Company anticipates that its effective tax rate will continue to be relatively high during that amortization period and, in particular, estimates that its effective tax rate for the year ending December 31, 1999 will be between 40% and 42%. The actual effective tax rate for 1998 and 1999 may vary significantly from the Company's estimates as the result of a number of factors, including any and all factors that cause the Company's actual revenues for those years to vary from the Company's internal estimates. SIX MONTHS ENDED JUNE 30, 1998 AND 1997 REVENUES. Revenues increased by 59.5% to $28.4 million in the six months ended June 30, 1998 from $17.8 million in the six months ended June 30, 1997. Transaction services revenues increased by 41.5% to $17.0 million in the six months ended June 30, 1998 from $12.0 million in the six months ended June 30, 1997. The increase in transaction services revenues for the six months ended June 30, 1998 was primarily due to increased volume of qualification and activation transactions processed for carrier clients. Software licensing revenues increased by 331.0% to $7.5 million in the six months ended June 30, 1998 from $1.7 million in the six months ended June 30, 1997. The increase in software licensing revenues for the six months ended June 30, 1998 was principally a result of the increase in revenues attributable to the Company's Channel Solutions and Fraud Management products and services. Consulting services revenues decreased by 3.5% to $3.9 million in the six months ended June 30, 1998 from $4.1 million in the six months ended June 30, 1997. The decrease in consulting services revenues for the six months ended June 30, 1998 was principally due to a decrease in the consulting services utilized by the Company's largest client partially offset by an increased demand for the consulting services provided to other clients of the Company. COST OF REVENUES. Transaction services cost of revenues increased by 46.2% to $10.1 million in the six months ended June 30, 1998 from $6.9 million in the six months ended June 30, 1997. The increase in transaction services cost of revenues for the six months ended June 30, 1998 resulted principally from increases in transaction volume and costs attributable to expansion of the Company's staff and systems capacity. Software licensing cost of revenues increased by 236.2% to $1.4 million in the six months ended June 30, 1998 from $0.4 million in the six months ended June 30, 1997. The increase in software licensing cost of revenues for the six months ended June 30, 1998 was primarily due to the increased costs of revenues for Fraud Management products. Consulting services cost of revenues increased by 151.8% to $2.5 million in the six months ended June 30, 1998 from $1.0 million in the six months ended June 30, 1997. The increase in consulting services cost of revenues was primarily due to the increase in consulting staff due to the expansion of the consulting services group, including both newly hired personnel and personnel reallocated from other areas of the Company's operations as part of the establishment of Lightbridge Consulting Services. DEVELOPMENT. Development expenses increased by 76.1% to $4.7 million in the six months ended June 30, 1998 from $2.7 million in the six months ended June 30, 1997. The increase in costs for the six months ended June 30, 1998 resulted primarily from the addition of engineering personnel necessary to support the Company's product development plans. -14- SALES AND MARKETING. Sales and marketing expenses increased by 41.0% to $3.7 million in the six months ended June 30, 1998 from $2.6 million in the six months ended June 30, 1997. The increase for the six months ended June 30, 1998 was due to the addition of direct sales and product marketing personnel, increased commissions resulting from the higher level of revenues and increased use of marketing programs, including trade shows. This increase was offset in part by the reallocation during the three months ended June 30, 1998 of certain personnel to Lightbridge Consulting Services as well as the allocation of certain related expenses for those three months to consulting services cost of revenues. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased by 172.1% to $5.8 million in the six months ended June 30, 1998 from $2.1 million in the six months ended June 30, 1997. The increase reflected the amortization of $1.3 million of goodwill and acquired technology attributable to the Company's acquisition of Coral, certain costs associated with the integration of Coral and the addition of finance personnel. The increase also reflected (i) a one-time write-off during the six months ended June 30, 1998 of approximately $0.1 million relating to fixed assets, including leasehold improvements and telephone systems, used at Coral's existing facilities in Longmont, Colorado, that will not be deployed at its new facilities in Broomfield, Colorado, (ii) write-offs of approximately $0.3 million for bad debts attributable principally to contracts of Coral that predated the Company's acquisition of Coral and (iii) accruals of approximately $0.3 million for various matters, including sales taxes, the Company's allowance for doubtful accounts and costs attributable to the Company's establishment of foreign subsidiaries in Asia and the United Kingdom. OTHER INCOME, NET. Other income, net in the six months ended June 30, 1998 consisted predominantly of interest income and expense. Interest expense decreased to $0.1 million in the six months ended June 30, 1998 from $0.2 million in the six months ended June 30, 1997. Interest income decreased to $0.4 million in the six months ended June 30, 1998 from $0.6 million in the six months ended June 30, 1997 as a result of lower cash balances due to the investment made in the service delivery infrastructure and computer equipment for development activities of the business during 1997. PROVISION FOR (BENEFIT FROM) INCOME TAXES. During the six months ended June 30, 1998 and 1997, the Company's effective tax rate was 47.0% and (3.6)%, respectively. The Company's effective tax rate in 1997 was affected by the reversal of its deferred tax valuation allowance and the utilization of certain tax credits in the quarter ended March 31, 1997. LIQUIDITY AND CAPITAL RESOURCES Prior to its initial public offering, the Company funded its operations primarily through private placements of equity and debt securities, cash generated from operations, bank borrowings and equipment financings. In October 1996, the Company consummated an initial public offering in which 4,370,000 shares of the Company's common stock, $.01 par value, were sold at an initial public offering price of $10.00 per share. The total shares consisted of 3,021,868 shares sold by the Company and 1,348,132 shares sold by selling shareholders. Proceeds to the Company, net of underwriters' discount and associated costs, were approximately $27.1 million. These proceeds were used to repay certain debt obligations of the Company, to repurchase certain shares of the common stock of the Company and to fund working capital and other general corporate purposes. The Company has a $4.0 million working capital line of credit and a $3.0 million equipment line of credit with a bank. The working capital line of credit is secured by a pledge of the Company's accounts receivable, equipment and intangible assets, and borrowing availability 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 (8.5% at June 30, 1998). 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 -15- limited to $1,250,000 in the aggregate. At June 30, 1998, there were no borrowings outstanding under the working capital line of credit and borrowings of $0.3 million were outstanding under the equipment line of credit. The Company's agreements with the bank contain covenants that, among other things, prohibit the declaration or payment of dividends and require the Company to maintain certain financial ratios which the Company believes are not restrictive to its business operations. The working capital line of credit expires in June 1999, and the equipment line of credit expires in June 2001. The Company's capital expenditures in the totalled $0.7 million and $1.9 million, respectively, for the three and six months ended June 30, 1998 and $2.3 million and $3.5 million, respectively, for the three and six months ended June 30, 1997. The capital expenditures during these periods consisted of purchases of fixed assets, principally for the Company's services delivery infrastructure and computer equipment for development activities. Capital expenditures during the three months ended June 30, 1998 included leasehold improvements and other costs attributable to the relocation of Coral's facilities to Broomfield, Colorado. The Company expects capital expenditures for the remainder of 1998 to total approximately $2.3 million, including additional capital expenditures related to the relocation of Coral's Colorado facilities. The Company leases its facilities and certain equipment under non-cancelable capital and operating lease agreements that expire at various dates through December 2002. During the three months ended June 30, 1998, the Company completed development of version 1.19 of the Customer Acquisition System ("CAS"), the Company's transaction processing system. Version 1.19 completed Year 2000 compliance for the core CAS and its front-end access points. The Company expects that version 1.20 of CAS, which currently is scheduled for release during the three months ending December 31, 1998, will include Year 2000 support for third-party interfaces to CAS, such as interfaces with credit bureaus and billing systems. The Company also continued its testing and modification efforts relating to its other software products. The Company may be required to make significant expenditures in connection with the on-going design and testing of its software-based services and products and interfaces to third-party systems for Year 2000 compatibility, and any related modifications or other development work that may be required to cause those services and products to be Year 2000 compatible. The Company currently estimates that it will spend approximately $0.3 million on Year 2000 testing and compliance during the latter half of 1998, although the actual amount of these expenditures may vary significantly, depending upon the timing and results of testing and integration activities, including those that require the involvement and cooperation of third parties. The Company currently is unable to estimate accurately the amount of expenditures for Year 2000 compliance that may be required in fiscal 1999 and thereafter, although it currently believes the amount of these expenditures will not be material. As of June 30, 1998, the Company had cash and cash equivalents of $13.4 million and working capital of $22.6 million. The Company believes that the current cash balances and funds available under existing lines of credit will be sufficient to finance the Company's operations and capital expenditures for at least the next twelve months. INFLATION Although certain of the Company's expenses increase with general inflation in the economy, inflation has not had a material impact on the Company's financial results to date. RECENT ACCOUNTING PRONOUNCEMENTS Effective January 1, 1998, the Company adopted the provisions of Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and AICPA Statement of Position No. 97-2, -16- "Software Revenue Recognition." Adoption of these pronouncements has not had a material effect on reported results of operations or financial position. However, the future effects of AICPA Statement of Position No. 97-2 on the Company's results of operations will depend on the nature and terms of the individual software agreements entered into in future periods. In June 1997, the Financial Accounting Standards Board released Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 establishes standards applicable to the manner in which the Company reports information about operating segments in its annual financial statements commencing with the Company's fiscal year ending December 31, 1998 and will require that the Company report selected information about operating segments in subsequent interim financial reports issued to stockholders. REVENUES AND COSTS OF REVENUES FOR THREE MONTHS ENDED SEPTEMBER 30, 1997 AND DECEMBER 31, 1997 As discussed under "-Overview" above, prior to the filing of this Form 10-Q, the Company has reported its software licensing and consulting services revenues as a single line item in its income statements. The following table presents the Company's revenues and costs of revenues for the last two quarters of the year ended December 31, 1997 on the basis of three components-- transaction services, software licensing and consulting services--consistent with the presentation in the income statements included in this Form 10-Q.
Three months ended ------------------------------------------- September 30,1997 December 31, 1997 ----------------- ----------------- Revenues: Transaction services............................... $6,749,506 $ 8,130,089 Software licensing................................. 862,843 3,723,661 Consulting services................................ 1,844,933 1,407,602 ----------------- ----------------- Total revenues................................... $9,457,282 $13,261,352 ================= ================= Cost of revenues:..................................... Transaction services............................... $3,754,795 $ 4,859,486 Software licensing................................. 232,358 826,593 Consulting services................................ 397,949 486,796 ----------------- ----------------- Total cost of revenues........................... $4,385,102 $ 6,172,875 ================= =================
-17- PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held a Special Meeting in Lieu of Annual Meeting of Stockholders on May 28, 1998 at which Andrew I. Fillat and D. Quinn Mills were re-elected as Class II directors. Messrs. Fillat and Mills each received 11,553,585 votes for re-election and no votes against re-election. A total of 259,382 votes were withheld in each case, and there were no abstentions or broker non-votes. The other directors of the Company consist of (i) Debora J. Wilson, who is the sole Class I Director and whose term expires in 2000, and (ii) Pamela D.A. Reeve and Torrence C. Harder, who are Class III Directors and whose terms expire in 1999. Item 5. OTHER INFORMATION Any stockholder intending to present a proposal at the 1999 Annual Meeting of Stockholders must submit such proposal to the Company at its offices no later than December 28, 1998 in order to be considered for inclusion in the proxy statement relating to that meeting. In addition, in accordance with the Company's By-Laws, any stockholder wishing to bring an item of business before the 1999 Annual Meeting of Stockholders must deliver notice of such item of business to the Company at its offices no later than March 28, 1999, even if such item is not to be included in the proxy statement relating to that meeting. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits NO. DESCRIPTION 10.1 Loan Modification Agreements dated from August 19, 1996 to June 26, 1998, each amending the Amended and Restated Credit Agreement dated as of June 18, 1996 between the Company and Silicon Valley Bank, which Amended and Restated Credit Agreement has been filed with the Securities and Exchange Commission as Exhibit 10.4 to the Company's Registration Statement on Form S-1, as amended (File No. 333-6589). 27.1 Financial Data Schedule for the three months ended June 30, 1998 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, 1997 is incorporated herein by reference (b) Reports on Form 8-K The Company did not file any Current Report on Form 8-K during the three months ended June 30, 1998. -18- 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. Date: August 14, 1998 By: /s/ Joseph S. Tibbetts, Jr. --------------------------------------------- Joseph S. Tibbetts, Jr. Senior Vice President, Finance and Administration and Chief Financial Officer (Authorized Officer and Principal Financial and Accounting Officer) -19- EX-10.1 2 LOAN MODIFICATION AGREEMENT Exhibit 10.1 LOAN MODIFICATION AGREEMENT This Loan Modification Agreement is entered into as of August 19, 1996, by and between Lightbridge, Inc. ("Borrower") whose address is 281 Winter Street, Waltham, MA 02154 and Silicon Valley Bank, a California-chartered bank ("Bank"), with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan production office located at Wellesley Office Park, 40 William Street, Suite 350, Wellesley, MA 02181, doing business under the name "Silicon Valley East". 1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may ------------------------------------ be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other documents, an Amended and Restated Credit Agreement, dated June 18, 1996, as may be amended from time to time (the "Credit Agreement"). The Credit Agreement provided for, among other things, a Committed Revolving Line in the original principal amount of Four Million and 00/100 Dollars ($4,000,000.00), as evidenced by an Amended and Restated Promissory Note, dated June 18, 1996 (the "Working Capital Line of Credit Note"), and a Committed Equipment Line in the original principal amount of Two Million and 00/100 Dollars ($2,000,000.00), as evidenced by a Promissory Note, dated June 18, 1996 (the "Equipment Line of Credit Note"). Defined terms used but not otherwise defined herein shall have the same meanings as in the Credit Agreement. Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as the "Indebtedness." 2. DESCRIPTION OF COLLATERAL: Repayment of the Indebtedness is secured by a ------------------------- Security Agreement dated April 1, 1992, as amended, and a Collateral Assignment of Trademarks dated October 5, 1994. Hereinafter, the above-described security documents, together with all other documents securing payment of the Indebtedness shall be referred to as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents." 3. DESCRIPTION OF CHANGE IN TERMS. - -- ------------------------------ A. Modification(s) to Credit Agreement. ----------------------------------- 1. Section 6.8 entitled "Quick Ratio" is hereby amended in its entirety, to read as follows: Borrower shall maintain, as of the last day of each calendar month, beginning as of the month ended June 30, 1996, a ratio of Quick Assets to Current Liabilities of at least 1.00 to 1.00. 2. Section 6.10 entitled "Debt-Net Worth Ratio" is hereby amended in its entirety, to read as follows: Borrower shall maintain, as of the last day of each calendar month, beginning as of the month ended June 30, 1996, a ratio of Total Liabilities to Tangible Net Worth of not more than 1.50 to 1.00. For calculation purposes, deferred revenue shall be excluded from the Quick Ratio and Debt-Net Worth Ratio covenants. 1 3. Section 6.9 entitled "Tangible Worth Ratio" is hereby amended in its entirety, to read as follows: Borrower shall maintain, as of the last day of each fiscal quarter, a Tangible Net Worth of not less than eighty percent (80%) of capital raised following Borrower's successful completion of an initial public offering. 4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended ------------------ wherever necessary to reflect the changes described above. 5. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no ----------------------- defenses against the obligations to pay any amounts under the Indebtedness. 6. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the ------------------- existing Indebtedness, Bank is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. The terms of this Paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements. 7 JURISDICTION/VENUE. Borrower accepts for itself and in connection with its ------------------ properties, unconditionally, the non-exclusive jurisdiction of any state or federal court of competent jurisdiction in the Commonwealth of Massachusetts in any action, suit, or proceeding of any kind against it which arises out of or by reason of this Loan Modification Agreement; provided, however, that if for any reason Bank cannot avail itself of the courts of the Commonwealth of Massachusetts, then venue shall lie in Santa Clara County, California. 8. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective ---------------- only when it shall have been executed by Borrower and Bank (provided. however, in no event shall this Loan Modification Agreement become effective until signed by an officer of Bank in California). 2 This Loan Modification Agreement is executed as of the date first written above. BORROWER: BANK: LIGHTBRIDGE, INC. SILICON VALLEY BANK, doing business as SILICON VALLEY EAST By: /s/ Kevin Collins By: /s/ Pamela J. Lowe ---------------------- ------------------------- Name: Kevin Collins Name: Pamela Lowe ---------------------- ------------------------- Title: Controller Title: Vice President ---------------------- ------------------------- SILICON VALLEY BANK By: /s/ Christine Ware ------------------------- Name: Christine Ware ------------------------- Title: Vice President ----------------------- (Signed at Santa Clara County, CA) 3 LOAN MODIFICATION AGREEMENT This Loan Modification Agreement is entered into as of December 12, 1996, by and between Lightbridge, Inc. ("Borrower") whose address is 281 Winter Street, Waltham, MA 02154 and Silicon Valley Bank, a California-chartered bank ("Bank"), with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan production office located at Wellesley Office Park, 40 William Street, Suite 350, Wellesley, MA 02181, doing business under the name "Silicon Valley East". 1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may ------------------------------------- be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other documents, an Amended and Restated Credit Agreement, dated June 18, 1996, as may be amended from time to time (the "Credit Agreement"). The Credit Agreement provided for, among other things, a Committed Revolving Line in the original principal amount of Four Million and 00/100 Dollars ($4,000,000.00), as evidenced by an Amended and Restated Promissory Note, dated June 18, 1996 (the "Working Capital Line of Credit Note"), and a Committed Equipment Line in the original principal amount of Two Million and 00/100 Dollars ($2,000,000.00), as evidenced by a Promissory Note, dated June 18, 1996 (the "Equipment Line of Credit Note"). Defined terms used but not otherwise defined herein shall have the same meanings as in the Credit Agreement. Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as the "Indebtedness." 2. DESCRIPTION OF COLLATERAL: Repayment of the Indebtedness is secured by a --------------------------- Security Agreement dated April 1, 1992, as amended, and a Collateral Assignment of Trademarks dated October 5, 1994. Hereinafter, the above-described security documents, together with all other documents securing payment of the Indebtedness shall be referred to as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents." 3. DESCRIPTION OF CHANGE IN TERMS. ------------------------------ A. Modification(s) to Working Capital Line of Credit Note. ------------------------------------------------------ 1. The interest rate to be applied to the unpaid principal balance of the Working Capital Line of Credit Note is hereby decreased, effective as of this date, to a rate per annum equal to the Prime Rate (as defined herein). B. Modification(s) to Equipment Line of Credit Note. ------------------------------------------------ 1. The interest rate to be applied to the unpaid principal balance of the Equipment Line of Credit Note is hereby decreased, effective as of this date, to a rate per annum equal to one- quarter of one percentage point (0.250%) above the Prime Rate (as defined herein). C. Modification(s) to Credit Agreement. ----------------------------------- 1. The financial covenants set forth in Section 6.8 entitled "Quick Ratio", Section 6.10 entitled "Debt-Net Worth Ratio" and Section 6.11 entitled "Liquidity" shall now be maintained by Borrower on a quarterly basis (rather than monthly), beginning with the quarter ended September 30, 1996. 1 2. Section 2.4(a) entitled "Interest Rate" is hereby amended in its entirety, to read as follows: Except as set forth in Section 2.4(b), (i) each Advance shall bear interest, on the average Daily Balance, at a rate equal to the Prime Rate, and (ii) each Equipment Advance shall bear interest, on the average Daily Balance, at a rate equal to one- quarter of one percentage point (0.250%) above the Prime Rate. 3. Section 6.3 entitled "Financial Statements, Reports, Certificates" is hereby amended in part, as follows: Borrower shall deliver to Bank: (a) as soon as available, but in any event within forty-five (45) days after the end of each fiscal quarter, beginning with the fiscal quarter ended September 30, 1996, a company-prepared consolidated balance sheet and income statement covering Borrower's consolidated operations during such period, certified by an officer of Borrower reasonably acceptable to Bank. Within forty-five (45) days after the last day of each fiscal quarter, beginning with the fiscal quarter ended September 30, 1996, Borrower shall deliver to Bank with the quarterly financial statements a Compliance Certificate signed by a Responsible Officer. 4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended ------------------ wherever necessary to reflect the changes described above. 5. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no ----------------------- defenses against the obligations to pay any amounts under the Indebtedness. 6. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the ------------------- existing Indebtedness, Bank is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. The terms of this Paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements. 7 JURISDICTION/VENUE. Borrower accepts for itself and in connection with its ------------------ properties, unconditionally, the non-exclusive jurisdiction of any state or federal court of competent jurisdiction in the Commonwealth of Massachusetts in any action, suit, or proceeding of any kind against it which arises out of or by reason of this Loan Modification Agreement; provided, however, that if for any reason Bank cannot avail itself of the courts of the Commonwealth of Massachusetts, then venue shall lie in Santa Clara County, California. 8. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective ---------------- only when it shall have been executed by Borrower and Bank (provided, however, in no event shall this Loan Modification Agreement become effective until signed by an officer of Bank in California). 2 This Loan Modification Agreement is executed as of the date first written above. BORROWER: BANK: LIGHTBRIDGE, INC. SILICON VALLEY BANK, doing business as SILICON VALLEY EAST By: /s/ Kevin Collins By: /s/ Pamela J. Lowe ---------------------- ------------------------- Name: Kevin Collins Name: Pamela Lowe ---------------------- ------------------------- Title: Controller Title: Vice President ---------------------- ------------------------- SILICON VALLEY BANK By: /s/ Christine Ware ------------------------- Name: Christine Ware ------------------------- Title: Vice President ----------------------- (Signed at Santa Clara County, CA) 3 LOAN MODIFICATION AGREEMENT This Loan Modification Agreement is entered into as of March 5, 1997. by and between Lightbridge, Inc. ("Borrower") whose address is 261 Winter Street. Waltham, MA 02154 and Silicon Valley Bank, a California-chartered bank ("Bank"), with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan production office located at Wellesley Office Park, 40 William Street, Suite 350, Wellesley, MA 02181, doing business under the name "Silicon Valley East". 1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be ------------------------------------- owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other documents, an Amended and Restated Credit Agreement, dated June 18, 1996, as may be amended from time to time (the "Credit Agreement"). The Credit Agreement provided for, among other things, a Committed Revolving Line in the original principal amount of Four Million and 00/100 Dollars ($4,000,000.00), as evidenced by an Amended and Restated Promissory Note, dated June 18, 1996 (the "Working Capital Line of Credit Note"), and a Committed Equipment Line in the original principal amount of Two Million and 00/100 Dollars ($2,000,000.00), as evidenced by a Promissory Note, dated June 18, 1996 (the "Equipment Line of Credit Note"). Defined terms used but not otherwise defined herein shall have the same meanings as in the Credit Agreement. Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as the "Indebtedness." 2. DESCRIPTION OF COLLATERAL: Repayment of the Indebtedness is secured by a ------------------------- Security Agreement dated April 1, 1992, as amended, and a Collateral Assignment of Trademarks dated October 5, 1994. Hereinafter, the above-described security documents, together with all other documents securing payment of the Indebtedness shall be referred to as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents." 3. DESCRIPTION OF CHANGE IN TERMS. ------------------------------ A. Modification(s) to Credit Agreement ----------------------------------- 1. Section 2.1.2 entitled "Letters of Credit" is hereby incorporated into the Loan Agreement as follows: Letters of Credit. Subject to the terms and conditions of this ----------------- Agreement, Bank agrees to issue or cause to be issued Letters of Credit for the account of Borrower in an aggregate face amount not to exceed (i) the lesser of the $4,000,000.00 or the Borrowing Base minus (ii) the then outstanding principal balance of the Committed Revolving Line; provided that the face amount of -------- outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) shall not in any case exceed One Million Two Hundred Fifty Thousand and 00/100 Dollars ($1,250,000.00) Each such Letter of Credit shall have an expiry date no later than one hundred eighty (180) days after the Maturity Date of the Working Capital Line of Credit Note provided that Borrower's Letter of Credit reimbursement obligation shall be secured by cash on terms acceptable to Bank at any time after the Maturity Date if the term of the Agreement is not extended by Bank. All such Letters of Credit shall be, in form and substance, acceptable to Bank in its sole discretion and shall be subject to the terms and conditions of Bank's form of application and Letter of Credit agreement. 1 Borrower shall indemnity, defend and hold Bank harmless from any loss, cost, expense or liability, including, without limitation, reasonable attorneys' fees, arising out of or in connection with any Letters of Credit. Borrower may request that Bank issue a Letter of Credit payable in a currency other than United States Dollars. If a demand for payment is made under any such Letter of Credit, Bank shall treat such demand as an Advance to Borrower of the equivalent of the amount thereof (plus cable charges) in United States currency at the then prevailing rate of exchange in San Francisco, California, for sales of that other currency for cable transfer to the country of which it is the currency. Upon the issuance of any Letter of Credit payable in a currency other than United States Dollars, Bank shall create a reserve (the "Letter of Credit Reserve") under the Working Capital Line of Credit for Letters of Credit against fluctuations in currency exchange rates, in an amount equal to ten percent (10%) of the face amount of such Letter of Credit. The amount of such reserve may be amended by Bank from time to time to account for fluctuations in the exchange rate. The availability of funds under the Working Capital Line of Credit shall be reduced by the amount of such reserve for so long as such Letter of Credit remains outstanding. 2. The first sentence of Section 2.1 entitled "Advances" is hereby amended in its entirety, to read as follows: Subject to and upon the terms and conditions of this Agreement, Bank agrees to make Advances to Borrower in an aggregate amount not to exceed the committed Revolving Line minus the face amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) or the Borrowing Base minus the face amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit), whichever is less. 4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended ------------------ wherever necessary to reflect the changes described above. 5. NO DEFENSES OF BORROWER. Borrower agrees that as of this date, it has no ----------------------- defenses against the obligations to pay any amounts under the Indebtedness. 6. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the ------------------- existing Indebtedness, Bank is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Bark to make any future modifications to the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. The terms of this Paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements. 7. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its ------------------ properties, unconditionally, the non-exclusive jurisdiction of any state or federal court of competent jurisdiction in the Commonwealth of Massachusetts in any action, suit. or proceeding of any kind against it which arises out of or by reason of this Loan Modification Agreement; provided, however, that if for any reason Bank cannot avail 2 itself of the courts of the Commonwealth of Massachusetts, then venue shall lie in Santa Clara County, California. 8. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective ---------------- only when it shall have been executed by Borrower and Bank (provided, however, in no event shall this Loan Modification Agreement become effective until signed by an officer of Bank in California). BORROWER: BANK: LIGHTBRIDGE, INC. SILICON VALLEY BANK, doing business as SILICON VALLEY EAST By: /s/ Kevin Collins By: /s/ Carolyn Macedo ---------------------- ------------------------- Name: Kevin Collins Name: Carolyn Macedo ---------------------- ------------------------- Title: Controller Title: Vice President ---------------------- ------------------------- SILICON VALLEY BANK By: /s/ Amy Young ------------------------- Name: Amy Young ------------------------- Title: AVP ----------------------- (Signed at Santa Clara County, CA) 3 FOURTH LOAN MODIFICATION AGREEMENT This Fourth Loan Modification Agreement is entered into as of June 5, 1997, by and between Lightbridge, Inc., a Delaware corporation "Borrower") with its principal place of business at 281 Winter Street, Waltham, MA 02154, and Silicon Valley Bank, a California-chartered bank ("Bank") with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan production office located at Wellesley Office Park, 40 William Street, Suite 350, Wellesley, MA 02181, doing business under the name "Silicon Valley East". 1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among the indebtedness which may ------------------------------------ be owing by Borrower to Lender (collectively, "Indebtedness"), Borrower is indebted to Lender pursuant to, among other documents, an Amended and Restated Credit Agreement, dated as of June 18, 1996, as amended and in effect on the date hereof (as so amended, the "Loan Agreement"). The Loan Agreement provides for, among other things, a Committed Revolving Line in the original principal amount of Four Million and 00/100 Dollars ($4,000,000) (the "Committed Revolving Line"), including a sublimit for Letters of Credit of One Million Two Hundred Fifty Thousand and 00/100 Dollars ($1,250,000), and a Committed Equipment Line in the original principal amount of Two Million and 00/100 Dollars ($2,000,000). Defined terms used herein without definition shall have the meanings ascribed thereto in the Loan Agreement. 2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by ------------------------- the Collateral as described in the Security Agreement and in the Trademarks Assignment. Hereinafter, the Loan Agreement, together with all other documents evidencing or securing the Indebtedness, shall be referred to collectively as the "Existing Loan Documents." 3. MODIFICATIONS TO LOAN AGREEMENT. The parties hereto agree that the Loan ------------------------------- Agreement shall be amended as follows: (a) the definition of "Current Liabilities" in Section 1.1 of the Loan Agreement is hereby amended by: (1) deleting the fourth fine of said definition in its entirety; and (ii) inserting in place thereof the following: "...therein, all outstanding Loans made under...." (b) The definition of "Loans" in Section 1.1 of the Loan Agreement is hereby amended by: (i) deleting said definition in its entirety; and (ii) inserting in place thereof the following: ""Loans" means, collectively, the Advances, Equipment Advances, Letters of Credit and any other extension of credit by Bank for the benefit of Borrower hereunder." 1 (c) The definition of "Revolving Maturity Date" in Section 1.1 of the Loan Agreement is hereby amended by: (i) deleting the reference to "June 5, 1997" included in said definition; and (ii) inserting in place thereof "June 4, 1998." (d) Section 6.3 of the Loan Agreement is hereby amended by: (i) deleting the third line of the second full paragraph of said Section 6.3 in its entirety; and (ii) inserting in place thereof the following: " ... Exhibit B hereto, together with an aged listing of accounts --------- receivable." (e) Section 6.8 of the Loan Agreement is hereby amended by: (i) deleting said Section 6.8 in its entirety; and (ii) inserting in place thereof the following: "Section 6.8 Quick Ratio. Borrower shall maintain, as of the ----------- last day of each fiscal quarter, a ratio of Quick Assets to Current Liabilities of at least 3.00:1.0." (f) Section 6.9 of the Loan Agreement is hereby amended by: (i) deleting said Section 6.9 in its entirety; and (ii) inserting in place thereof the following: "Section 6.9 Tangible Net Worth. Borrower shall maintain, as of ------------------ the last day of each fiscal quarter, a Tangible Net Worth of at least $25,000,000." (g) Section 6 of the Loan Agreement is hereby further amended by: (i) deleting Sections 6.10, 6.11, 6.12 and 6.13 in their entirety; and (ii) renumbering the remainder of Section 6 accordingly. (h) Section 8.2(a) of the Loan Agreement is hereby amended by: (i) deleting said Section 8.2(a) in its entirety; and (ii) inserting in place thereof the following: "(a) If Borrower fails to perform any obligation under Sections 6.3, 6.6, 6.7, 6.8 or 6.9 or violates any of the covenants contained in Article 7 of this Agreement, or" (i) Exhibits A, B and C of the Loan Agreement are hereby amended by: ------------------- (i) by deleting said Exhibits A, B and C in their entirety; and (ii) by ---------- inserting in place thereof Exhibits A, B and C attached to this Fourth Loan ------------------- Modification Agreement. 4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended ------------------ wherever to reflect the modifications described in Section 3 of this Fourth Loan Modification Agreement. 2 5. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and ------------------------------ warrants to Bank as follows: (a) Borrower has adequate corporate power and authority to execute and deliver this Fourth Loan Modification Agreement and the other documents executed and/or delivered in connection herewith (collectively, the "Modification Documents") and to perform its respective obligations hereunder and thereunder, and under the Existing Loan Documents, as amended hereby. Each of this Fourth Loan Modification Agreement and the other Modification Documents has been duly authorized, executed and delivered by Borrower, and does not contravene any law, rule or regulation applicable to Borrower or any of the terms of its Certificate of Incorporation or by-laws, or any other indenture, agreement or undertaking to which Borrower is a party. This Fourth Loan Modification Agreement and the other Modification Documents effectively amend the Existing Loan Documents in accordance with the terms hereof and thereof. Borrower's obligations hereunder and under the other Modification Documents, and under the Loan Agreement and the other Existing Loan Documents, each as amended hereby and thereby, constitute legally valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. (b) All of the representations and warranties made by Borrower in the Loan Agreement and the other Loan Documents are true and correct on the date hereof as if made on and as of the date hereof and are so repeated herein, except that representations and warranties of financial statements or conditions as of an earlier date relate solely to such earlier date. (c) Upon the execution and delivery of this Fourth Loan Modification Agreement and the satisfaction of the conditions precedent set forth in Section 6 hereof, no Event of Default shall exist and be continuing. 6. CONDITIONS PRECEDENT. -------------------- (a) The agreements contained herein and the amendments contemplated hereby shall not be effective unless each of the following conditions precedent is satisfied: (1) All of the representations and warranties made by Borrower in Section 5 hereof shall be true and correct; (2) Bank shall have received a Facility Fee equal to one-quarter of one percentage point of the Committed Revolving Line or Ten Thousand Dollars ($10,000), which fee shall be fully earned and non- refundable. (3) Bank shall have received an opinion of Borrower's counsel in form and substance satisfactory to Bank; 3 (4) Bank shall have received, in form and substance satisfactory to Bank, a certificate(s) of the Treasurer of the Borrower as to the satisfaction of the condition specified in clauses (1), (2) and (3) of this Section 6(a); (5) Bank shall have received, in form and substance satisfactory to Bank, such other documents as Bank shall deem necessary and/or appropriate. Upon satisfaction of each of the conditions precedent set forth in this Section 6(a), the agreements contained herein and the amendments contemplated hereby shall be deemed effective as of the date hereof (b) From and after the satisfaction of the conditions precedent set forth in Section 6(a) hereof, Bank's obligations to make any Loans to Borrower under the Loan Agreement and the other Loan Documents shall be subject to the additional conditions that (i) all of the representations and warranties made by Borrower herein, whether directly or incorporated herein by reference, shall be true and correct immediately prior to the time of the proposed Loan as if made at and as of such time, except that representations and warranties of financial statements or conditions as of an earlier date relate solely to such earlier date, and (ii) no Event of Default, or event or condition which, with notice or lapse of time, or both, would constitute an Event of Default, would occur after giving effect to the making of such Loan. From and after the satisfaction of the conditions precedent set forth in Section 6(a) hereof, each request by Borrower for a Loan under the Loan Agreement and the other Loan Documents shall be deemed to be a representation and warranty by Borrower that all of the conditions precedent in this Section 6(b) have been met. 7. NO DEFENSES OF BORROWER. Borrower agrees that it has no defenses to ----------------------- the payment of all Obligations, whether under the Loan Agreement, the other Loan Documents or otherwise. 8. CONTINUING VALIDITY. Borrower understands and agrees that in modifying ------------------- the Existing Loan Documents, Bank is relying upon Borrower's representations, warranties and agreements contained in these Modification Documents and in the Existing Loan Documents. Except as expressly modified pursuant to this Fourth Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank's agreement to amend the Existing Loan Documents pursuant to this Fourth Loan Modification Agreement shall in no way obligate Bank to make any future amendments or modifications to the Existing Loan Documents. Nothing in this Fourth Loan Modification Agreement shall constitute a satisfaction of Borrower's Obligations to Bank. It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of the Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker, endorser or guarantor will be released by virtue of this Fourth Loan Modification Agreement. 4 9. EXPENSES. Borrower agrees to pay to Bank upon demand (a) an amount -------- equal to any and all out-of-pocket costs or expenses (including legal fees and disbursements) incurred or sustained by Bank in connection with the preparation of these Modification Documents and related matters, and (b) from time to time any and all out-of-pocket costs or expenses (including legal fees and disbursements) hereafter incurred or sustained by Bank in connection with the administration of credit extended by Bank to Borrower or the preservation of or enforcement of Bank's rights under any of the Loan Documents or in respect of any of Borrower's other obligations to Bank. 10. MISCELLANEOUS. This Fourth Loan Modification Agreement shall be ------------- considered a "Loan Document" under and as defined in the Loan Agreement. This Fourth Loan Modification Agreement shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts (without giving effect to the conflicts of law principles thereof), and shall take effect as a sealed instrument under such laws. Borrower accepts for itself and in connection with its properties, unconditionally, the non-exclusive jurisdiction of any state or federal court of competent jurisdiction in The Commonwealth of Massachusetts in any action, suit or proceeding of any kind against it which arises out of or by reason of this Fourth Loan Modification Agreement; provided, -------- however, that if for any reason Bank cannot avail itself of the courts of The - ------- Commonwealth of Massachusetts, then venue shall lie in Santa Clara County, California. This Fourth Loan Modification Agreement shall become effective only when it shall have been executed by Borrower and Bank (provided, however, in no event shall this Fourth Loan Modification Agreement become effective until signed by an officer of Bank in California). IN WITNESS WHEREOF, the parties have caused this Fourth Loan Modification Agreement to be duly executed and delivered as of the 5th day of June, 1997. LIGHTBRIDGE, INC. By: /s/ Pamela D.A. Reeve ------------------------------------------- Name: Pamela D.A. Reeve ------------------------------------------- Title: President & Chief Executive Officer ------------------------------------------- SILICON VALLEY BANK, doing business as SILICON VALLEY EAST By: /s/ Pamela Aldsworth ------------------------------------------- Name: Pamela Aldsworth ------------------------------------------- Title: Vice President ------------------------------------------- 5 SILICON VALLEY BANK By: /s/ Michelle Giannini ------------------------------------------- Name: Michelle Giannini ------------------------------------------- Title: AVP ------------------------------------------- (signed in Santa Clara County, California) 6 EXHIBIT A LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T. TO: CENTRAL CLIENT SERVICE DIVISION DATE: FAX#: (408) TIME: FROM: ------------------------------------------------------------------------- BORROWER'S NAME FROM: ------------------------------------------------------------------------- AUTHORIZED SIGNER'S NAME - ------------------------------------------------------------------------------- AUTHORIZED SIGNATURE PHONE: ------------------------------------------------------------------------ FROM ACCOUNT# -------------------------- TO ACCOUNT# -------------------------- =============================================================================== REQUESTED TRANSACTION TYPE: REQUEST DOLLAR AMOUNT --------------------------- --------------------- PRINCIPAL INCREASE (ADVANCE) $ ------------------------------ PRINCIPAL PAYMENT (ONLY) $ ------------------------------ INTEREST PAYMENT (ONLY) $ ------------------------------ PRINCIPAL AND INTEREST PAYMENT $ ------------------------------ OTHER INSTRUCTIONS: _____________________________________________________ =============================================================================== All representations and warranties of Borrower stated in the Amended and Restated Credit Agreement, dated as of June 18, 1996, between Borrower and Silicon Valley Bank, as amended and in effect as of the date hereof, are true, correct and complete in all material respects as of the date of the telephone request for an Advance/Equipment Advance confirmed by this Borrowing Certificate; provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of such date. =============================================================================== BANK USE ONLY TELEPHONE REQUEST: ----------------- The following person is authorized to request the loan payment transfer/loan advance on the advance designated account and is known to me. ------------------------------ -------------------------------- Authorized Requester Phone # ------------------------------ -------------------------------- Received by (Bank) Phone # ----------------------------------- Authorized Signature (Bank) =============================================================================== EXHIBIT B BORROWING BASE CERTIFICATE Borrower: Lightbridge, Inc. Bank: Silicon Valley Bank Commitment Amount: $4,000,000.00 ================================================================================ ACCOUNTS RECEIVABLE: 1. Accounts Receivable Book Value as of ________ $ ___________ 2. Additions (please explain on reverse) $ ___________ 3. TOTAL ACCOUNTS RECEIVABLE $ ___________ ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication) 4. Amounts over 90 days due $ ___________ 5. Balance of 50% over 90 day accounts $ ___________ 6. Concentration Limits $ ___________ 7. Foreign Accounts $ ___________ 8. Governmental Accounts $ ___________ 9. Contra Accounts $ ___________ 10. Promotion or Demo Accounts $ ___________ 11. Intercompany/Employee Accounts $ ___________ 12. Other (please explain on reverse) $ ___________ 13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $ ___________ 14. Eligible Accounts (#3 minus # 13) $ ___________ 15. loan VALUE OF ACCOUNTS (80% OF #14) $ ___________ INVENTORY $ N/A 16. Inventory Value as of _____________ ___________ $ N/A 17. LOAN VALUE INVENTORY (___% OF # 16) ___________ BALANCES 18. Maximum Loan Amount $ ___________ 19. Total Funds Available [Lesser of #18 or (#15 plus #17)] $ ___________ 20. Present balance owing on Line of Credit $ ___________ 21. Outstanding under Sublimits (Letters of Credit) $ ___________ 22. RESERVE POSITION (#19 minus #20 and #21) $ ___________ The undersigned represents and warrants that the foregoing is true, complete and correct, and that the information reflected in this Borrowing Base Certificate complies with the representations and warranties set forth in the Amended and Restated Credit Agreement, dated as of June 18, 1996, between the undersigned and Silicon Valley Bank, as amended and in effect on the date hereof. COMMENTS: - ------------------------------- By: --------------------------- Authorized Signer ------------------------------------ BANK USE ONLY Received by: __________________ Authorized Signer Date: _________________________ Verified: ____________________ Authorized Signer Date: _________________________ ------------------------------------ 19 COMPLIANCE CERTIFICATE TO: SILICON VALLEY BANK ("Bank") FROM: LIGHTBRIDGE, INC. ("Borrower") The undersigned authorized officer of Lightbridge, Inc. hereby certifies that in accordance with the terms and conditions of the Amended and Restated Credit Agreement dated as of June 18, 1996 between Borrower and Bank, as amended and in effect on the date hereof (as so amended, the "Agreement"), (i) Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below and (ii) all representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof Attached herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The Officer expressly acknowledges that no borrowings may be requested by the Borrower at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that such compliance is determined not just at the date this certificate is delivered. Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies - -------------------------------- ------------------- -------- Monthly financial statements Monthly within 30 days Yes No Annual (CPA Audited) FYE within 120 days Yes No A/R Agings Monthly within 25 days Yes No A/R Audit Annual* Yes No
Financial Covenant Required Actual Complies - -------------------------------- ------------------- ------- -------- Maintain on a Quarterly Basis: Minimum Quick Ratio 3.00:1.0 ___:1.0 Yes No Minimum Tangible Net Worth $25,000,000 $______ Yes No
*So long as Loans are outstanding under the Amended and Restated Credit Agreement, dated as of June 18, 1996, between Borrower and Bank, as amended and in effect from time to time. Comments Regarding Exceptions: See Attached Sincerely, ______________________________ Signature Title: Date: ------------------------------------ BANK USE ONLY Received by: __________________ Authorized Signer Date: _________________________ Verified: ____________________ Authorized Signer Date: _________________________ Compliance Status: Yes No ------------------------------------ LOAN MODIFICATION AGREEMENT This Loan Modification Agreement is entered into as of October 15, 1997, by and between Lightbridge, Inc. ("Borrower") whose address is 67 South Bedford Street, Burlington, MA 01803 and Silicon Valley Bank, a California-chartered bank ("Bank"), with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan production office located at Wellesley Office Park, 40 William Street, Suite 350, Wellesley, MA 02181, doing business under the name "Silicon Valley East". 1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may ------------------------------------ be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other documents, an Amended and Restated Credit Agreement, dated June 18, 1996, as may be amended from time to time (the "Credit Agreement"). The Credit Agreement provided for, among other things, a Committed Revolving Line in the original principal amount of Four Million and 00/100 Dollars ($4,000,000.00), as evidenced by an Amended and Restated Promissory Note, dated June 18, 1996 (the "Working Capital Line of Credit Note"), and a Committed Equipment Line in the original principal amount of Two Million and 00/100 Dollars ($2,000,000.00), as evidenced by a Promissory Note, dated June 18, 1996 (the "Equipment Line of Credit Note"). Defined terms used but not otherwise defined herein shall have the same meanings as in the Credit Agreement. Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as the "Indebtedness." 2. DESCRIPTION OF COLLATERAL: Repayment of the Indebtedness is secured by the ------------------------- Collateral as described in the Security Agreement and in the Trademarks Assignment as defined in the Loan Agreement. Hereinafter, the above-described security documents, together with all other documents securing payment of the Indebtedness shall be referred to as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents." 3. DESCRIPTION OF CHANGE IN TERMS. ------------------------------ A. Modification(s) to the Equipment Line of Credit Agreement. --------------------------------------------------------- 1. The interest rate to be applied to the unpaid principal balance of the Equipment Line of Credit Note is hereby decreased, effective as of the date of this Loan Modification Agreement, to a rate per annum equal to the Prime Rate, as defined herein. A. Modification(s) to Credit Agreement. ----------------------------------- 1. Effective as of the date of this Loan Modification Agreement, Section 2.4(a) entitled "Interest Rate" is hereby amended in its entirety to read as follows: Except as set forth in Section 2.4(b), each Advance and each Equipment Advance shall bear interest at a rate per annum equal to the Prime Rate. 2. Section 6.3 entitled "Financial Statements, Reports, Certificates" is hereby amended to require Borrower to provide Bank its interim consolidated balance sheet and income statement, with a Compliance Certificate, within thirty (30) days (rather than forty-five (45) days) after the end of each quarter. 3. Section 6.8 entitled "Quick Ratio" is hereby amended in its entirety to read as follows: 1 Effective as of Borrower's fiscal quarter ended September 30, 1997, Borrower shall maintain, as of the last day of each fiscal quarter, a ratio of Quick Assets to Current Liabilities of at least 2.00 to 1.00. 4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended ------------------ wherever necessary to reflect the changes described above. 5. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no ----------------------- defenses against the obligations to pay any amounts under the Indebtedness. 6. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the ------------------- existing Indebtedness, Bank is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. The terms of this Paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements. 7. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its ------------------ properties, unconditionally, the non-exclusive jurisdiction of any state or federal court of competent jurisdiction in the Commonwealth of Massachusetts in any action, suit, or proceeding of any kind against it which arises out of or by reason of this Loan Modification Agreement; provided, however, that if for any reason Bank cannot avail itself of the courts of the Commonwealth of Massachusetts, then venue shall lie in Santa Clara County, California. 8. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective ---------------- only when it shall have been executed by Borrower and Bank (provided, however, in no event shall this Loan Modification Agreement become effective until signed by an officer of Bank in California). This Loan Modification Agreement is executed as of the date first written above. BORROWER: BANK: LIGHTBRIDGE, INC. SILICON VALLEY BANK, doing business as SILICON VALLEY EAST By: /s/ William G. Brown By: ----------------------- ------------------------- Name: William G. Brown Name: ----------------------- ------------------------- Title: Chief Financial Officer Title: ----------------------- ------------------------- SILICON VALLEY BANK By: ------------------------- Name: ------------------------- Title: ----------------------- (Signed at Santa Clara County, CA) 2 SIXTH LOAN MODIFICATION AGREEMENT This Sixth Loan Modification Agreement is entered into as of June 26, 1998, by and between LIGHTBRIDGE, INC., a Delaware corporation, with its principal place of business at 67 South Bedford Street, Burlington, Massachusetts 01803 (the "Borrower") and SILICON VALLEY BANK, a California-chartered bank ("Bank"), with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan production office located at Wellesley Office Park, 40 William Street, Suite 350, Wellesley, MA 02181, doing business under the name "Silicon Valley East". 1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may ------------------------------------ be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of June 18, 1996, evidenced by, among other documents, (i) an Amended and Restated Promissory Note dated June 18, 1996 in the original principal amount of Four Million Dollars ($4,000,000.00) (the "Working Capital Note" or "Working Capital Line"), and (ii) a Promissory Note dated June 18, 1996 in the original principal amount of Two Million Dollars ($2,000,000.00) (the "Equipment Note" or "Equipment Line") (hereinafter, individually and collectively, the "Notes"). The Notes are governed by the terms and conditions of a certain Amended and Restated Credit Agreement dated June 18, 1996 between Borrower and Bank, as amended by certain Loan Modification Agreements dated as of August 19, 1996, December 12, 1996, March 5, 1997, June 5, 1997, and October 15, 1997 (as amended, the "Loan Agreement"). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement. Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as the "Indebtedness". 2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by the ------------------------- Collateral as described in the Loan Agreement, which includes certain Collateral defined in (i) a Security Agreement dated April 1, 1992 by Borrower in favor of Bank, as amended by a First Amendment to Security agreement dated October 5, 1994, and (ii) a Collateral Assignment of Trademarks dated as of October 5, 1994 (together with any other collateral security granted to Bank, the "Security Documents"). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents". 3. DESCRIPTION OF CHANGE IN TERMS. ------------------------------ A. Modification(s) to Equipment Note. --------------------------------- 1. The maximum principal amount of the Equipment Note is hereby increased from Two Million Dollars ($2,000,000.00) to Three Million Dollars ($3,000,000.00). 2. Effective as of October 15, 1997, the interest rate applied to the unpaid principal balance of the Equipment Line is accruing at a rate per annum equal to the Prime Rate. B. Modification(s) to Loan Agreement. --------------------------------- 1. The Loan Agreement shall be amended by deleting the following definition appearing in Section 1.1 thereof: "Revolving Maturity Date" means June 5, 1998." and inserting in lieu thereof the following: 3 "Revolving Maturity Date" means June 4, 1999." 2. The Loan Agreement shall be amended by deleting the following definition appearing in Section 1.1 thereof: "Committed Equipment Line" means Two Million Dollars ($2,000,000.00)." and inserting in lieu thereof the following: "Committed Equipment Line" means Three Million Dollars ($3,000,000.00). Notwithstanding the foregoing, the Committed Equipment Line shall be reduced by the outstanding balance of Equipment Advances made to Borrower pursuant to Section 2.2 hereof." 3. The Loan Agreement shall be amended by inserting after Section 2.2 thereof entitled Equipment Advances the following new section: "2.2.A. 1998-2001 Equipment Advances. ---------------------------- (a) Subject to and upon the terms and conditions of this Agreement, at any time from June 26, 1998 (the "Modification Date") through the ------- date which is thirty-six (36) months from the Modification Date (the "Second Equipment Availability End Date"), Bank agrees to make advances (each an "Equipment Advance" and collectively, the "Equipment Advances") to Borrower in an aggregate outstanding amount not to exceed the Committed Equipment Line. To evidence the Equipment Advance or Equipment Advances, Borrower shall deliver to Bank, at the time of each Equipment Advance request, an invoice for the equipment to be purchased. The Equipment Advances shall be used only to purchase Equipment and shall not exceed One Hundred Percent (100%) of the invoice amount of such equipment purchased by Borrower in the ordinary course of business, excluding taxes, shipping, warranty charges, freight discounts and installation expense. Software may, however, constitute only up Five Hundred Thousand Dollars ($500,000.00) of aggregate Equipment Advances. (b) Interest shall accrue from the date of each Equipment Advance at the per annum rate equal to the Prime Rate and shall be payable monthly on the Payment Date. Amounts currently amortizing under Section 2.2 above shall continue to be repaid as provided in Section 2.2 above, and shall continue to be treated as advances under the Committed Equipment Line. Any Equipment Advances made pursuant to this Section 2.2.A that are outstanding on any of the following dates (the "Amortization Dates"), will be payable in Thirty-Six (36) equal monthly installments of principal, plus all accrued interest, beginning on the Payment Date of the month following the applicable Amortization Date, and ending on the thirty-fifth month thereafter. The Amortization Dates shall be as follows: (i) the date which is six (6) months from the Modification Date; (ii) the date which is twelve (12) months from the Modification Date; (iii) the date which is eighteen (18) months from the Modification Date; (iv) the date which is twenty-four (24) months from the Modification Date; (v) the date which is thirty (30) months from the Modification Date; and (vi) the date which is thirty-six (36) months from the Modification Date. Equipment Advances, once repaid, may not be reborrowed. 4 (c) When Borrower desires to obtain an Equipment Advance, Borrower shall notify Bank (which notice shall be irrevocable) by facsimile transmission to be received no later than 3:00 p.m. Pacific time one (1) Business Day before the day on which the Equipment Advance is to be made. Such notice shall be substantially in the form of Exhibit A. The notice shall be signed by a Responsible Officer or its designee and include a copy of the invoice for the Equipment to be financed." 4. The Loan Agreement shall be amended by deleting the following text appearing the second paragraph of Section 6.3 thereof entitled "Financial Statements, Reports, Certificates": "Within twenty-five (25) days after the last day of each month, Borrower shall deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in substantially the form of Exhibit B hereto, together with aged listings of --------- accounts receivable." and inserting in lieu thereof the following: "Within twenty-five (25) days after the last day of each month, with respect to which either (i) Obligations are outstanding, (ii) Advances were made, or (iii) Letters of Credit were issued, Borrower shall deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in substantially the form of Exhibit B hereto, together with aged --------- listings of accounts receivable." 5. The Loan Agreement shall be amended by deleting in its entirety the third paragraph of Section 6.3 entitled "Financial Statements, Reports, Certificates" and inserting in lieu thereof the following: "Within forty-five (45) days after the last day of each quarter, Borrower shall deliver to Bank quarterly financial statements together with a Compliance Certificate signed by a Responsible Officer in substantially the form of Exhibit C --------- hereto." 6. The Loan Agreement shall be amended by deleting Section 7.3 thereof entitled "Mergers or Acquisitions" and inserting in lieu thereof the following: "Mergers or Acquisitions. Merge or consolidate, or permit -------------------------- any of its Subsidiaries to merge or consolidate, with or into any other business organization, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person without prior written approval by the Bank." 7. The Compliance Certificate appearing as Exhibit C to the Loan --------- Agreement is hereby replaced with the Compliance Certificate attached as Exhibit A hereto. --------- 4. FEE. Borrower shall pay to Bank a modification fee equal to Three Thousand ---- Dollars ($3,000.00) for the Equipment Line, plus Ten Thousand Dollars ($10,000.00) for the Working Capital Line, which fee shall be due on the date hereof and which shall be deemed fully earned as of the date hereof. 5 5. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended ------------------- wherever necessary to reflect the changes described above. 6. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and ------------------------------ reaffirms all terms and conditions of all secured or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Indebtedness. 7. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no ----------------------- defenses against the obligations to pay any amounts under the Indebtedness. 8. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the ------------------- existing Indebtedness, Bank is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. 9. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its ------------------ properties, unconditionally, the non-exclusive jurisdiction of any state or federal court of competent jurisdiction in the Commonwealth of Massachusetts in any action, suit, or proceeding of any kind against it which arises out of or by reason of this Loan Modification Agreement; provided, however, that if for any reason Bank cannot avail itself of the courts of the Commonwealth of Massachusetts, then venue shall lie in Santa Clara County, California. 10. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective ---------------- only when it shall have been executed by Borrower and Bank (provided, however, in no event shall this Loan Modification Agreement become effective until signed by an officer of Bank in California). This Loan Modification Agreement is executed as of the date first written above. ("BORROWER") LIGHTBRIDGE, INC. By: /s/ Joseph S. Tibbetts, Jr. --------------------------- Name: Joseph S. Tibbetts, Jr. --------------------------- Title: Chief Financial Officer --------------------------- 6 (BANK) SILICON VALLEY BANK, doing business as SILICON VALLEY EAST By:______________________________________ Name:____________________________________ Title:___________________________________ SILICON VALLEY BANK By:______________________________________ Name:____________________________________ Title:___________________________________ (signed in Santa Clara County, California) 7 EXHIBIT A COMPLIANCE CERTIFICATE TO: SILICON VALLEY BANK FROM: LIGHTBRIDGE, INC. The undersigned authorized officer of LIGHTBRIDGE, INC. hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in compliance for the period ending ____________________ with all required covenants except as noted below and (ii) all representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof. Attached herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The Officer expressly acknowledges that no borrowings may be requested by the Borrower at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that such compliance is determined not just at the date this certificate is delivered. Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies - ------------------ -------- -------- Quarterly financial statements and CC Quarterly within 45 days Yes No Annual (CPA Audited) FYE within 120 days Yes No BBC and A/R Agings Monthly within 25 days Yes No (when borrowing)
Financial Covenant Required Actual Complies - --------------------------------------- ----------------- -------- -------- Maintain on a Quarterly Basis: Minimum Quick Ratio 2.0:1.0 ___:1.0 Yes No Minimum Tangible Net Worth $25,000,000 $_______ Yes No
------------------------------ BANK USE ONLY Received By: _______________ Date: ______________________ Reviewed By: ________________________ Compliance Status: Yes/No ------------------------------ Comment Regarding Exceptions: Sincerely, LIGHTBRIDGE, INC. ______________________ Date:_____________ SIGNATURE ______________________ TITLE 8 EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 APR-01-1998 JUN-30-1998 13,381,604 0 14,977,530 243,858 0 31,065,655 23,508,381 12,049,319 50,233,690 8,497,457 0 0 0 166,651 39,623,392 50,233,690 15,145,482 15,145,482 7,702,942 7,702,942 7,112,930 0 33,772 550,363 272,100 278,263 0 0 0 278,263 0.02 0.02
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