UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 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, 2010





 ̈ 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: 000-28543




LIGHTBRIDGE
CORPORATION


(Exact
name of registrant as specified in its charter)





Nevada
            
            91-1975651(State
      or other jurisdiction of
            
            (I.R.S.
      Empl. Ident. No.)incorporation
      or organization)





1600
Tysons Boulevard, Suite 550


McLean,
VA 22102


(Address
of principal executive offices, Zip Code)





(571)
730-1200





(Registrant’s
telephone number, including area code)




Thorium
Power Ltd.


(Former
Name, Former Address and Former Fiscal Year if Changed Since Last
Report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈ No  ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large Accelerated Filer
             ̈
            Accelerated Filer  ̈Non-Accelerated Filer
            o (Do not check if a smaller reporting company)
            Smaller reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).   Yes  ̈ No x




The
number of shares outstanding of each of the issuer’s classes of common equity,
as of July 19, 2010 is as follows:





Class of Securities
            
            Shares OutstandingCommon Stock, $0.001 par value
            
            10,349,975





Transitional
Small Business Disclosure Format (check one): Yes  ̈ No x










ITEM
1. FINANCIAL STATEMENTS





LIGHTBRIDGE
CORPORATION





UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS




JUNE 30, 2010 AND
2009




TABLE OF
CONTENTS




PageCondensed
      Consolidated Balance Sheets
            
            2Unaudited
      Condensed Consolidated Statements of Operations
            
            3Unaudited
      Condensed Consolidated Statements of Cash Flows
            
            4Unaudited
      Condensed Consolidated Statement of Changes in Stockholders’
      Equity
            
            5Notes
      to Unaudited Condensed Consolidated Financial Statements
            
            6










Lightbridge
Corporation
 Condensed
Consolidated Balance Sheets




June
      30,
            
            
            December
      31,2010
            
            
            2009(Unaudited)ASSETSCurrent
      AssetsCash
      and cash equivalents
            
            $
            3,077,451
            
            
            $
            3,028,791Restricted
      cash
            
            
            263,300
            
            
            
            652,174Accounts
      receivable - project revenue and reimbursable project
costs
            
            
            1,132,656
            
            
            
            2,421,088Prepaid
      expenses & other current assets
            
            
            389,101
            
            
            
            574,095Total
      Current Assets
            
            
            4,862,508
            
            
            
            6,676,148Property
      Plant and Equipment -net
            
            
            84,143
            
            
            
            97,559Other
      AssetsPatent
      costs - net
            
            
            264,716
            
            
            
            241,845Security
      deposits
            
            
            120,486
            
            
            
            120,486Total
      Other Assets
            
            
            385,202
            
            
            
            362,331Total
      Assets
            
            $
            5,331,853
            
            
            $
            7,136,038LIABILITIES
      AND STOCKHOLDERS EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued liabilities
            
            $
            1,546,336
            
            
            $
            2,162,221Deferred
      Revenue
            
            
            213,300
            
            
            
            0Total
      Liabilities
            
            
            1,759,636
            
            
            
            2,162,221Commitments
      and contingenciesStockholders'
      EquityPreferred
      stock, $0.001 par value, 50,000,000 authorized shares, no shares issued
      and outstanding
            
            
            -
            
            
            
            -Common
      stock, $0.001par value, 500,000,000 authorized, 10,307,513 shares and
      10,168,412shares issued and
      outstanding at  June 30, 2010 and December 31, 2009,
      respectively
            
            
            10,308
            
            
            
            10,168Additional
      paid in capital - stock and stock equivalents
            
            
            56,539,091
            
            
            
            54,108,685Deficit
            
            
            (52,410,629
            )
            
            
            (48,723,286
            )Common
      stock reserved for issuance, 4,204 shares and 5,721 shares at June 30,
      2010 and December 31, 2009, respectively
            
            
            34,750
            
            
            
            34,750Deferred
      stock compensation
            
            
            (601,303
            )
            
            
            (456,500
            )Total
      Stockholders' Equity
            
            
            3,572,217
            
            
            
            4,973,817Total
      Liabilities and Stockholders' Equity
            
            $
            5,331,853
            
            
            $
            7,136,038




The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements


2




Lightbridge
Corporation
 Unaudited
Condensed Consolidated Statements of Operations
 (Unaudited)


Three
      Months Ended
            
            
            Six
      Months EndedJune
      30,
            
            
            June
      30,2010
            
            
            2009
            
            
            2010
            
            
            2009Revenue:Consulting
      Revenue
            
            $
            1,962,295
            
            
            $
            3,430,485
            
            
            $
            4,361,427
            
            
            $
            6,374,538Cost
      of  Consulting Services Provided
            
            
            1,262,908
            
            
            
            1,888,846
            
            
            
            2,768,398
            
            
            
            3,637,364Gross
      Margin
            
            
            699,387
            
            
            
            1,541,639
            
            
            
            1,593,029
            
            
            
            2,737,174Operating
      ExpensesGeneral
      and administrative
            
            
            2,543,647
            
            
            
            2,342,580
            
            
            
            4,915,910
            
            
            
            4,605,261Research
      and development expenses
            
            
            158,237
            
            
            
            559,112
            
            
            
            362,980
            
            
            
            1,012,917Total
      Operating Expenses
            
            
            2,701,884
            
            
            
            2,901,692
            
            
            
            5,278,890
            
            
            
            5,618,178Operating
      loss
            
            
            (2,002,497
            )
            
            
            (1,360,053
            )
            
            
            (3,685,861
            )
            
            
            (2,881,004
            )Other
      Income and (Expenses)Interest
      income
            
            
            896
            
            
            
            13,492
            
            
            
            1,048
            
            
            
            16,520Other
            
            
            (1,984
            )
            
            
            (389
            )
            
            
            (2,530
            )
            
            
            (4,927
            )Total
      Other Income and Expenses
            
            
            (1,088
            )
            
            
            13,103
            
            
            
            (1,482
            )
            
            
            11,593Net  loss
      before income taxes
            
            
            (2,003,585
            )
            
            
            (1,346,950
            )
            
            
            (3,687,343
            )
            
            
            (2,869,411
            )Income
      taxes
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Net  loss
            
            $
            (2,003,585
            )
            
            $
            (1,346,950
            )
            
            $
            (3,687,343
            )
            
            $
            (2,869,411
            )Net
      Loss Per Common Share, Basic and diluted
            
            $
            (0.19
            )
            
            $
            (0.13
            )
            
            $
            (0.36
            )
            
            $
            (0.29
            )Weighted
      Average Number of shares outstanding for the period used to compute per
      share data - (prior reporting period restated to reflect 1 for 30 reverse
      stock split)
            
            
            10,296,694
            
            
            
            10,061,391
            
            
            
            10,232,553
            
            
            
            10,058,485





The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
 3
 
  Lightbridge
Corporation
 Unaudited
Condensed Consolidated Statements of Cash Flows
 (Unaudited)


Six
      Months EndedJune
      30,2010
            
            
            2009Operating
      Activities:Net
      Loss
            
            $
            (3,687,343
            )
            
            $
            (2,869,411
            )Adjustments
      to reconcile net loss from operations to net cash used in operating
      activities:Stock
      based compensation
            
            
            1,582,092
            
            
            
            2,519,098Depreciation
      and amortization
            
            
            13,416
            
            
            
            13,040Changes
      in non-cash operating working capital items:Accounts
      receivable - fees and reimburseable project costs
            
            
            1,288,432
            
            
            
            1,459,329Prepaid
      expenses and other current assets
            
            
            184,994
            
            
            
            (260,222
            )Accounts
      payable, accrued liabilities and other current liabilities
            
            
            87,766
            
            
            
            (1,500,982
            )Deferred
      revenue
            
            
            213,300
            
            
            
            0Net
      Cash Used In Operating Activities
            
            
            (317,343
            )
            
            
            (639,148
            )Investing
      Activities:Property
      and equipment
            
            
            0
            
            
            
            (12,039
            )Patent
      costs
            
            
            (22,871
            )
            
            
            (18,340
            )Net
      Cash Used In Investing Activities
            
            
            (22,871
            )
            
            
            (30,379
            )Financing
      Activities:Restricted
      cash
            
            
            388,874
            
            
            
            0Net
      Cash Provided by (Used In) Financing Activities
            
            
            388,874
            
            
            
            0Net
      Decrease In Cash and Cash Equivalents
            
            
            48,660
            
            
            
            (669,527
            )Cash
      and Cash Equivalents, Beginning of Period
            
            
            3,028,791
            
            
            
            5,580,244Cash
      and Cash Equivalents, End of Period
            
            $
            3,077,451
            
            
            $
            4,910,717Supplemental
      Disclosure of Cash Flow InformationCash
      paid during the year:Interest
      paid
            
            $
            0
            
            
            $
            0Income
      taxes paid
            
            $
            0
            
            
            $
            266,000Non-Cash
      Financing ActivityGrant
      of Common Stock for Payment of Accrued Liabilities
            
            $
            703,652
            
            
            $
            0





The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
 4
 
  Lightbridge
Corporation
 Unaudited
Condensed Consolidated Statements of Changes in Stockholders’
Equity
 For
the Six Months Ended June 30, 2010 (Unaudited) and Year Ended December 31,
2009


Common
      Stock
            
            
            Additional
            
            
            
            
            
            Stock
      Committed
            
            
            Deferred
            
            
            Stockholders’Shares
            
            
            Amount
            
            
            Paid-in
      Capital
            
            
            Deficit
            
            
            Future
      Issuance
            
            
            Stock
      Compensation
            
            
            EquityBalance
      - December 31, 2008
            
            
            10,049,769
            
            
            $
            10,050
            
            
            $
            48,898,894
            
            
            $
            (41,489,974
            )
            
            $
            114,787
            
            
            $
            (225,959
            )
            
            $
            7,307,798Stock
      based compensation
            
            
            
            
            
            
            
            
            
            
            4,483,735
            
            
            
            
            
            
            
            139,000
            
            
            
            226,252
            
            
            
            4,848,987Net
      loss for the year
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (7,233,312
            )
            
            
            
            
            
            
            
            
            
            
            (7,233,312
            )Shares
      issued - non cash
            
            
            108,026
            
            
            
            108
            
            
            
            675,722
            
            
            
            
            
            
            
            (219,037
            )
            
            
            (456,793
            )
            
            
            0Shares
      issued - cash (options exercised)
            
            
            10,617
            
            
            
            10
            
            
            
            50,334
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            50,344Balance
      - December 31, 2009
            
            
            10,168,412
            
            
            
            10,168
            
            
            
            54,108,685
            
            
            
            (48,723,286
            )
            
            
            34,750
            
            
            
            (456,500
            )
            
            
            4,973,817Stock
      based compensation
            
            
            
            
            
            
            
            
            
            
            1,296,281
            
            
            
            
            
            
            
            69,500
            
            
            
            216,310
            
            
            
            1,582,091Net
      loss for the period
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (3,687,343
            )
            
            
            
            
            
            
            
            
            
            
            (3,687,343
            )Shares
      issued - non cash
            
            
            139,101
            
            
            
            140
            
            
            
            1,134,125
            
            
            
            
            
            
            
            (69,500
            )
            
            
            (361,113
            )
            
            
            703,652Balance
      - June 30, 2010
            
            
            10,307,513
            
            
            $
            10,308
            
            
            $
            56,539,091
            
            
            $
            (52,410,629
            )
            
            $
            34,750
            
            
            $
            (601,303
            )
            
            $
            3,572,217




The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
 5
 
  Lightbridge
Corporation
 Notes
to Unaudited Condensed Consolidated Financial Statements
 For
the Six Months Ended June 30, 2010 and 2009


1. NATURE OF OPERATIONS AND BASIS OF
PRESENTATION





Basis of
presentation





The accompanying unaudited condensed
consolidated financial statements of the Lightbridge Corporation and
its subsidiaries have been prepared in accordance with the rules and regulations
of the Securities and Exchange Commission, or the SEC, including the
instructions to Form 10-Q and Regulation S-X. Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles in the United States of America
have been condensed or omitted from these statements pursuant to such rules and
regulations and, accordingly, they do not include all the information and notes
necessary for comprehensive consolidated financial statements and should be read
in conjunction with our audited consolidated financial statements for the year
ended December 31, 2009, included in our Annual Report on Form 10-K for the year
ended December 31, 2009.





In the opinion of the management of the
Company, all adjustments, which are of a normal recurring nature, necessary for
a fairstatement of the results for the
three-month period have been made. Results for the interim periods presented are
not necessarily indicative of the results that might be expected for the
entire fiscal year.  When used in these
notes, the terms "Company", "we", "us" or "our" mean Lightbridge Corporation and
all entities included in our consolidated financial
statements.




Nature of operations





Our
subsidiary, Thorium Power Inc., or TPI, was incorporated in the
state of Delaware on January 8, 1992. On February 14, 2006, Lightbridge
Corporation entered into an agreement and plan of merger with TPI.
On October 6, 2006 Lightbridge Corporation acquired TPI through
a merger transaction pursuant to the agreement and plan of merger. On
September 29, 2009 we changed our name from Thorium Power, Ltd. to Lightbridge
Corporation and we effected a 1-for-30 reverse stock split of our common
stock.
  We are
now engaged in two business segments. The first business segment is the
development, promotion and marketing of our patented advanced nuclear fuel
designs for existing and new light water reactors. Currently, we have two
primary fuel product families in the development stage: (1) All-metal fuel
technology based on a uranium-zirconium alloy that has a potential to increase
power output by up to 30% per reactor, reduce initial capital cost per megawatt
and annual operating costs per kilowatt-hour, and reduce the volume of spent
fuel per kilowatt-hour compared to reactors operating on conventional uranium
oxide fuel, and (2) Thorium-based fuel technology based on a seed-and-blanket
fuel assembly configuration that provides enhanced proliferation resistance,
reduced volume and long-term radio-toxicity of spent fuel, and other
benefits.
  Within
the all-metal fuel product family, most of our research and development work
to-date has been focused on Western-type pressurized water reactors
(PWRs).  However, while we have not yet studied in sufficient detail
its application to other reactor types, we expect that the all-metal fuel’s
benefits seen in PWRs could also potentially apply to boiling water reactors
(BWRs) as well as small modular reactors.  We also believe that the
all-metal fuel technology can be synergistic with future fast reactor fuel
designs currently under development.
  One of
the key benefits of our designed all-metal fuel technology is a potential
increase of up to 30% in power output per reactor compared to reactors using
standard oxide nuclear fuel. This increased power output is expected to lower
the initial capital cost per megawatt and annual operating costs per
kilowatt-hour which we believe would strengthen the economics of nuclear power
versus other forms of power generation. In addition, currently operating light
water reactors could also take advantage of this increased power output by
switching to our all-metal fuel designas part of a power uprate
process.  An actual power uprate level is expected to be determined
based on results of a cost/benefit analysis as some major reactor modifications
may be required to accommodate power uprates above a certain level.


6




Lightbridge
Corporation
 Notes
to Unaudited Condensed Consolidated Financial Statements
 For
the Six Months Ended June 30, 2010 and 2009




Our
all-metal fuel design is expected to provide a proliferation resistant fuel
cycle and result in up to 23% less volume of used fuel per kilowatt-hour of
electricity generated.  It is also expected to have improved fuel
operation compared to standard oxide fuel.




Within
the thorium-based fuel product family, we currently have three types, or
variants, of thorium-based fuel designs in various stages of development. The
first is designed to provide reactor owners/operators with a proliferation
resistant fuel technology that will not generate weapons-usable plutonium in the
spent fuel. The second is designed to dispose of reactor-grade plutonium that
has been extracted from spent fuel from commercial reactors and stockpiled in
Russia, Western Europe, the U.S., Japan, and other countries. The third is
designed to dispose of weapons-grade plutonium that is stockpiled in Russia and
the United States. All three of these fuel variants are expected to have
additional benefits, including reduced volume and reduced long-term
radio-toxicity of spent fuel for the same amount of electricity generated, as
compared with the uranium fuels that are currently used in light water
reactors.  To-date, our focus has been on the first
variant.





From our
U.S. and Moscow offices, we are working with our US partners, Texas A&M
University and Idaho National Laboratory, and Russian nuclear research
institutes on testing and demonstration of our metallic fuel rods in a test
reactor environment as a key step toward a full-scale demonstration in a Western
commercial reactor.





Once ournuclearfueldesignsare further developed and tested, we
plan to license our intellectual property rights to fuel fabricators, nuclear
generators, and governments for use in commercial light water nuclear reactors,
or sell the technology to a major nuclear company or government contractor, or
some combination of the two.We anticipate having the final design of
our fuel technology for our all-metal fuel designandcommencing the demonstration of our fuel
inanoperatingcommercialreactor within the next fiveto sixyears. Presentlymostof our research, testing and
demonstration activities are being conducted in Russia. Our research operations
are subject to various political, economic, and other risks and uncertainties
inherent inRussia.





On August
3, 2009, we entered into two agreements with AREVA regarding our fuel
technology business.  The first was an Agreement for Consulting
Services, or Consulting Agreement, pursuant to which we conducted the first
phase of an investigation of specific topics of thorium fuel cycles in AREVA’s
light water reactors, or LWRs. This first phase primarily focused on providing
initial general results relating to evolutionary approaches to the use of
thorium in AREVA’s LWRs, specifically within AREVA’s Evolutionary Power Reactor.
The first phase under the Consulting Agreement includes total fees of
approximately $550,000 payable to us for services provided thereunder. We completed the work underphase one of the Consulting
Agreement during the
quarter ended June 30, 2010.The anticipated second
phase and further phases of the collaboration, including a detailed study of
evolutionary and longer-term thorium fuel concepts, will be conducted in
accordance with additional collaborative agreements. The second agreement we
signed with AREVA was a five-year Collaborative Framework Agreement, pursuant to
which we will establish a joint steering committee with AREVA, which will
be responsible for reviewing project proposals, will be empowered to make
scientific and/or technical decisions and will allocate the resources required
to implement future collaborative projects between us and
AREVA.  AREVA’s use of
our intellectual property for commercial purposes or any purpose other than as
specified in theagreementwould be separately negotiated on a
royalty basis.





Pursuant to our agreementswith AREVA, each party retains
ownership in its existing (i.e., developed prior to entering into theagreements with
AREVA) intellectual
property. The parties have also agreed that AREVA will retain full ownership of
any work product resulting from the services performed under theConsulting Agreementthat relate to AREVA’s LWRs and we will
retain full ownership of any work product resulting from the services performed
under theConsultingAgreement that relate to reactors other
than AREVA’s LWRs, including, but not limited to Russian VVER-type
reactors.





Our business model expanded in 2007, and
our second business segment is providing consulting and strategic advisory
services to companies and governments planning to create or expand electricity
generation capabilities using nuclear power plants. We have secured four
contracts with successively larger values for consulting and strategic advisory
services in theUnited Arab
Emirates, or UAE. OnAugust 1, 2008, we signed separate consulting services
agreements with two government entities formed byAbu Dhabi. Under these two agreements, we are to
provide consulting and strategic advisory services over a contract term of five
years starting fromJune
23, 2008, with automatic
renewals of these contracts for one year periods.




7




Lightbridge
Corporation
 Notes
to Unaudited Condensed Consolidated Financial Statements
 For
the Six Months Ended June 30, 2010 and 2009




In April 2010 we
entered into an agreement with another foreign government to evaluate the
feasibility of developing and deploying a civil nuclear power program as one
element of a strategy to meet future electricity generation needs. Lightbridge's
statement of work for the country's government will initially focus on two
distinct areas. The first, an economic feasibility study that
will address the question of whether deployment of a civil nuclear power program
would meet the economic, energy portfolio mix and environmental objectives of the country. The
second, a site suitability study that will evaluate and rank sites that are
potentially suitable for the construction and operation of commercial nuclear
power plants. If sites are identified and meet the necessary protocol,
Lightbridge will determine up to three preferred locations. Lightbridge intends
to communicate additional details about the client relationship pending the
outcome of the initial scope of work. Total contract price for this work is
approximately $700,000 and we expect to complete this project and recognize
revenue by the end of the third quarter of 2010. This agreement
required an upfront fee paid to us of
$213,300, which was recorded as deferred revenue at June 30, 2010. We were
required under the agreement to issue a letter
of credit to this customer to secure the upfront fee they paid to us. We
deposited $213,300, which is part of the restricted cash total of $263,500 at
June 30, 2010, to the bank as security for this letter of credit. We will
recognize revenue from this new contract upon the completion of certain defined
contract deliverables that are accepted by this customer under this
agreement.





Accounting
Policies





a) Consolidation




These financial statements include the
accounts of Lightbridge Corporation, aNevadacorporation, and our wholly-owned
subsidiaries, Thorium Power, Inc., aDelawarecorporation, and Lightbridge Power
International Holding, LLC, aDelawarelimited liability
company.




All significant intercompany
transactions and balances have been eliminated in consolidation. We formed a
branch office in theUnited
Kingdomin 2008 called
Lightbridge Advisors Limited, which is wholly-owned by our subsidiary
Lightbridge Power International Holding, LLC, as well as a branch office inMoscowRussia, established in July 2009 and a branch
office in the UAE in January 2010.





b)Use
of Estimates and Assumptions




The preparation of financial statements,
in conformity with accounting principles generally accepted in theUnited States of America, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.





Significant
Estimates





These consolidated financial statements
include some amounts that are based on management's best estimates and
judgments. The most significant estimates relate to valuation of stock grants
and stock options, the valuation allowance for deferred taxes, impairment testing of intangible assets and
various contingent liabilities. It is reasonably possible that the
above-mentioned estimates and others may be adjusted as more current information
becomes available, and any adjustment could be significant in future reporting
periods.




8




Lightbridge
Corporation
 Notes
to Unaudited Condensed Consolidated Financial Statements
 For
the Six Months Ended June 30, 2010 and 2009




c)Revenue
Recognition





Consulting Business
Segment





Revenue—at the present time we are
deriving substantially all of our revenue from our consulting and strategic
advisory services business segment, by offering services to foreign governments
planning to create or expand electricity generation capabilities using nuclear
power plants. Our fee structure for each client engagement is dependent on a
number of variables, including the size of the client, the complexity, the level
of the opportunity for us to improve the client’s electrical generation
capabilities using nuclear power plants, and other factors. The accounting
policy we use to recognize revenue depends on the terms of the specific
contract. Substantially all of our revenue producing consulting contracts
mentioned below, for the six months ended June 30, 2010 and June 30, 2009, are
with the Executive Affairs Authority, or EAA, ofAbu Dhabi, one of the member Emirates of the UAE, and the related
entities: Emirates Nuclear Energy Corporation, or
ENEC, and Federal Authority for Nuclear Regulation, or FANR. All of our revenues
recognized under these EAA contracts for the six months ended June 30, 2010 and
June 30, 2009 are recognized on a time and expense
basis.




Certain customer arrangements
require evaluation of the criteria outlined in
the accounting standards of reporting revenue Gross as a Principal Versus Net as
an Agentin determining whether it is appropriate
to record the gross amount of revenue and related costs or the net amount earned
as agent fees. Generally, when we are primarily obligated in a transaction,
revenue is recorded on a gross basis. Other factors that we consider in
determining whether to recognize revenue on a gross versus net basis include our
assumption of credit risk, our latitude in establishing prices, our
determination of service specifications and our involvement in the provision of
services. When we conclude that we are not primarily obligated as a principal,
we record the net amount earned as agent fees within net sales. We recognized
revenue gross as a Principal for the six months ended June 30, 2010 and
2009.





Technology Business
Segment





Once ourall-metal fuel assembly
design and thorium-based nuclear
fuel designs have advanced to a commercially usable stage, we will seek to
license our technology to major government contractors or nuclear companies,
working for theU.S.and other governments. We expect that
our revenue from license fees will be recognized on a straight-line basis over
the expected period of the related license term.





We recognize revenue from our agreement
with AREVA upon the completion of certain defined contract deliverables that are
accepted by AREVA.





d)Stock-Based
Compensation





We account for stock-based awards at the
fairvalue on the date of grant and
recognition of compensation over the service period for awards expected to vest.
The fairvalue of restricted stock and
restricted stock units is determined based on the number of shares granted and
the average of the high bid and low asked prices of the shares in the market on
the trading day immediately preceding the grant date. Such value is recognized
as expense over the service period, net of estimated
forfeitures.





e)Earnings per
Share





Basic earnings per share is calculated
using our weighted-average outstanding common shares. Diluted earnings per share
is calculated using our weighted-average outstanding common shares including the
dilutive effect of stock awards as determined under the treasury stock
method.




9




Lightbridge
Corporation
 Notes
to Unaudited Condensed Consolidated Financial Statements
 For
the Six Months Ended June 30, 2010 and 2009




f)Recent Accounting
Pronouncements





FASB Accounting Standards Codification
(Accounting Standards Update “ASU” 2009-1). In June 2009, the FASB approved
its Accounting Standards Codification, or Codification, as the single source of
authoritativeUnited
Statesaccounting and
reporting standards applicable for all non-governmental entities, with the
exception of the SEC and its staff. The Codification is effective for interim or
annual financial periods ending afterSeptember 15, 2009and impacts our financial statements as
all future references to authoritative accounting literature will be referenced
in accordance with the Codification. There have been no changes to the content
of our financial statements or disclosures as a result of implementing the
Codification during the quarter endedSeptember 30, 2009. As a result of our implementation
of the Codification during the quarter endedSeptember 30, 2009, previous references to new accounting
standards and literature are no longer applicable.





2. FINANCIAL STATUS OF THE
COMPANY





We are currently executing our
strategic plan for 2010 and working on determining our future cash
needs. Management anticipates, based on its current working capital and
projected working capital requirements, that we will have enough working
capital funds to sustain our current operations at the current operating level
until sometime in 2011. In support of our longer-term business plan, we
will need to raise additional capital by way of an offering of equity
securities, an offering of debt securities, or by obtaining financing through a
bank or other entity to finance our research and development expenditures. We
may also need to raise additional capital sooner to support our overhead
operation if the consulting and strategic advisory services business becomes
non-sustaining. Currently, we are working on other revenue opportunities
with the overall goal of increasing our profitability and cash flow. We
expect to meet all of our financial commitments and operating needs for
2010.





3. CONSULTING
REVENUES





ENEC and FANR
Projects





Substantially all of ourtotal consultingrevenue earned in the amount of
approximately $1.5million and $3.8million for the three
months  and six months ended June 30, 2010 and 2009, has been derived
from the two consulting contracts we entered into in August 2008, for consulting
services to be rendered for future periods.  The variation in revenue
reflects the uneven nature of consulting projects and the timing of revenues
recognized on the respective projects.





We expect to continue to provide
strategic advisory services to the EAA of Abu Dhabi and to both the ENEC and
FANR entities during the five-year term of these consulting agreements. Under
these agreements, revenue will be recognized on a time and expense basis. We
periodically discuss our consulting work with the EAA of Abu Dhabi, who will
review the work we perform, and our reimbursable travel expenses, prior to the
date of our monthly invoicing for services and expenses.





Travel costs and other reimbursable
costs under these contracts are reported in the accompanying statement of
operations as both revenue and cost of consulting services provided, and totaled
approximately $278,000 and $639,000 for the three months and six months ended
June 30, 2010 respectively and approximately $304,000 and $638,000 for the three
months and six months ended June 30, 2009, respectively. The total travel and
other reimbursable expenses that have not been reimbursed are being presented on
the accompanying balance sheet and included in total accounts receivable in the
amount of approximately $90,000 at June 30, 2010 and approximately $159,000 at
December 31, 2009. The remaining accounts receivable reported at June 30. 2010
of approximately $1,043,000 represents consulting fees billed and due for the
work performed for both the ENEC and FANR projects mentioned above. Total
accounts receivable reported on the accompanying balance sheet is approximately
$1,133,000 at June 30, 2010 and approximately  $2,421,000 at December
31, 2009. At June 30, 2010 approximately $541,000 is for June 2010 work that was
billed in July 2010.




10




Lightbridge
Corporation
 Notes
to Unaudited Condensed Consolidated Financial Statements
 For
the Six Months Ended June 30, 2010 and 2009




4. BUSINESS SEGMENTS





We have two principal operating
segments, which are (1) fuel technology (includes the AREVA contract) and (2)
consulting and strategic advisory services. These operating segments were
determined based on the nature of the operations and the services offered.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision-maker, in deciding how to allocate resources and in
assessing performance. Our Chief Executive Officer and Chief Operating
Officer/Chief Financial Officer have been identified as the chief operating
decision makers. Our chief operating decision makers direct the allocation of resources to
operating segments based on the profitability, the cash flows, and the business
plans of each respective segment.





We evaluate performance based on
several factors, of which the primary financial measure is business segment
income before taxes. The following tables show the operations of our
reportable segments for the three months and six months ended June 30, 2010 and
2009:




BUSINESS SEGMENT RESULTS – THREE MONTHS
ENDED JUNE 30, 2010 AND 2009





Consulting
            
            
            Technology
            
            
            Corporate and
      Eliminations
            
            
            Total2010
            
            
            2009
            
            
            2010
            
            
            2009
            
            
            2010
            
            
            2009
            
            
            2010
            
            
            2009Revenue
            
            
            1,480,190
            
            
            
            3,430,485
            
            
            
            482,105
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            1,962,295
            
            
            
            3,430,485Segment Profit – Pre
      Tax
            
            
            214,106
            
            
            
            1,404,485
            
            
            
            148,392
            
            
            
            (559,111
            )
            
            
            (2,366,083
            )
            
            
            (2,192,324
            )
            
            
            (2,003,585
            )
            
            
            (1,346,950
            )Total
Assets
            
            
            1,149,442
            
            
            
            3,907,115
            
            
            
            123,203
            
            
            
            236,215
            
            
            
            4,059,208
            
            
            
            6,452,152
            
            
            
            5,331,853
            
            
            
            10,595,482Property
      Additions
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            12,039
            
            
            
            0
            
            
            
            12,039Interest
      Expense
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Depreciation
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            6,666
            
            
            
            7,036
            
            
            
            6,666
            
            
            
            7,036




BUSINESS SEGMENT RESULTS – SIX MONTHS
ENDED JUNE 30, 2010 AND 2009





Consulting
            
            
            Technology
            
            
            Corporate and
      Eliminations
            
            
            Total2010
            
            
            2009
            
            
            2010
            
            
            2009
            
            
            2010
            
            
            2009
            
            
            2010
            
            
            2009Revenue
            
            
            3,774,322
            
            
            
            6,374,538
            
            
            
            587,105
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            4,361,427
            
            
            
            6,374,538Segment Profit – Pre
      Tax
            
            
            826,922
            
            
            
            2,600,020
            
            
            
            13,943
            
            
            
            (1,012,916
            )
            
            
            (4,528,208
            )
            
            
            (4,456,515
            )
            
            
            (3,687,343
            )
            
            
            (2,869,411
            )Total
Assets
            
            
            1,149,442
            
            
            
            3,907,115
            
            
            
            123,203
            
            
            
            236,215
            
            
            
            4,059,208
            
            
            
            6,452,152
            
            
            
            5,331,853
            
            
            
            10,595,482Property
      Additions
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            12,039
            
            
            
            0
            
            
            
            12,039Interest
      Expense
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Depreciation
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            13,416
            
            
            
            13,040
            
            
            
            13,416
            
            
            
            13,040





11




Lightbridge
Corporation
 Notes
to Unaudited Condensed Consolidated Financial Statements
 For
the Six Months Ended June 30, 2010 and 2009




5. RESEARCH AND DEVELOPMENT
COSTS





Research and development costs, included
in the statement of operations amounted to approximately $158,000 and $363,000
for the three months and six months ended June 30, 2010 respectively andapproximately$559,000 and $1,013,000for the three months and six months
ended June 30,2009, respectively. Total cumulative expense has amounted to $8.3
million from January 8, 1992, the inception of TPI, to June 30, 2010. These
totals do not include the costs incurred on the research and development
contracts with AREVA which may result in potential intellectual property
for us to use in the future, for other than AREVA’s LWRs reactors,
including but not limited to Russian VVER-type reactors.





Research and Development
Contracts





We entered into a contract with
AREVA on August 3, 2009, under which we are obligated to perform
certain specific research and development activities under an Initial
Collaborative Agreement. We receive fees under the terms of this AREVA
Agreement.




AREVA
was obligated to pay us a total of $550,000 for services provided in
phase 1, assuming no early termination and assuming completion of the original
scope of work. AREVA was also obligated to reimburse us for any
reasonable out of pocket expenses properly incurred by us and directly
attributable to the provision of the services outlined in the AREVA Agreement.
We have completed this phase 1 work and have billed the total amount to
AREVA.


Deferred projects costs incurred under
our new contract with a government agency mentioned above, included on the
balance sheet in the caption “prepaid expenses & other current assets”,
totaled approximately $93,148 at June 30, 2010. Deferred project costs are then
recognized or amortized to an expense captioned, “cost of consulting services
provided” (on the accompanying Statement of Operations), when the revenue is to
be recognized or when the project is completed. There has been no revenue
recognized under thisnewcontract as of June 30,
2010.





6.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES




Accounts payable and accrued expenses consistedof the following:
            
            June 30,
              2010
            
            
            December, 31
              2009Trade
    Payables
            
            $
            198,506
            
            
            $
            296,120Accrued
      Expenses
            
            
            846,833
            
            
            
            928,054Accrued
    Payroll
            
            
            500,997
            
            
            
            938,047$
            1,546,336
            
            
            $
            2,162,221




7.  STOCKHOLDERS'
EQUITY





All common stock shares and share prices
reflected in the financial statements, hereto, and in the discussion below
reflect the effect of the 1-for-30 stock reverse stock split onSeptember 29, 2009.




12




Lightbridge
Corporation
 Notes
to Unaudited Condensed Consolidated Financial Statements
 For
the Six Months Ended June 30, 2010 and 2009




Total common stock outstanding at June
30, 2010 and December 31, 2009 was 10,307,513 and  10,168,412,
respectively. At June 30, 2010, there were 4,204 shares reserved for future
issuance and 1,899,691 stock options outstanding, all totaling 12,211,408 of
total stock and stock equivalents outstanding at June 30,
2010.




a) Stock-based
Compensation





We have a stock-based compensation
plan to reward for services rendered by officers, directors, employees and consultants. OnJuly 17, 2006, we amended this stock
plan. We have reserved 2,500,000 shares of common stock of our
unissued share capital for the stock plan. Other limitations are as
follows:




(i)
            No more than an aggregate of
      1,250,000 shares can be granted for the purchase of restricted common
      shares during the term of the stock
plan;





(ii)
            The maximum number of shares of
      common stock with respect to which options may be granted to any one
      person during any fiscal year may not exceed 266,667 shares;
      and




(iii)
            The maximum number of restricted
      shares that may be granted to any one person during any fiscal
      year may not exceed 166,667 common
  shares.





Total stock options outstanding at June
30, 2010 were 1,899,691 of which 1,379,469 of these options were vested at June
30, 2010. Stock option expense was approximately $569,000 and approximately
$1,183,000 for the three months ended June 30, 2010 and 2009, respectively.
Stock option expense was approximately $1,296,000 and approximately $2,393,000
for the six months ended June 30, 2010 and 2009,
respectively.




Stock option transactions to the
employees, directors, advisory board members and
consultants are summarized as follows for the six months ended June 30,
2010:





Stock Options
      Outstanding
            
            2010Beginning of the
      year
            
            
            1,785,204Granted
            
            
            114,487ExercisedForfeitedExpiredEnd of
    period
            
            
            1,899,691Options
      exercisable
            
            
            1,379,469





The above table includes options issued
as of June 30, 2010 as follows:





i).
            A total of 432,269 non-qualified
      5-10 year options have been issued, and are outstanding, to advisory board
      members at exercise prices of $4.50 to $14.40 per
      share.





ii).
            A total of 1,246,088 non-qualified
      5-10 year options have been issued, and are outstanding, to
      our directors, officers and
      employees at exercise prices of $4.68 to $23.85 per share. From this
      total, 750,623 options are outstanding to the Chief Executive Officer who
      is also a director, with remaining contractual
      lives of 0.13– 9.7 years. All other options issued have a remaining
      contractual life ranging from 0.02 years to 9.7
    years.





iii).
            A total of 221,334 non-qualified
      5-10 year options have been issued, and are outstanding, to
      our consultants at exercise prices of $6.30 to $19.20 per
      share.




13




Lightbridge
Corporation
 Notes
to Unaudited Condensed Consolidated Financial Statements
 For
the Six Months Ended June 30, 2010 and 2009




The following table provides certain
information with respect to the above-referenced stock options that are
outstanding and exercisable at June 30, 2010:




Stock Options Outstanding
            
            
            Stock Options VestedExercise Prices
            
            Weighted
              Average
              Remaining
              Contractual Life
              - Years
            
            
            Number of
              Awards
            
            
            Number of
              Awards
            
            
            Weighted
              Average
              Exercise Price$4.50 -
    $8.70
            
            
            6.83
            
            
            
            913.484
            
            
            
            435,628
            
            
            
            $6.09$9.00 -
    $12.90
            
            
            5.64
            
            
            
            185,674
            
            
            
            166,456
            
            
            
            $10.46$13.20-$18.90
            
            
            4.33
            
            
            
            493,865
            
            
            
            470,717
            
            
            
            $13.97$19.20-$23.85
            
            
            5.15
            
            
            
            306,668
            
            
            
            306,668
            
            
            
            $22.84Total
            
            
            5.79
            
            
            
            1,899,691
            
            
            
            1,379,469
            
            
            
            $13.03





The aggregate intrinsic value of stock
options outstanding at June 30, 2010 was $1,930,643 of which $925,447 related to
vested awards. Intrinsic value is calculated based on the difference between the
exercise price of the underlying awards and the quoted price of our common stock
as of the reporting date ($8.20 per share as of the close on June 30,
2010).





Assumptions used in the Black Scholes
option-pricing model for the six months ended June 30 2010 and 2009 were as
follows:





Six months ended6/30/2010
            
            
            6/30/2009Average risk-free interest
      rate
            
            
            3.73%
            
            
            
            2.59%Average expected
      life
            
            10
            
            
            10Expected
      volatility
            
            
            98.46%
            
            
            
            97.79%Expected
      dividends
            
            
            0
            %
            
            
            0
            %





Stock-based
compensation expense includes the expense related to (1) grants of stock
options, (2) grants of restricted stock, and (3) stock issued as consideration
for some of the services provided by our directors and strategic advisory
council members. We record these director stock-based compensation expenses and
advisory council stock-based compensation expenses in the caption with all of
our other general and administrative expenses. Grants of stock options and
restricted stock are awarded to our employees, directors, consultants and board
members, and we recognize the fair market value of these awards ratably as they
are earned. The expense related to payments in stock for services is recognized
as the services are provided.





During
the three months ended June 30, 2010 and 2009, approximately $724,000 and
approximately $1,246,000 respectively, was recorded as total stock-based
compensation. During the six months ended June 30, 2010 and 2009, approximately
$1,582,000 and $2,519,000 respectively, was recorded as total stock-based
compensation.





The total
fair market value of restricted stock awards is recorded as deferred stock
compensation (a component of equity, which is presented in the Balance Sheet),
as grants are awarded. Deferred stock compensation is amortized as stock-based
compensation expense is recognized, or grants are forfeited. On June 30, 2010
and December 31, 2009, the balance carried in the deferred stock compensation
account was approximately $601,000 and approximately $456,000 respectively.
During the six months ended June 30, 2010, we have amortized approximately
$216,000 as stock-based compensation expense. We have recorded deferred stock
compensation related to new grants of restricted stock in the amount of
approximately $361,000.




14




Lightbridge
Corporation
 Notes
to Unaudited Condensed Consolidated Financial Statements
 For
the Six Months Ended June 30, 2010 and 2009


b).
Warrants





There are no warrants outstanding as of
June 30, 2010.




c). Common Stock
reserved for Future Issuance





Common stock reserved for future
issuance consists of





Shares ofCommonStock
            
            
            AmountStock-based
      compensation
            
            
            4,204
            
            
            $
            34,750





8. INCOME TAXES





Our tax provision for interim periods is
determined using an estimate of our annual effective tax rate adjusted for
discrete items, if any, that are taken into account in the relevant period. Each
quarter we update our estimate of the annual effective tax rate, and if our
estimated tax rate changes we make a cumulative adjustment. The 2010 and 2009
annual effective tax rate is estimated to be at a combined 40% for theU.S.federal and states statutory tax
rates.





As of June 30, 2010 and
December 31, 2009, there were no tax contingencies
recorded.





Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of assets and
liabilities recognized for financial reporting and the amounts recognized for
income tax purposes. The significant components of deferred tax assets (at a 40%
effective tax rate) as of June 30, 2010 and December 31, 2009 respectively, are
as follows:




Deferred
      Tax Assets
              
              Total
      Amount
              
              
              Deferred
      Tax Asset Amount2010
              
              
              2009
              
              
              2010
              
              
              2009Capitalized start up
      costs
              
              $
              7,125,807
              
              
              $
              7,125,807
              
              
              $
              2,850,323
              
              
              $
              2,850,323Stock-based
      compensation
              
              
              19,357,883
              
              
              
              17,929,307
              
              
              
              7,743,153
              
              
              
              7,171,723Net
      operating loss carryforward
              
              
              18,215,199
              
              
              
              15,956,432
              
              
              
              7,286,080
              
              
              
              6,382,573Less:
      valuation allowance
              
              
              (44,698,889
              )
              
              
              (41,011,546
              )
              
              
              (17,879,556
              )
              
              
              (16,404,619
              )$
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -




We have net operating loss
carryforward for federal and state tax purposes of approximately $18.2 million
that is available to offset future taxable income. For financial reporting
purposes, no deferred tax asset was recognized because management estimates that
it is more likely than not that substantially all of the net operating losses at
Decmeber will expire unused. As a result, the amount of the
deferred tax assets considered realizable was reduced 100% by a valuation
allowance. We have no other deferred tax assets or liabilities. The
changes in the valuation allowance were increases of approximately $800,000 and
$1,474,000 for the three months and six months ended June 30, 2010. Many
of our operating expenses in the 2007 and 2006 tax years were classified
under the internal revenue code as capitalized start-up costs which were not
deductible for tax purposes in those tax years, but are now amortized as
start-up costs in 2010 and 2009 .





We filed a consolidated tax return
with our subsidiaries.





In 2009, we prepaid federal and
state income taxes in the amount of $266,000 for estimates for 2008 corporate
taxes. We received this amount back from the Internal Revenue Service and
State taxing authorities in the fourth quarter of 2009.




15




Lightbridge
Corporation
 Notes
to Unaudited Condensed Consolidated Financial Statements
 For
the Six Months Ended June 30, 2010 and 2009




9. RESEARCH
AGREEMENT





Effective
on August 21, 2009, TPI entered into an agreement for ampoule irradiation
testing, or the AIT Agreement, with Kurchatov. Under the AIT Agreement, TPI
agreed to compensate Kurchatov for irradiation testing of TPI’s proprietary
nuclear fuel designs conducted in 2008 and part of 2009. Pursuant to the AIT
Agreement, TPI is obligated to pay to Kurchatov a total of $400,000, and
Kurchatov is obligated to transfer to TPI the worldwide rights in all of the
test data generated in the course of the irradiation testing of TPI’s
proprietary nuclear fuel designs in 2008 and part of 2009, and Kurchatov agrees
not to use, in any manner, the work product associated with such testing or
exercise any rights associated therewith without the written consent of TPI.
Further, Kurchatov is obligated to provide to TPI and its affiliates specified
information and documentation for audit purposes and to obtain any and all
permits from Russian governmental entities which may be required in order for
Kurchatov to perform under the AIT Agreement. To-date, a total of $35,000 has
already been paid to Kurchatov under the AIT Agreement.  The remaining
balance under the AIT Agreement is due upon the completion of certain
deliverables and the receipt of a Russian export license.





In
October 2009 we entered into an umbrella agreement, or the SOSNY Agreement,
with Russian Limited Liability Research and Development Company, or SOSNY.
SOSNY will serve as our prime contractor in Russia to manage the research
and development activities related to the lead test assembly, or LTA,
program for Russian designed VVER-1000 reactors. SOSNY is a leading Russian
commercial nuclear entity specializing in front-end and back-end nuclear fuel
cycle management and logistics services.  Specific work will be carried out
under individual task orders to be issued under the SOSNY
Agreement.  The scope, deliverables, and costs are to be agreed
between the parties for each individual task order.  On June 17, 2010,
TPI entered into Task Order No. 1 with SOSNY whereby TPI is obligated to pay to
SOSNY a total of 7,259,000 Russian Rubles (approximately $235,000 at the June
30, 2010 exchange rate) for certain R&D work to be completed and all
deliverables to be submitted to TPI by December 31, 2010.





In addition to the above agreements,
there are consulting agreements with several consultants working on various
projects for the Company, which total approximately $5,000 per
month.





10.  COMMITMENTS AND
CONTINGENCIES





We have employment agreements
with our executive officers and some consultants, the terms of which expire
at various times. Such agreements provide for minimum compensation levels, as
well as incentive bonuses that are payable if specified management goals are
attained. Under each of the agreements, in the event the officer's employment is
terminated (other than voluntarily by the officer or by us for cause, or
upon the death of the officer), we, if all provisions of the employment
agreements are met, are committed to pay certain benefits, including specified
monthly severance.





We  entered into an agreement to
lease new office space under the terms of a sublease with a term of 65 months
commencing August 1, 2008. Under the terms of the sublease, the lease payments
are inclusive of pass-through costs, which include real estate taxes and
standard operating expenses. We paid the security deposit related to this
sublease agreement in the amount of $120,486. We pay monthly rental
fees in the amount of $40,162 in the first year of the sublease agreement, and
payments increase by a factor of 4% each year thereafter. We may terminate
this agreement by providing 60 days notice to the sublessor. The monthly
straight-line rental expense fromAugust 1, 2008toDecember 1, 2013is $45,189.  As a result of
the straight-line rent calculation generated by the one free rent period and
rent escalation, we have a deferred rent credit of $68,702 at June 30,
2010.




16




Lightbridge
Corporation
 Notes
to Unaudited Condensed Consolidated Financial Statements
 For
the Six Months Ended June 30, 2010 and 2009




Future estimated rental payments under
our operating leases are as follows:





TotalYear ending -December 31,
      2010
            
            
            536,467Year ending -December 31,
      2011
            
            
            564,109Year ending -December 31,
      2012
            
            
            586,136Year ending -December 31,
      2013
            
            
            609,016Total minimum lease
      payments
            
            $
            2,857,368





11. SUBSEQUENT
EVENTS





Subsequent Events (Included in ASC 855
“Subsequent Events”, previously SFAS No. 165). SFAS No.165, “Subsequent
Events” establishes accounting and disclosure requirements for subsequent
events. SFAS 165 details the period after the balance sheet date during which we
should evaluate events or transactions that occur for potential recognition or
disclosure in the financial statements, the circumstances under which we should
recognize events or transactions occurring after the balance sheet date in its
financial statements and the required disclosures for such events. We adopted
this statement effectiveJune 15, 2009and have evaluated all subsequent
events through the filing date with the SEC.




17




FORWARD-LOOKING
STATEMENTS





This
Quarterly Report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). The words “believe,” “expect,” “anticipate,”
“project,” “target,” “optimistic,” “intend,” “aim,” “will” or similar
expressions are intended to identify forward-looking statements. Such statements
include, among others, those concerning our expected financial performance and
strategic and operational plans, as well as all assumptions, expectations,
predictions, intentions or beliefs about future events. These statements are
based on the beliefs of our management as well as assumptions made by and
information currently available to us and reflect our current view concerning
future events. As such, they are subject to risks and uncertainties that could
cause our results to differ materially from those expressed or implied by such
forward-looking statements. Such risks and uncertainties include, among many
others: our significant operating losses; our limited operating history;
uncertainty of capital resources; the speculative nature of our business; our
ability to successfully implement new strategies; present and possible future
governmental regulations; operating hazards; competition; the loss of key
personnel; any of the factors in the “Risk Factors” section of the Company’s
Annual Report on Form 10-K; other risks identified in this Report; and any
statements of assumptions underlying any of the foregoing. You should also
carefully review other reports that we file with the SEC. The Company assumes no
obligation and does not intend to update these forward-looking statements,
except as required by law.





All
statements other than statements of historical fact are statements that could be
deemed forward-looking statements. The Company assumes no obligation and does
not intend to update these forward-looking statements, except as required by
law. When used in this report, the terms “Lightbridge”, “Company”, “we”, “our”,
and “us” refer to Lightbridge Corporation (a Nevada corporation) and its
wholly-owned subsidiaries Thorium Power, Inc. (a Delaware corporation) and
Lightbridge International Holding, LLC (a Delaware limited liability
company).





ITEM
      2.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





General
Overview





We are a
developer of proprietary, proliferation resistant nuclear fuel designs and a
provider of nuclear energy consulting and strategic advisory services, each of
which will be described in the following sections.





Technology
Business Segment





To date,
our operations have been devoted primarily to the development and demonstration
of our nuclear fuel designs, developing strategic relationships within and
outside of the nuclear power industry, securing political and financial support
from the U.S. and Russian governments, and the filing of patent applications
(including related administrative functions).





On August
3, 2009, we entered into two agreements with AREVA regarding our fuel
technology business.  The first was an Agreement for Consulting
Services, or Consulting Agreement, pursuant to which we conducted the first
phase of an investigation of specific topics of thorium fuel cycles in AREVA’s
light water reactors, or LWRs. This first phase primarily focused on providing
initial general results relating to evolutionary approaches to the use of
thorium in AREVA’s LWRs, specifically within AREVA’s Evolutionary Power Reactor.
The first phase under the Consulting Agreement has been completed and included
total fees of approximately $550,000 payable to us for services provided
thereunder. The anticipated second phase and further phases of the
collaboration, including a detailed study of evolutionary and longer-term
thorium fuel concepts, will be conducted in accordance with additional
collaborative agreements. The second agreement we signed with AREVA was a
five-year Collaborative Framework Agreement, pursuant to which we will
establish a joint steering committee with AREVA, which will be responsible for
reviewing project proposals, will be empowered to make scientific and/or
technical decisions and will allocate the resources required to implement future
collaborative projects between us and AREVA.




18




To date,
we have only had minimal direct revenues from our research and development
activities regarding our proprietary nuclear fuel technology, and we do not
expect to generate licensing revenues from this business for several years,
until our fuel designs can be fully tested and demonstrated and we obtain the
proper approvals to use our nuclear fuel designs in nuclear reactors. We believe
we can leverage our general nuclear technology, business and regulatory
expertise as well as industry relationships, to optimize our technology
development plans and to support our consulting and strategic advisory services
with the highest levels of expertise and experience in the nuclear power
industry. Additionally, our knowledge of and credibility in addressing
proliferation related issues that we have developed over many years, benefit our
consulting and strategic advisory services business. Our advisory services
include a focus on non-proliferation, safety and operational transparency of
nuclear power programs.





Consulting
and Strategic Advisory Services Business Segment





Substantially
all of our revenues are derived from this business segment, which provides
nuclear consulting services to entities within the United Arab Emirates (“UAE”),
as described in Item 1 of Part 1, “Financial Statements – Note 3 – Consulting
Revenues.”  We have also entered into an agreement with another
foreign government to evaluate the feasibility of developing and deploying a
civil nuclear power program as one element of a strategy to meet future
electricity generation needs in the country.  Going forward, we may
enter into additional consulting contracts to provide support and assistance to
other commercial and governmental entities that are looking to develop and
expand their nuclear power industry capabilities and infrastructure. In future
consulting engagements, we expect that revenues may be derived either from fixed
professional fee agreements or from fees generated through hourly rates, billed
on a time and expense basis.





Our most
significant expense related to our consulting and strategic advisory services
business segment is the cost of consulting services provided, which relates to
costs associated with generating consulting revenues, and includes employee
payroll expenses and benefits, contractor compensation, vendor compensation,
marketing expenses, direct costs of training and recruiting the consulting staff
and other costs. As revenues are generated from services performed by our
permanent staff and contractors, our success depends on attracting, retaining
and motivating talented, creative and experienced professionals at all levels in
our business.




Material
Opportunities and Challenges




Proprietary
Nuclear Fuel Technology Development




We
believe that a major opportunity for us is the possibility that our advanced
nuclear fuel designs, which are currently in the research and development stage,
will be used in many existing and new light water nuclear reactors in the
future. Light water reactors are the dominant reactor types currently in use in
the world, and fuels for such reactors constitute the majority of the commercial
market for nuclear fuel. Currently, we have two primary fuel product families in
the development stage: (1) All-metal fuel technology based on a
uranium-zirconium alloy that has a potential to increase power output by up to
30% per reactor, reduce the initial capital cost per megawatt and annual
operating costs per kilowatt-hour, reduce the volume of spent fuel per
kilowatt-hour compared to reactors operating on conventional uranium oxide fuel,
and enhance proliferation resistance, and (2) Thorium-based fuel technology
based on a seed-and-blanket fuel assembly configuration that provides enhanced
proliferation resistance, reduced volume and long-term radio-toxicity of spent
fuel, and other benefits.


Within
the all-metal fuel product family, most of our research and development work
to-date has been focused on Western-type pressurized water reactors
(PWRs).  However, while we have not yet studied in sufficient detail
its application to other reactor types, we expect that the all-metal fuel’s
benefits seen in PWRs could also potentially apply to boiling water reactors
(BWRs) as well as small modular reactors.  We also believe that the
all-metal fuel technology can be synergistic with future fast reactor fuel
designs currently under development.




19





Within
the thorium-based fuel product family, we currently have three types, or
variants, of thorium-based fuel designs in various stages of development. The
first is designed to provide reactor owners/operators with a proliferation
resistant fuel technology that will not generate weapons-usable plutonium in the
spent fuel. The second is designed to dispose of reactor-grade plutonium that
has been extracted from spent fuel from commercial reactors and stockpiled in
Russia, Western Europe, the U.S., Japan, and other countries. The third is
designed to dispose of weapons-grade plutonium that is stockpiled in Russia and
the United States. All three of these fuel variants are expected to have
additional benefits, including reduced volume and reduced long-term
radio-toxicity of spent fuel for the same amount of electricity generated, as
compared with the uranium fuels that are currently used in light water
reactors.  To-date, our focus has been on the first
variant.




From our
U.S. and Moscow offices, we are working with our US partners, Texas A&M
University and Idaho National Laboratory, and Russian nuclear research
institutes on testing and demonstration of our metallic fuel rods in a test
reactor environment as a key step toward a full-scale demonstration in a Western
commercial reactor.  We believe that it will be necessary to enter
into commercial arrangements with one or more major nuclear fuel fabricators,
which in many cases are also nuclear fuel vendors, as a prerequisite to having
our fuel designs widely deployed in global markets.





We
believe that because of the reduced initial capital cost per megawatt and annual
operating costs per kilowatt-hour, the all-metal fuel technology could offer
significant economic incentives to nuclear power plant operators that could make
it palatable to them to adopt this fuel technology in their existing or new
build reactors.  Due to the expected cost savings on a per
kilowatt-hour basis, we also believe that the all-metal fuel technology offers
significant revenue opportunities to us in the Western light water reactor
market in the future.  As a result, we intend to focus our future
research and development efforts on testing and demonstration of this fuel
technology in the United States and overseas.  At the same time, we
believe the testing and demonstration work on our all-metal fuel technology will
also benefit and advance our thorium-based seed-and-blanket fuel assembly design
due to the similarities and synergies between the all-metal fuel rods and the
metallic seed fuel rods utilized in the seed-and-blanket fuel assembly
design.





We
believe that our greatest challenge will be acceptance of these fuel designs by
nuclear power plant operators, which have in the past been hesitant to be the
first to use a new type of nuclear fuel. In addition, our fuel designs would
require regulatory approval by relevant nuclear regulatory authorities, such as
the Nuclear Regulatory Commission in the United States or its equivalent
agencies in other countries, before they can be used in commercial reactors. The
regulatory review process, which is outside of our control, may take longer than
expected and may delay a rollout of the fuel designs into the market. We believe
that demonstration of one of the Company’s fuel designs in a commercial nuclear
reactor would make deployment of the other designs easier, due to the many
similarities that exist among our fuel designs.





We have
been building relationships with companies and organizations in the nuclear
power industry for several years. We will attempt to cause some or all of these
companies and organizations to work in a consortium or a joint venture type
arrangement with us in the future. However, we may not be able to develop any
such consortium or arrangement in the near term or at all. The companies that we
have identified for potential relationships have existing contracts with nuclear
power plant owner/operators, under which they supply nuclear fuel branded with
their name to such nuclear power plants. We will attempt to cause these nuclear
fuel vending companies to provide their nuclear power plant operating customers
with fuels that are designed with our technology. To do so, we will need to
enter into agreements with one or more of these companies. Without such
arrangements it would be more difficult for us to license our fuel designs
because, in addition to the reputations, guarantees, services, and other
benefits that these nuclear fuel vendors provide when selling fuel to nuclear
power plant operators, they also often have multi-year fuel supply contracts
with the reactor operators. These multi-year fuel supply contracts act as a
barrier to entry into the market, such that it can be very difficult to
penetrate some markets for nuclear fuel without working with a nuclear fuel
vendor that can support long term contracts. If we are successful in
demonstrating our fuel designs in a test reactor environment, followed by a
full-scale demonstration in an operating commercial reactor, and in continuing
to build relationships with nuclear fuel vendors, we believe it may lead to one
or more of these major companies in the nuclear power industry working with us
in producing and selling our nuclear fuel designs to commercial reactor
operators and governments.




20




Consulting
and Strategic Advisory Services





Our
emergence in the field of nuclear energy consulting is in direct response to the
need for independent assessments and highly qualified and integrated strategic
advisory services for countries looking to establish nuclear energy programs,
while still providing a blueprint for safe, clean, efficient and cost-effective
non-proliferative nuclear power. We offer full-scope planning and strategic
advisory services for new and existing markets and offer such services without a
bias towards or against any reactor vendor or fuel technology. We believe that
there are significant opportunities available to provide services to governments
that are dedicated to non-proliferative, safe, and transparent nuclear
programs.





Our major
challenge in pursuing our business is that the decision making process for
nuclear power programs typically involves careful consideration by many parties
and therefore requires significant time. Also, many of the potential clients
that could benefit from our services are in regions of the world where tensions
surrounding nuclear energy are high, or in countries where public opinion plays
an important role. Domestic and international political pressure may hinder our
efforts to provide nuclear energy services, regardless of our focus on
non-proliferative nuclear power.




Business
Segments and Periods Presented




We have
provided a discussion of our results of operations on a consolidated basis and
have also provided certain detailed segment information for each of our business
segments below for the three and six months ended June 30, 2010 and 2009, in
order to provide a meaningful discussion of our business segments. We have
organized our operations into two principal segments: Consulting and Strategic
Advisory Services and Fuel Technology. We present our segment information along
the same lines that our chief executives review our operating results in
assessing performance and allocating resources.




BUSINESS SEGMENT RESULTS – THREE MONTHS
ENDED JUNE 30, 2010 AND 2009





Consulting
            
            
            Technology
            
            
            Corporate and
      Eliminations
            
            
            Total2010
            
            
            2009
            
            
            2010
            
            
            2009
            
            
            2010
            
            
            2009
            
            
            2010
            
            
            2009Revenue
            
            
            1,480,190
            
            
            
            3,430,485
            
            
            
            482,105
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            1,962,295
            
            
            
            3,430,485Segment Profit – Pre
      Tax
            
            
            214,106
            
            
            
            1,404,485
            
            
            
            148,392
            
            
            
            (559,111
            )
            
            
            (2,366,083
            )
            
            
            (2,192,324
            )
            
            
            (2,003,585
            )
            
            
            (1,346,950
            )Total
Assets
            
            
            1,149,442
            
            
            
            3,907,115
            
            
            
            123,203
            
            
            
            236,215
            
            
            
            4,059,208
            
            
            
            6,452,152
            
            
            
            5,331,853
            
            
            
            10,595,482Property
      Additions
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            12,039
            
            
            
            0
            
            
            
            12,039Interest
      Expense
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Depreciation
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            6,666
            
            
            
            7,036
            
            
            
            6,666
            
            
            
            7,036




21




BUSINESS SEGMENT RESULTS – SIX MONTHS
ENDED JUNE 30, 2010 AND 2009





Consulting
            
            
            Technology
            
            
            Corporate and
      Eliminations
            
            
            Total2010
            
            
            2009
            
            
            2010
            
            
            2009
            
            
            2010
            
            
            2009
            
            
            2010
            
            
            2009Revenue
            
            
            3,774,322
            
            
            
            6,374,538
            
            
            
            587,105
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            4,361,427
            
            
            
            6,374,538Segment Profit – Pre
      Tax
            
            
            826,922
            
            
            
            2,600,020
            
            
            
            13,943
            
            
            
            (1,012,916
            )
            
            
            (4,528,208
            )
            
            
            (4,456,515
            )
            
            
            (3,687,343
            )
            
            
            (2,869,411
            )Total
Assets
            
            
            1,149,442
            
            
            
            3,907,115
            
            
            
            123,203
            
            
            
            236,215
            
            
            
            4,059,208
            
            
            
            6,452,152
            
            
            
            5,331,853
            
            
            
            10,595,482Property
      Additions
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            12,039
            
            
            
            0
            
            
            
            12,039Interest
      Expense
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Depreciation
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            13,416
            
            
            
            13,040
            
            
            
            13,416
            
            
            
            13,040





Technology
Business





Over the
next 12 to 15 months we expect to incur up to $8 – $9 million in
research and development expenses related to the development of our proprietary
nuclear fuel designs. We spent approximately $0.2 million and $0.4 million for
research and development during the three and six months ended June 30, 2010,
respectively, and a cumulative amount from the date of our inception (January 8,
1992, date of inception of Thorium Power Inc.) to June 30, 2010, of
approximately $8.3 million. As of May 1, 2008, we established an office in
Moscow and leased office space to support research and development activities in
Russia, and, in July 2009, we hired several employees (former consultants) to
work on our research and development projects in Russia.





Over the
next several years, we expect that our research and development activities will
increase and will be primarily focused on testing and demonstration of our
all-metal fuel technology for Western-type pressurized water
reactors.  The main objective of this research and development phase
is to prepare for full-scale demonstration of our fuel technology in an
operating commercial PWR.  As discussed above, we believe the testing
and demonstration work on our all-metal fuel technology will also benefit and
advance our thorium-based seed-and-blanket fuel assembly design due to the
similarities and synergies between the all-metal fuel rods and the metallic seed
fuel rods utilized in the seed-and-blanket fuel assembly design.





On August
3, 2009, we entered into a consulting agreement with AREVA for $550,000 as
discussed above. For the six months ended June 30, 2010, our total revenue from
AREVA was approximately $587,000 including billings for expense reimbursements.
We have largely completed the scope of work under phase one of the consulting
agreement.





Consulting
and Strategic Advisory Services Business





At the
present time, substantially all of our revenue for the three and six months
ended June 30, 2010, from our consulting and strategic advisory services
business segment is derived by offering services to governments outside the U.S.
planning to create or expand electricity generation capabilities using nuclear
power plants benefiting from thorium-based or other nuclear fuels. The fee type
and structure that we offer for each client engagement is dependent on a number
of variables, including the complexity, the level of the opportunity for us to
improve the client’s electricity generation capabilities using nuclear power
plants, and other factors. Company’s revenues totaling approximately $1.5
million and $3.8 million for the three months and six months ended June 30,
2010, respectively, have been derived primarily from our continuing work
under the August 1, 2008 agreements and follow-on agreements in 2009, with the
Executive Affairs Authority (“EAA”) of Abu Dhabi, and with the related entities,
the Emirates Nuclear Energy Corporation (“ENEC”) and the Federal Authority for
Nuclear Regulation (“FANR”) as described in Item 1, Part 1, “Financial
Statements – Note 1 - Nature of Operations and Basis of Presentation.” We
entered into next phase follow-on agreements in March 2009 and July 2009 to
continue our consulting services under the ENEC and FANR agreements for
2009.  Revenue was recognized on a time and expense basis for the
three and six months ended June 30, 2010 and 2009.




22





The cost
of consulting services provided was approximately $1.3 million and $1.9 million
for the three months ended June 30, 2010 and 2009, respectively and $2.8 million
and $3.6 million for the six months ended June 30, 2010 and 2009, respectively.
These amounts consisted primarily of direct labor consulting expenses and other
labor support costs incurred. Some indirect corporate overhead expenses incurred
were allocated to the technology and consulting and strategic advisory services
business segment, and are included above in the business segment information
chart as part of Segment Profit (Loss) – Pre Tax.





Financial
Status





At June
30, 2010, our total assets were approximately $5.3 million and total liabilities
were approximately $1.8 million. From the results of operations including our
consulting business segment, our working capital surplus at December 31, 2009
was approximately $4.5 million, and as of June 30, 2010, our working capital
surplus was approximately $3.1 million. Accounts payable and accrued liabilities
balance as of June 30, 2010 equaled approximately $1.5 million, a decrease of
approximately $0.7 million from the total accounts payable and accrued expenses
reported at December 31, 2009 of $2.2 million.





Management
expects that our current cash position, as well as the revenue and profits that
are expected to be earned from our follow-on agreements from the two consulting
agreements entered into in August 2008, and the AREVA agreement, will meet our
foreseeable working capital needs for our current operations until sometime in
2011. We anticipate entering into other consulting and technology agreements
with our existing and new clients that may generate additional revenues in 2010
and beyond.  In support of our longer-term business plan for our
technology business segment, we will need to raise additional capital in 2010 by
way of an offering of equity securities, an offering of debt securities, or by
obtaining financing through a bank or other entity to finance our future
overhead and research and development expenditures. We will also need to raise
capital to support our technology business if the consulting and strategic
advisory services business becomes non-sustaining. Our current average monthly
projected working capital requirements for the Company, excluding the
$8 – $9 million of research and development expenses we expect to
incur in Russia over the next 12 to 15 months, is approximately $1
million per month. A financing will need to take place sometime in 2010 to
ensure that we have the necessary working capital to continue our planned
business operations through 2010 and beyond. It is important to note that
financing may not be available or we may not be able to obtain that financing on
terms acceptable to us. If additional funds are raised through the issuance of
equity securities, there may be a significant dilution in the value of our
outstanding common stock. To support this financing activity, we are exploring
transaction opportunities that could simultaneously create strategic industry
and market alliances for the Company to support our operations in 2010 and
beyond.





Recent
Events





None.





Consolidated
Results of Operations





Comparison
of the Three Months Ended June 30, 2010 to June 30, 2009





The
following table summarizes certain aspects of the Company’s consolidated results
of operations for the three months ended June 30, 2010 compared to the three
months ended June 30, 2009.




23





Three
      Months EndedJune
      30,
            
            
            (Decrease)
            
            
            (Decrease)2010
            
            
            2009
            
            
            Change $
            
            
            Change %Consulting
      Revenues
            
            $
            1,962,295
            
            
            
            3,430,485
            
            
            $
            (1,468,190
            )
            
            
            -43
            %Cost
      of services providedConsulting
      expenses
            
            $
            1,262,908
            
            
            
            1,888,846
            
            
            $
            (625,938
            )
            
            
            -33
            %%
      of total revenues
            
            
            64
            %
            
            
            55
            %Gross
      profit
            
            $
            699,387
            
            
            $
            1,541,639
            
            
            $
            (842,252
            )
            
            
            -55
            %%
      of total revenues
            
            
            36
            %
            
            
            45
            %Operating
      ExpensesGeneral
      and administrative
            
            $
            2,543,647
            
            
            $
            2,342,580
            
            
            $
            201,067
            
            
            
            9
            %%
      of total revenues
            
            
            130
            %
            
            
            68
            %Research
      and development expenses
            
            $
            158,237
            
            
            $
            559,112
            
            
            $
            (400,875
            )
            
            
            -72
            %%
      of total revenues
            
            
            8
            %
            
            
            16
            %Total
      Operating Loss
            
            $
            (2,002,497
            )
            
            $
            (1,360,053
            )
            
            $
            642,444
            
            
            
            47
            %%
      of total revenues
            
            
            -102
            %
            
            
            -40
            %Other
      Income and (Expenses)Interest
      income/expense, other
            
            $
            (1,088
            )
            
            $
            13,103
            
            
            $
            (14,191
            )
            
            
            108
            %%
      of total revenues
            
            
            0
            %
            
            
            0
            %Net
      loss - before income taxes
            
            $
            (2,003,585
            )
            
            $
            (1,346,950
            )
            
            $
            656,635
            
            
            
            49
            %%
      of total revenues
            
            
            -102
            %
            
            
            -39
            %




Revenues





We
entered into next phase follow-on agreements in March 2009 and July 2009 to
continue our consulting services under the ENEC and FANR agreements. Revenue
earned under both of these agreements for the three months ended June 30, 2010
and 2009 and under the August 1, 2008 agreements with ENEC and FANR were
recognized on a time and expense basis.





We earned
$1.5 million of revenue for the three months ended June 30, 2010 as compared to
$3.4 million of revenue for the three months ended June 30, 2009  from
our consulting and strategic advisory services business segment. The 56 percent
decrease in revenue for the three months ended June 30, 2010 compared to the
same period in 2009 was primarily due to the uneven nature of our consulting
projects with ENEC and FANR which are being performed pursuant to ongoing
requests to work on specific projects on a time and expense basis as needed.
Notwithstanding the normal variations in billable hours worked under these
contracts, in the third quarter of 2009 we re-negotiated some of our billing
rates to further enhance and maintain the competitiveness of our advisory
services which also resulted in a reduction of our revenue for the three months
ended June 30, 2010 compared to the same three month period in 2009. The future
revenue to be earned and recognized under both the ENEC and FANR agreements will
depend upon agreed upon work plans which can differ from the revenue amounts
initially planned to be earned under these agreements.




24





For the
three months ended June 30, 2010, we earned approximately $0.5 million of fees
from our consulting agreement with AREVA mentioned above.  We
received  total fees plus expense reimbursements of $0.6 million for
services provided pursuant to this Consulting Agreement. The anticipated second
phase and further phases of the collaboration, including a detailed study of
evolutionary and longer-term thorium fuel concepts, will be conducted in
accordance with additional collaborative agreements based upon the results of
the first phase.




Cost of Services
Provided





The
primary reason for the decrease in the cost of services for the three months
ended June 30, 2010 compared with the same period in 2009 is due to the decrease
in billable hours for the ENEC and FANR projects. These expenses related to the
consulting, professional, administrative and other costs allocated to the
technology and consulting projects, which were incurred to perform and support
the work done for our Areva agreement and our consulting projects with ENEC and
FANR. The billing rates to us from our consultants who provide services under
our consulting contracts have primarily remained unchanged in 2010 and
2009.





Gross
Profit





Gross
profit margin of 36% for the three months ended June 30, 2010 is lower compared
to the same period in 2009. Our gross margins from our advisory contracts with
ENEC and FANR decreased due to the reduction that occurred in the third quarter
of 2009 in some of our hourly consultants billing rates to the ENEC and
FANR.





General and Administrative
Expenses





There was
a 9% increase in the general and administrative expenses for the three months
ended June 30, 2010, as compared to the same period in 2009. This increase was
primarily due to an increase in (1) employee wages and payroll related benefits
of approximately $118,000, (2) costs for accounting and audit fees of
approximately $39,000, incurred to strengthen our internal controls and for
Sarbanes Oxley compliance, (3) cost of our Nasdaq listing and other dues of
$33,000, (4) insurance costs of approximately
$33,000  and  (5) a net decrease of approximately $22,000
for consulting/professional fees stock-based compensation and other general
overhead costs.   In the future, stock-based compensation may be
offered to attract new employees in 2010, due to our expansion to meet the
demands of contracts with our current customers, and anticipated future business
with new customers. We expect our general and administrative expenses may
increase in future periods due to the expansion of our technology and consulting
and strategic advisory services business segments and the hiring of new
officers, employees and consultants to help further develop and support our
technology and consulting and strategic advisory services segments.





Research and Development
Costs





The
decrease in research and development costs for the three months ended June 30,
2010 compared to the same period in 2009 is due to a temporary decrease in this
quarter in our research and development activities performed by outside
contractors for us in Russia. We expect that our research and development
expenses will increase in the future periods.   Over the next 12
to 15 months we expect to incur approximately up to $8 – $9 million in
research and development expenses related to the development of our proprietary
nuclear fuel designs.





Other Income and
Expense





The
decrease in other income and expense for the three months ended June 30, 2010
compared to the same period in 2009 is due to the decrease in interest income
earned on our idle cash.




25





Comparison
of the Six months Ended June 30, 2010 to June 30, 2009





The
following table summarizes certain aspects of the Company’s consolidated results
of operations for the six months ended June 30, 2010 compared to the six months
ended June 30, 2009.




Six
      Months EndedJune
      30,
            
            
            (Decrease)
            
            
            (Decrease)2010
            
            
            2009
            
            
            Change $
            
            
            Change %Consulting
      Revenues
            
            $
            4,361,427
            
            
            
            6,374,538
            
            
            $
            (2,013,111
            )
            
            
            -32
            %Cost
      of services providedConsulting
      expenses
            
            $
            2,768,398
            
            
            
            3,637,364
            
            
            $
            (868,966
            )
            
            
            -24
            %%
      of total revenues
            
            
            63
            %
            
            
            57
            %Gross
      profit
            
            $
            1,593,029
            
            
            $
            2,737,174
            
            
            $
            (1,144,145
            )
            
            
            -42
            %%
      of total revenues
            
            
            37
            %
            
            
            43
            %Operating
      ExpensesGeneral
      and administrative
            
            $
            4,915,910
            
            
            $
            4,605,261
            
            
            $
            310,649
            
            
            
            7
            %%
      of total revenues
            
            
            113
            %
            
            
            72
            %Research
      and development expenses
            
            $
            362,980
            
            
            $
            1,012,917
            
            
            $
            (649,937
            )
            
            
            -64
            %%
      of total revenues
            
            
            8
            %
            
            
            16
            %Total
      Operating Loss
            
            $
            (3,685,861
            )
            
            $
            (2,881,004
            )
            
            $
            804,857
            
            
            
            28
            %%
      of total revenues
            
            
            -85
            %
            
            
            -45
            %Other
      Income and (Expenses)Interest
      income/expense, other
            
            $
            (1,482
            )
            
            $
            11,593
            
            
            $
            (13,075
            )
            
            
            113
            %%
      of total revenues
            
            
            0
            %
            
            
            0
            %Net
      loss - before income taxes
            
            $
            (3,687,343
            )
            
            $
            (2,869,411
            )
            
            $
            817,932
            
            
            
            29
            %%
      of total revenues
            
            
            -85
            %
            
            
            -45
            %





Revenues





We earned
$3.8 million of revenue for the six months ended June 30, 2010 as compared to
$6.4 million of revenue for the six months ended June 30, 2009 from our
consulting and strategic advisory services business segment. The 41 percent
decrease in revenue for the six months ended June 30, 2010 compared to the same
period in 2009 was primarily due to the uneven nature of our consulting projects
with ENEC and FANR which are being performed pursuant to ongoing requests to
work on specific projects on a time and expense basis as needed. As discussed
above, notwithstanding the normal variations in billable hours worked under
these contracts, in the third quarter of 2009 we re-negotiated some of our
billing rates to further enhance and maintain the competitiveness of our
advisory services which also resulted in a reduction of our revenue for the six
months ended June 30, 2010 compared to the same three six month period in 2009.
The future revenue to be earned and recognized under both the ENEC and FANR
agreements will depend upon agreed upon work plans which can differ from the
revenue amounts initially planned to be earned under these
agreements.




26





For the
six months ended June 30, 2010, we earned approximately $0.6 million of fees
plus reimbursement of expenses from our consulting agreement with AREVA
mentioned above.  The anticipated second phase and further phases of
the collaboration, including a detailed study of evolutionary and longer-term
thorium fuel concepts, will be conducted in accordance with additional
collaborative agreements based upon the results of the first phase.




Cost of Services
Provided





The
primary reason for the decrease in the cost of services for the six months ended
June 30, 2010 compared with the same period in 2009 is due to the decrease in
billable hours for the ENEC and FANR projects. These expenses related to the
consulting, professional, administrative and other costs allocated to our
technology and consulting projects, which were incurred to perform and support
the work done for our consulting projects with ENEC and FANR. The billing rates
to us from our consultants who provide services under our consulting contracts
have primarily remained unchanged in 2010 and 2009.





Gross
Profit





Gross
profit margin of 37% for the six months ended June 30, 2010 is lower compared to
the same period in 2009. Our gross margins from our advisory contracts with ENEC
and FANR decreased due to the reduction that occurred in the third quarter of
2009 in some of our hourly consultants billing rates to ENEC and
FANR.





General and Administrative
Expenses





There was
a 7% increase in the general and administrative expenses for the six months
ended June 30, 2010, as compared to the same period in 2009. This increase was
primarily due to an increase in (1) employee wages and payroll related benefits
of approximately $241,000, (2) costs for travel expenses of approximately
$104,000, (3) insurance costs of approximately $24,000 and (4) a net decrease of
$58,000 for consulting/professional fees, stock based compensation
and  other general overhead costs. In the future, stock-based
compensation may be offered to attract new employees in 2010, due to our
expansion to meet the demands of contracts with our current customers, and
anticipated future business with new customers. We expect our general and
administrative expenses may increase in future periods due to the expansion of
our technology and consulting and strategic advisory services business segment
and the hiring of new officers, employees and consultants to help further
develop and support our technology  and consulting and strategic
advisory services business segments.





Research and Development
Costs





The
decrease in research and development costs for the six months ended June 30,
2010 compared to the same period in 2009 is due to a temporary decrease in this
quarter in our research and development activities performed by outside
contractors for us in Russia. We expect that our research and development
expenses will increase in the future periods.   Over the next 12
to 15 months we expect to incur approximately up to $8 – $9 million in
research and development expenses related to the development of our proprietary
nuclear fuel designs.





Other Income and
Expense





The
decrease in other income and expense for the six months ended June 30, 2010
compared to the same period in 2009 is due to the decrease in interest income
earned on our idle cash.




27





Liquidity
and Capital Resources





As of
June 30, 2010, we had a total of cash and cash equivalents of $3.1 million. The
following table provides detailed information about our net cash flow for all
financial statements periods presented in this report.




Cash
      FlowSix
      Months EndedJune
      30,2010
            
            
            2009Net
      cash provided by (used in) operating activities
            
            $
            (317,343)
            
            
            $
            (639,148)Net
      cash used in investing activities
            
            $
            (22,871)
            
            
            $
            (30,379)Net
      cash provided by (used in) financing activities
            
            $
            388,874
            
            
            $
            0Net
      cash inflow (outflow)
            
            $
            48,660
            
            
            $
            (669,527)




Operating
Activities




Net cash
used in our operating activities decreased by approximately $322,000 for the six
months ended June 30, 2010 as compared to the same period in
2009.  This decrease in funds used by our operating activities was
primarily due to decrease in cash used to pay accounts payable and accrued
expenses, as compared to the same period in 2009. This decrease was offset by an
increase in our operating loss, which was due to a decrease in our revenue,
decrease in gross margins and increase in general and administrative expenses
for the six months ended June 30, 2010. The other changes to the operating
activities cash flows are mentioned above in the Consolidated Results of
Operations section of this management discussion and analysis, regarding our
operating expenses.




Investing
Activities




Net cash
used in our investing activities for the six months ended June 30, 2010 as
compared to the same period in 2009, decreased by approximately $7,000, which
was due to the decrease in purchases of property and equipment. This decrease
was offset by an increase in patent costs in 2010 for the filing of patent
applications. These patent applications are filed for the new developments
resulting from our research and development activities in our fuel technology
business segment. We anticipate these patent costs to increase in the future
periods due to the work we plan to perform on our all-metal fuel
design.




Financing
Activities




There was
increase in net cash provided by our financing activities for the six months
ended June 30, 2010 as compared to the same period in 2009 of $388,874. This
increase is due to the decrease in restricted cash held as
collateral.




Management
expects that the proceeds from our technology and consulting agreements in 2010,
as well as the expected proceeds that we will earn under the two consulting
agreements entered into in August 2008 and the follow-on agreements with ENEC
and FANR, and the AREVA agreement, will meet our foreseeable working capital
needs for our current operations until sometime in 2011. However, we will need
to raise additional capital in the near term by way of an offering of
equity securities, an offering of debt securities, or by obtaining financing
through a bank or other entity to support our longer term business plan. We will
also need to raise capital in the near term to support our overhead operation if
the consulting and strategic advisory services business becomes non-sustaining.
If we need to obtain additional financing, that financing may not be available
or we may not be able to obtain that financing on terms acceptable to us. If
additional funds are raised through the issuance of equity securities, there may
be a significant dilution in the value of our outstanding common
stock.




28





Off
Balance Sheet Arrangements




We do not
have any off balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity or capital
expenditures or capital resources that is material to an investor in our
securities.




Seasonality




Our
business has not been subject to any material seasonal variations in operations,
although this may change in the future.





Inflation





Our
business, revenues and operating results have not been affected in any material
way by inflation.





Critical
Accounting Policies and Estimates




The SEC
issued Financial Reporting Release No. 60, “Cautionary Advice Regarding
Disclosure About Critical Accounting Policies” suggesting that companies provide
additional disclosure and commentary on their most critical accounting policies.
In Financial Reporting Release No. 60, the SEC has defined the most critical
accounting policies as the ones that are most important to the portrayal of a
company’s financial condition and operating results, and require management to
make its most difficult and subjective judgments, often as a result of the need
to make estimates of matters that are inherently uncertain. Based on this
definition, we have identified the following significant policies as critical to
the understanding of our financial statements.




The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make a variety of estimates and
assumptions that affect (i) the reported amounts of assets and liabilities and
disclosure of contingent liabilities as of the date of the financial statements
and (ii) the reported amounts of revenues and expenses during the reporting
periods covered by the financial statements.




Our
management expects to make judgments and estimates about the effect of matters
that are inherently uncertain. As the number of variables and assumptions
affecting the future resolution of the uncertainties increase, these judgments
become even more subjective and complex. Although we believe that our estimates
and assumptions are reasonable, actual results may differ significantly from
these estimates. Changes in estimates and assumptions based upon actual results
may have a material impact on our results of operation and/or financial
condition. We have identified certain accounting policies that we believe are
most important to the portrayal of our current financial condition and results
of operations. Our significant accounting policies are disclosed in Note 2 to
the Consolidated Financial Statements included in the Annual Report on Form 10-K
filed with the Commission on March 16, 2010





Accounting for Stock Based
Compensation, Stock Options and Warrants Granted to Employees and
Non-employees




We
adopted the FASB requirements for stock-based compensation, where all forms of
share-based payments to employees, including employee stock options and employee
stock purchase plans, are treated the same as any other form of compensation by
recognizing the related cost in the statement of income.





Under
these requirements, stock-based compensation expense is measured at the grant
date based on the fair value of the award, and the expense is recognized ratably
over the award’s vesting period. For all grants made, we recognize compensation
cost under the straight-line method.




29




We
measure the fair value of stock options on the date of grant using a
Black-Scholes option-pricing model which requires the use of several estimates,
including:




•
            the
      volatility of our stock price;•
            the
      expected life of the option;


•
            risk
      free interest rates; and•
            expected
      dividend yield.




Prior to
the completion of our merger in October 2006, we had limited historical
information on the price of our stock as well as employees' stock option
exercise behavior for stock options issued prior to the merger. As a result, we
could not rely on historical experience alone to develop assumptions for stock
price volatility and the expected life of options. As such, our stock price
volatility was estimated with reference to our historical stock price for the
time period before the merger, from the date the announcement of the merger was
made. We utilized the closing prices of our publicly-traded stock from the
announcement date in January 2006 to determine our volatility and will continue
to use our historical stock price closing prices to determine our
volatility.




The
expected life of options is based on internal studies of historical experience
and projected exercise behavior. We estimate expected forfeitures of stock-based
awards at the grant date and recognize compensation cost only for those awards
expected to vest. The forfeiture assumption is ultimately adjusted to the actual
forfeiture rate. Estimated forfeitures are reassessed in subsequent periods and
may change based on new facts and circumstances. We utilize a risk-free interest
rate, which is based on the yield of U.S. treasury securities with a maturity
equal to the expected life of the options. We have not and do not expect to pay
dividends on our common shares in the near term.





The
options were valued using the Black-Scholes option pricing model. The
assumptions used were as follows: volatility of 98%, a risk-free interest rate
of 2.56% to 3.73%, dividend yield of 0% and an exercise term of two to ten
years.





Income
Taxes





We
account for income taxes using the liability method in accordance with ASC 740,
Accounting for Income Taxes, which requires the recognition of deferred tax
assets or liabilities for the tax-effected temporary differences between the
financial reporting and tax bases of our assets and liabilities and for net
operating loss and tax credit carry forwards. The tax expense or benefit for
unusual items, prior year tax exposure items or certain adjustments to valuation
allowances are treated as discrete items in the interim period in which the
events occur.





On
January 1, 2007, we adopted ASC 740 for Accounting for Uncertainty in Income
Taxes. ASC 740 addresses the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in the financial
statements. Under ASC 740, we may recognize the tax benefit from an uncertain
tax position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical
merits of the position. As a result of the implementation ASC 740, we did not
recognize any current tax liability for unrecognized tax benefits. We have a net
operating loss carry-forward of approximately $18.2 million against which we
have taken a 100% valuation allowance, as of the date of these financial
statements.





Contingent
Liabilities





Liabilities
for accrued expenses and loss contingencies arising from various claims,
assessments, litigation, fines and penalties and other sources are recorded when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. When facts and circumstances show that in
a particular reporting period it is no longer probable that a contingent
liability previously reported will not be paid, those accrued liabilities are
adjusted in that period or are no longer recorded on the balance
sheet.




30




Revenue Recognition from
Consulting Contracts





We
believe one of our critical accounting policies is revenue recognition from our
consulting contracts. We are currently primarily deriving our revenue from fees
by offering consulting and strategic advisory services to foreign commercial and
government owned entities planning to create or expand electricity generation
capabilities, using nuclear power plants. Our fee type and structure for each
client engagement depend on a number of variables, including the size of the
client, the complexity, the level of the opportunity for us to improve the
client’s electricity generation capabilities using nuclear power plants, and
other factors.





We
recognize revenue from the current two consulting agreements that we entered
into with the EAA in August 2008 and the follow-on agreements in 2009, as time
and expense contracts.




We
recognize revenue associated with fixed-fee service contracts in accordance with
the provisions of the contract which include client acceptance provisions.
We do not recognize revenue until such time as the client has confirmed its
acceptance. When a loss is anticipated on a contract, the full amount of the
anticipated loss is recognized immediately. We are recognizing the revenue
associated with the AREVA agreements as our client accepts specified
deliverables under the contract.




We
recognize revenue in accordance with SEC Staff Accounting Bulletin or SAB,
No. 104, Revenue Recognition. We recognize revenue when all of the
following conditions are met:





1.
            There
      is persuasive evidence of an
arrangement;





2.
            The
      service has been provided to the
customer;




3.
            The
      collection of the fees is reasonably assured;
  and




4.
            The
      amount of fees to be paid by the customer is fixed or
      determinable.




Intangibles




As
presented on the accompanying balance sheets, we had patents with a net book
value of approximately $265,000 and $242,000 as of June 30, 2010 and December
31, 2009, respectively. There are many assumptions and estimates that may
directly impact the results of impairment testing, including an estimate of
future expected revenues, earnings and cash flows, and discount rates applied to
such expected cash flows in order to estimate fair value. We have the ability to
influence the outcome and ultimate results based on the assumptions and
estimates we choose for testing. To mitigate undue influence, we set criteria
that are reviewed and approved by various levels of
management. The determination of whether or not intangible assets have become
impaired involves a significant level of judgment in the assumptions. Changes in
our strategy or market conditions could significantly impact these judgments and
require adjustments to recorded amounts of intangible assets. We will amortize
our patents when they are placed in service. Our patents were not placed into
service as of June 30, 2010 and December 31, 2009.





Recent Accounting
Pronouncements





See
Item 1 of Part I, “Financial Statements — Note 1 — Accounting Policies —
Recent Accounting Pronouncements.”





ITEM 4T. CONTROLS AND
PROCEDURES.





Disclosure
Controls and Procedures





As
required by Rule 13a-15 under the Exchange Act, we carried out an evaluation of
the effectiveness of the design and operation of our disclosure controls and
procedures, as of the end of the period covered by this report on Form 10-Q.
This evaluation was carried out under the supervision and with the participation
of our management, including our President and Chief Executive Officer, and our
Chief Financial Officer. Based upon that evaluation, management concluded that
our disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports that it files or submits under the
Exchange Act is accumulated and communicated to management (including the Chief
Executive Officer and Chief Financial Officer) to allow timely decisions
regarding required disclosure and that our disclosure controls and procedures
are effective to give reasonable assurance that the information required to be
disclosed by us in reports that we file under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the SEC.




31





There
were no changes in our internal control over financial reporting identified in
connection with the evaluation performed that occurred during the period covered
by this report that have materially affected or are reasonably likely to
materially affect, our internal control over financial reporting.





Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including the Company’s Chief Executive and acting Chief Financial
Officer as appropriate, to allow timely decisions regarding required
disclosure.





Internal
Controls Over Financial Reporting





Section
404 of the Sarbanes-Oxley Act of 2002 requires that management document and test
the Company’s internal control over financial reporting and include in this
Quarterly Report on Form 10-Q a report on management’s assessment of the
effectiveness of our internal control over financial reporting.





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f) of
the Exchange Act. Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
we conducted an evaluation of the effectiveness of our internal control over
financial reporting based upon the framework in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”). Based on that evaluation, our management concluded that our
internal control over financial reporting is effective, as of June 30, 2010, and
was effective during the entire quarter ended June 30, 2010.





PART
II


OTHER
INFORMATION





ITEM
1.     LEGAL PROCEEDINGS





From time
to time, we may become involved in various lawsuits and legal proceedings which
arise in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. We are currently not aware
of any such legal proceedings or claims that we believe will have a material
adverse affect on our business, financial condition or operating
results.




ITEM
1A.     RISK FACTORS





In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, "Item 1A. Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2009,
as well as the risk factors discussed below, which could materially affect our
business, financial condition or future results. The risks described below, as
well as those described in our Annual Report on Form 10-K are not the only
risks facing our Company. Additional risks and uncertainties not currently known
to us or that we currently deem to be immaterial also may materially adversely
affect our business, financial condition or future results.





32





Our fuel designs have never
been tested in an existing commercial reactor and actual fuel performance, as
well as the willingness of commercial reactor operators and fuel fabricators to
adopt a new design, is uncertain.
 
 Nuclear power research and
development entails significant technological risk. New designs must be
fabricated, tested and licensed before market opportunities will exist. Our fuel
designs are still in the research and development stage and while certain
testing on our thorium-based seed-and-blanket fuel technology has been completed
in test facilities inRussia, the fuel technology is yet
to be demonstrated in an existing commercial reactor. We will not be certain
about the ability of the fuel we design to perform in actual commercial reactors
until we are able to demonstrate our fuel designs. We will also have to
establish a relationship with a fuel fabricator to actually produce fuel using
our designs. If our fuel designs do not perform as anticipated in commercial
use, we will not realize revenues from licensing or other use of our fuel
designs.  In addition, there are several technical challenges involved
in commercializing our fuelsthat must be overcome before
our fuels can be marketed..
 
 Our fuel designs differ from
fuels currently licensed and used by commercial nuclear power plants. As a
result, the regulatory licensing and approval process for our fuels may be
delayed and made more costly, and industry acceptance of our fuels may be
hampered.
 
 Our fuel designs differ
significantly in some aspects from the fuel licensed and used today by
commercial nuclear power plants.  These differences will likely result
in more prolonged and extensive review by the U.S. Nuclear Regulatory Commission
and other nuclear regulatory licensing authorities that might decide that the
planned testing is insufficient and require additional testing. Also, the
nuclear industry may be hesitant to switch to another fuel with little or no
history of successful commercial use because of the need for additional
engineering and testing with no guarantee of success, as well as investor
reluctance to invest in a new technology when viable existing technologies are
available. Furthermore, our research and development
program schedule for the all-metal fuel technology is based on the assumption
that an existing Russian metal fuel performance database would be transferable
to our fuel design and acceptable for regulatory licensing purposes outside of
Russia and that we will be able to secure unrestricted access to such database
and use it for regulatory licensing purposes worldwide.Russiahas over two decades of
successful operating experience with metal fuels similar to our metallic
fuel.  In addition,Russiaconducted extensive test
reactor irradiations of metal fuels that provide additional fuel performance
data, including fuel performance under accident conditions.  There is
a risk that if this fuel performance database is found by the regulatory
authority not to be transferable to our metal fuel designor
insufficient.  There is also a risk thatwewould beunable to secure
unrestricted rights to use the data.  If any of these
risks materialize,itwould cause significant
delays to our research and development program schedule and require
substantially more time and funding to conduct extensive testing that may be
required to generate sufficient fuel performance data for regulatory licensing
purposes.


Our plans to
develop our fuel designs depend on us acquiring rights to the designs, data,
processes and methodologies that are used or may be used in our business in the
future. If we are unable to obtain such rights on reasonable terms in the
future, our ability to exploit our intellectual property may be
limited.





Dr. Alvin
Radkowsky invented the thorium fuel technology that we are developing. Upon
founding Thorium Power in 1992, Dr. Radkowsky assigned all of his rights in the
intellectual property relating to such fuel designs to Thorium Power, Inc.
Thorium Power, Inc. then filed patent applications in the United States and
other countries and the patents were issued and are held solely by our Company.
We are currently conducting fuel assembly design work in Russia through our
Moscow office personnel as well as the Russian Research Centre Kurchatov
Institute, OKBM, MSZ Electrostal and others that are independent contractors
that are owned or are closely affiliated with the government of the Russian
Federation. We do not currently have all of the necessary licensing or other
rights to acquire or utilize certain designs, data, methodologies or processes
required for the fabrication of fuel assemblies. If we desire to utilize such
processes or methodologies in the future, we must obtain a license or other
right to use such technologies from the Russian entities that previously
developed and own such technologies. If we are unable to obtain such a license
or other right on terms that the Russian entities deem to be reasonable, then we
may not be able to fully exploit our intellectual property and may be hindered
in the sale of products and services.





The price of
fossil fuels or uranium may fall, which would reduce the interest in thorium
fuel by reducing the economic advantages of utilizing thorium-based fuels and
adversely affect the market prospects for our fuel
designs.





Coal, uranium
and crude oil prices have been quite volatile over the past several years.
Management believes the increasing cost of these energy sources is helping to
attract interest in other sources of energy such as thorium. If prices of
traditional energy sources fall, then the demand that the company expects for
thorium based fuels may not materialize. A decrease in demand for thorium-based
fuels would negatively affect our future operating results.
  33





Applicable
Russian intellectual property law may be inadequate to protect our intellectual
property and if third parties successfully assert claims against our
intellectual property, our business could be materially adversely
affected.





Intellectual
property rights are evolving in Russia, trending towards international norms,
but are by no means fully developed. We work closely with our Russian branch
office employees and other Russian contractors and entities to develop much of
our material intellectual property.  Our rights in this intellectual
property, therefore, derive, or are affected by, Russian intellectual property
laws. If the application of these laws to our intellectual property rights
proves inadequate, then we may not be able to fully avail ourselves of our
intellectual property and our business model may fail or be significantly
impeded.





If
the Department of Energy, or DOE, were to successfully assert that an invention
claimed within our 2007 or 2008 Patent Cooperation Treaty, or PCT, patent
applications was first conceived or actually reduced to practice under a
contract with the DOE, then our intellectual property rights in that invention
would become compromised and our business model could fail or become
significantly impeded.





Work on
finite aspects and/or testing of some subject matter disclosed in our 2007 and
2008 Russian PCT patent applications was done under a government contract with
the DOE.  If the DOE asserted that an invention claimed in the 2007
and/or 2008 Russian PCT applications was first conceived or actually reduced to
practice under such a contract, and a U.S. court agreed, the DOE might gain an
ownership interest in such an invention outside of the Russian Federation and
our intellectual property rights in that claimed invention would become
compromised and our business model may then fail or be significantly
impeded.





If we are unable
to obtain or maintain intellectual property rights relating to our technology,
the commercial value of our technology may be adversely affected, which could in
turn adversely affect our business, financial condition and results of
operations.




Our
success and ability to compete depends in part upon our ability to obtain
protection in the United States and other countries for our nuclear fuel
designs by establishing and maintaining intellectual property rights relating to
or incorporated into our fuel technologies and products. We own a variety
of patents and patent applications in the United States, as well as
corresponding patents and patent applications in several foreign jurisdictions.
However, we have not obtained patent protection in each market in which we plan
to compete. In addition, we do not know how successful we would be should we
choose to assert our patents against suspected infringers. Our pending and
future patent applications may not issue as patents or, if issued, may not issue
in a form that will be advantageous to us. Even if issued, patents may be
challenged, narrowed, invalidated or circumvented, which could limit our ability
to stop competitors from marketing similar products or limit the length of term
of patent protection we may have for our products. Changes in either patent laws
or in interpretations of patent laws in the United States and other countries
may diminish the value of our intellectual property or narrow the scope of our
patent protection, which could in turn adversely affect our business, financial
condition and results of operations.




If we infringe or
are alleged to infringe intellectual property rights of third parties, our
business, financial condition and results of operations could be adversely
affected.




Our
nuclear fuel designs may infringe, or be claimed to infringe, patents or
patent applications under which we do not hold licenses or other rights. Third
parties may own or control these patents and patent applications in the United
States and abroad. Third parties could bring claims against us that would cause
us to incur substantial expenses and, if successfully asserted against us, could
cause us to pay substantial damages. Further, if a patent infringement suit were
brought against us, we could be forced to stop or delay commercialization
of the fuel design or a component thereof that is the subject of the
suit. As a result of patent infringement claims, or in order to avoid potential
claims, we may choose or be required to seek a license from the third party and
be required to pay license fees, royalties or both. These licenses may not be
available on acceptable terms, or at all. Even if we were able to obtain a
license, the rights may be nonexclusive, which could result in our competitors
gaining access to the same intellectual property. Ultimately, we could be forced
to cease some aspect of our business operations if, as a result of actual or
threatened patent infringement claims, we are unable to enter into licenses on
acceptable terms. This could significantly and adversely affect our business,
financial condition and results of operations. In addition to infringement
claims against us, we may become a party to other types of patent litigation and
other proceedings, including interference proceedings declared by the United
States Patent and Trademark Office regarding intellectual property rights with
respect to our nuclear fuel designs. The cost to us of any patent
litigation or other proceeding, even if resolved in our favor, could be
substantial. Some of our competitors may be able to sustain the costs of such
litigation or proceedings more effectively than we can because of their greater
financial resources. Uncertainties resulting from the initiation and
continuation of patent litigation or other proceedings could have a material
adverse effect on our ability to compete in the marketplace. Patent litigation
and other proceedings may also absorb significant management time.




34





ITEM
2.     UNREGISTERED SALES OF EQUITY SECURITIES OR USE
OF PROCEEDS





There
were no unregistered sales of equity securities during the fiscal quarter ended
June 30, 2010.





ITEM
3.     DEFAULTS UPON SENIOR SECURITIES





There
were no defaults upon senior securities during the fiscal quarter ended June 30,
2010.





ITEM
4.     (REMOVED AND RESERVED)





ITEM
5.     OTHER INFORMATION





Not
applicable.





ITEM
6.     EXHIBITS





The
following exhibits are filed with this report, except those indicated as having
previously been filed with the SEC and are incorporated by reference to another
report, registration statement or form. As to any shareholder of record
requesting a copy of this report, we will furnish any exhibit indicated in the
list below as filed with this report upon payment to us of our expenses in
furnishing the information.





Exhibit
              Number
            
            Description31.1
            
            Rule
      13a-14(a)/15d-14(a) Certification - Principal Executive
      Officer31.2
            
            Rule
      13a-14(a)/15d-14(a) Certification - Principal Accounting
      Officer32
            
            Section
      1350 Certifications




35




SIGNATURES





In
accordance with section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant caused this Report on Form 10-Q to be signed on its behalf by the
undersigned, thereto duly authorized individuals.





Date:
July 22, 2010





LIGHTBRIDGE
CORPORATION





By:
            /s/
      Seth GraeSeth
      GraeChief
      Executive Officer,President
      and Director(Principal
      Financial Officer)By:
            /s/
      James GuerraJames
      GuerraChief
      Operating Officer andChief
      Financial Officer(Principal
      Financial Officer andPrincipal
      Accounting Officer)




36




EXHIBIT
INDEX





Exhibit
              Number
            
            Description31.1
            
            Rule
      13a-14(a)/15d-14(a) Certification - Principal Executive
      Officer31.2
            
            Rule
      13a-14(a)/15d-14(a) Certification - Principal Accounting
      Officer32
            
            Section
      1350 Certifications





37