Lightbridge Corporation
Annual Report 2010

UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549 

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended: December 31, 2010

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) 
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from ___ to ___

Commission File Number: 000-28543

LIGHTBRIDGE CORPORATION 
(Exact Name of Registrant As Specified in Its Charter) 

Nevada
(State or Other Jurisdiction of
Incorporation or Organization)

91-1975651
(I.R.S. Employer
Identification Number)

1600 Tysons Boulevard, Suite 550 
McLean, Virginia 22102 
(Address of Principal Executive Office and Zip Code) 

(571) 730-1200 
(Registrant’s Telephone Number, Including Area Code) 

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes [  ]  No [X]

Yes [  ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]  No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

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

Large accelerated filer [  ]

Accelerated filer [X]

Non-accelerated filer [  ]

Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [  ]  No [X]

As of June 30, 2010, the aggregate market value of the shares of the Registrant’s common stock held by non-affiliates (based upon the closing price of such shares as reported
on the NASDAQ Stock Market on such date) was approximately $78.4 million. Shares of the Registrant’s common stock held by each executive officer and director have been
excluded  in  that  such  persons  may  be  deemed  to  be  affiliates  of  the  Registrant.  This  determination  of  affiliate  status  is  not  necessarily  a  conclusive  determination  for  other
purposes As of February 18, 2011 there were 12,346,645 shares of the Registrant’s common stock outstanding.

Portions of the Registrant’s Definitive Proxy Statement for its 2011 Annual Meeting of Shareholders to be filed with the Commission within 120 days after the close of the
Registrant’s fiscal year are incorporated by reference into Part III of this Annual Report on Form 10-K.

DOCUMENTS INCORPORATED BY REFERENCE:

 
LIGHTBRIDGE CORPORATION

FORM 10-K 
For the Fiscal Year Ended December 31, 2010 

TABLE OF CONTENTS

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

Item 5
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.

Item 10.
Item 11.
Item 12.
Item 13.
Item 14.

Item 15.

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders

PART I

PART II

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions
Principal Accountant Fees and Services

PART III

Exhibits, Financial Statement Schedules

PART IV

(i)

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FORWARD-LOOKING STATEMENTS

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act.  We  use  words  such  as  “believe”,  “expect”,  “anticipate”,  “project”,  “target”,  “plan”,  “optimistic”,  “intend”,  “aim”,  “will”  or  similar  expressions  which  are  intended  to
identify forward-looking statements. Such statements include, among others, (1) those concerning market and business segment growth, demand and acceptance of our Nuclear
Energy Consulting Services and Nuclear Fuel Technology Business, (2) any projections of sales, earnings, revenue, margins or other financial items, (3) any statements of the
plans,  strategies  and  objectives  of  management  for  future  operations,  (4)  any  statements  regarding  future  economic  conditions  or  performance,  (5)  uncertainties  related  to
conducting business in foreign countries, as well as (6) all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such
forward-looking statements are not guarantees of future performance and involve risks and uncertainties, as well as assumptions that if they were to ever materialize or prove
incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties, among
others, include:

our ability to attract new customers,

our ability to employ and retain qualified employees and consultants that have experience in the Nuclear Industry,

competition and competitive factors in the markets in which we compete,

general economic and business conditions in the local economies in which we regularly conduct business, which can affect demand for the Company’s services,

changes in laws, rules and regulations governing our business,

development and utilization of our intellectual property,

potential and contingent liabilities, and

the risks identified in Item 1A. “Risk Factors” included herein.

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  and  its  wholly-owned  subsidiaries  Thorium  Power,  Inc.  (a  Delaware  corporation)  and  Lightbridge  International  Holding,  LLC  (a  Delaware  limited
liability company).

(ii)

 
Item 1. Description of Business.

General Overview of Our Business Segments

PART I

We are a leading nuclear fuel technology company, and participate in the nuclear power industry in the U.S. and internationally. Our business operations can be categorized into
two segments: (1) we are a developer of next generation nuclear fuel technology that has the potential to significantly up-rate the power output of reactors, reducing the per-
megawatt-hour cost of generating nuclear energy and reducing nuclear waste and proliferation, and (2) we are a provider of nuclear power consulting and strategic advisory
services to commercial and governmental entities worldwide.

Our Nuclear Fuel Technology Business Segment

The Nature of Our Proprietary Technology Development Activities

We are developing innovative, proprietary nuclear fuel designs which we expect will significantly enhance the nuclear power industry’s economics and increase power output
by: (1) Extending the fuel cycle length to 24 months or longer while simultaneously increasing the power output by up to 17% in existing pressurized water reactors (including
Westinghouse 4-loop reactors, which are currently limited to an 18-month fuel cycle); (2) Enabling increased reactor power output (up to 30% increase) without changing the
core size in new-build PWRs; and (3) Addressing concerns relating to the back-end of the fuel cycle including the volume of used fuel per kilowatt-hour as well as proliferation
of weapons-usable materials. Significant technological synergies exist among our primary fuel products due to utilization of the proprietary metallic fuel rod technology that is
at the core of each of these products. As a result, once completed, full-scale demonstration and qualification of the metallic fuel rod technology will simultaneously advance all
of our product families currently under development. We currently anticipate that we will be able to complete demonstration of full-scale metallic fuel rod fabrication process
by the end of 2012 and begin lead test assembly (LTA) operation in a full-size commercial light water reactor, which involves testing a limited number of our full-scale fuel
assemblies in the core over three 18-month cycles, by the end of 2016. Accordingly, based on our current estimated schedule, final qualification of our fuel for 10-17% power
uprates in a commercial reactor is expected in 2021 (at the end of three 18-month cycles of LTA operation).

The fuel in a nuclear reactor generates heat energy. That heat is then converted into electricity that is sold. Burnup is the total amount of electricity generated per unit mass of
nuclear  fuel.  Burnup  is  largely  a  function  of  the  power  density  of  a  nuclear  fuel.  Power  density  is  the  amount  of  heat  power  generated  per  unit  volume  of  nuclear  fuel.
Conventional oxide fuel used in existing commercial reactors is approaching the limits of its burnup and power density capability. As a result, further optimization to increase
power  output  from  the  same  core  size  and  improve  the  economics  of  nuclear  power  generation  using  conventional  oxide  fuel  technologies  may  be  limited. As  the  industry
prepares to meet the increasing global demand for electricity production, longer operating cycles and higher reactor power outputs will become a much sought-after solution for
the current and future reactor fleet.

In response to the challenges associated with conventional oxide fuels, we are developing an innovative, proprietary metallic fuel technology, that is capable of significantly
higher burnup and power density compared to conventional oxide fuels, which we believe will allow current and new-build nuclear reactors to safely increase power production
and reduce the initial capital investment as well as operations and maintenance costs on a per kilowatt-hour basis. As a result, in addition to the projected electricity production
cost savings, we believe that our technology can result in utilities or countries needing to deploy fewer new reactors to generate the same amount of electricity. For utilities or
countries that already  have  operating  reactors,  our  technology  could  be  utilized  to  increase  the  power  output  of  those  reactors  instead  of  building  new  reactors.  Further,  we
believe that the fuel fabrication, or manufacturing process for this new fuel design is simpler, which we expect could lower fuel fabrication costs.

Various industry efforts currently underway to meet the growing demand for more electric power output from the same reactor core size, and to create a more efficient fuel
cycle, with improved safety, reliability and extended fuel cycle length, are largely focused on stretching the limits of conventional oxide fuels. While this strategy has worked
well in the past, now almost all of the available fuel performance margins with conventional oxide fuels have been utilized. However, due to the risk-averse nature of the major
industry players and a significant capital investment made in existing infrastructure supporting conventional oxide fuels, major fuel vendors are reluctant to take on early risks
associated with fuel development programs on next generation nuclear fuel designs. As a result, as discussed in the section below titled "Competition in the Nuclear Fuel Design
and Fabrication Area," we believe that we are well positioned to take advantage of this market opportunity by developing next generation fuel designs that can meet the needs
of the power generator.

1

 
Nuclear Fuel Development

Since  the  founding  of  our  company  in  1992,  we  have  been  engaged  in  the  design  and  development  of  proprietary  innovative  nuclear  fuels.  This  effort  has  led  us  to  the
development of a metallic fuel rod design that is at the heart of each of our nuclear fuel products.

We are currently focusing our development efforts on three primary fuel product lines: (1) all-uranium seed and blanket fuel for existing plants, (2) all-metal fuel (i.e., non-oxide
fuel)  for  new  build  reactors,  and  (3)  thorium-based  seed  and  blanket  fuel  for  both  existing  and  new  build  reactors.  Each  of  the  fuel  designs  utilizes  our  metallic  fuel  rod
technology. In addition, each of the fuel designs also advances our mission to improve the safety, proliferation resistance, performance, and cost competitiveness of nuclear
power generation.

Development of Three Nuclear Fuel Product Lines

The first nuclear fuel product line includes an all-uranium seed and blanket fuel that is particularly suitable for existing PWRs, though can also be utilized in new build PWRs.
We are developing two variants of this fuel technology for PWR reactors: (1) an all-uranium seed-and-blanket fuel for power uprate up to 10% and a 24-month fuel cycle, and
(2) an all-uranium seed-and-blanket fuel for a power uprate up to 17% and a 24-month fuel cycle. A power uprate, coupled with a 24-month fuel cycle, can be a particularly
attractive option for existing Westinghouse-type 4-loop PWRs that are currently limited to an 18-month fuel cycle due to fuel performance constraints attributed to conventional
uranium oxide fuels. To accommodate up to a 17% power uprate, a number of reactor design modifications would be required, including upgrades to the primary and secondary
systems. For uprates up to 10%, only relatively minor reactor system modifications would be required.

The second nuclear fuel product line includes our all-metal fuel, which we expect will be able to provide up to a 30% increase in power output of new build PWRs, such as
Westinghouse (U.S.)-designed AP-1000, AREVA (French)-designed EPR, Mitsubishi (Japanese)-designed APWR, KEPCO (Korean)-designed APR-1400 and others. Also, we
believe  that  this  fuel  technology  can  be  used  to  extend  the  fuel  cycle  length  up  to  24  months  in  addition  to  the  30%  uprate.  To  accommodate  up  to  a  30%  power  uprate,  a
number  of  reactor  design  modifications  would  be  required,  including  upgrades  to  the  primary  and  secondary  systems,  as  well  as  potential  modifications  to  the  reactor
containment structure.

The  third  nuclear  fuel  product  line  includes  our  thorium-based  seed-and-blanket  fuel,  which  we  believe  has  several  major  benefits,  including:  (1)  enhanced  proliferation
resistance, (2) significantly reduced volume (up to 40% reduction) and weight (up to 90% reduction) of spent fuel, and (3) reduced natural uranium requirements (up to 10%
reduction) in a once-through fuel cycle. These benefits can be particularly appealing to those markets that either have significant domestic thorium reserves but lack natural
uranium resources or are concerned with the cost of long-term storage as a used fuel management option. Further, the economics of our thorium-based fuel can become more
attractive  as  the  price  of  natural  uranium  increases  due  to  the  projected  reduction  in  natural  uranium  requirements  per  megawatt-day.  Finally,  the  enhanced  proliferation
resistance aspects of the fuel can appeal to markets that put key emphasis on non-proliferation.

The development of our power uprate product lines provides diversity to our fuel offerings and synergistically advances the development of our thorium-based fuel product line.

Competition in the Nuclear Fuel Design and Fabrication Area

There are several major companies that collectively fabricate a large majority of the fuel used in the world’s commercial nuclear power plants, including both Western-type
PWRs and BWRs, as well as Russian-type VVERs. To the extent that these companies currently own and may in the future develop new nuclear fuel designs that can be used in
the same types of reactors as those targeted by us, they can be viewed as potential competitors. However, our commercialization strategy is not to compete with these major fuel
fabricators, but rather to partner with one or more of these companies through a technology license arrangements. For this reason, we consider these companies as our potential
partners or licensees as opposed to our competitors.

2

 
We  are  pursuing  a  commercialization  strategy  aimed  at  generating  interest  in  our  nuclear  fuel  designs  from  one  or  more  major  nuclear  fuel  fabricators  that  could  lead  to  a
technology licensing or other teaming arrangement over the next three years to further conduct research and development activities. Our commercialization efforts are based on
a multi-prong approach that we believe will increase the probability of success:

1.

2.

3.

Approach major fuel fabricators (push marketing strategy)

Reach out early to nuclear power plants (pull marketing strategy)

Generate public, industry and government awareness in our fuel technologies

We are putting a significant amount of effort in reaching out to major fuel fabricators. Our ultimate commercial success depends on how soon and what kind of a commercial
arrangement we are able to negotiate with one or more of these potential partners. As a result, building relationships with these potential partners and keeping them up-to-date
on our fuel technology progress through ongoing dialogue are the essential elements of our commercialization strategy.

We recognize that a successful commercialization strategy is highly dependent upon the interest in our nuclear fuel designs from nuclear power plants which are the ultimate
fuel product user. If we are successful in generating sufficient interest from one or more nuclear power plants in evaluating our fuel technology for potential use, we believe it
would make it easier to find a major fuel fabricator that would be willing to partner with us in order to offer that fuel product to the nuclear power generator.

Finally,  it  is  also  important  to  generate  public,  industry  and  government  awareness  of  our  nuclear  fuel  technology  that  could  help  build  confidence  in  our  technology  and
increase  credibility  among  fuel  fabricators  and  nuclear  power  plants.  As  a  result,  we  are  pursuing  a  public  outreach  effort  by  seeking  publication  of  technical  papers
highlighting progress on our fuel designs in peer-reviewed technical journals and presentations at major international nuclear conferences.

Competition with respect to the design of commercially viable fuel products is limited to conventional uranium oxide fuels, which, as discussed above, are reaching the limits in
terms  of  their  capability  to  provide  increased  power  output  or  longer  fuel  cycles.  We  believe  that  the  industry  needs  fuel  products  that  can  provide  these  benefits.  To  our
knowledge, our nuclear fuel development project is the only commercially viable program that could achieve these goals. Due to the long-term product development timelines,
significant nuclear regulatory requirements, and our comprehensive patent portfolio, we believe that the barriers to entry prevent a viable competitor in the foreseeable future.

Future Licensing Revenue from Our Fuel Technology

We see our fuel technology development business as an intellectual property licensing business and we do not plan to become a fuel fabricator. Instead, we intend to license our
intellectual property rights in our nuclear fuel designs to existing major nuclear fuel fabricators that own and operate fuel fabrication facilities and have long-term fuel supply
contracts with nuclear power plants. We believe that this partnering strategy would also allow us to take advantage of the existing customer base of such major fuel fabricators,
thus enabling our fuel products to achieve high market penetration rates in a relatively short period of time. We are currently pursuing a research and development strategy
aimed at generating sufficient interest and confidence in our fuel technology among major fuel fabricators with a view of entering into a commercial arrangement with one or
more of them within the next 2-3 years.

We anticipate that the following factors will play a key role in structuring a technology license agreement with a major fuel supplier:

Sharing of future fuel development costs;

An upfront technology access fee payable to us;

Ongoing royalty fees from future fuel product sales payable to us based on the cost sharing formula; and

Potential training and consulting payments payable to us.

In addition to the fuel design license agreement, we believe that there may be a manufacturing technology license or manufacturing support fees that we may be able to receive
from the fuel fabricator.

3

 
 
 
 
 
 
 
 
 
 
Sources and Availability of Raw Materials

As previously stated, our fuel technology development business is a licensing business since we intend to license our fuel technology to fuel fabricators. Accordingly, we do not
plan to utilize any raw materials in the conduct of our operations. However, the fuel fabricators which will ultimately fabricate our fuel products will need zirconium, uranium
and/or thorium, and additional raw materials that are required for the production of nuclear fuel assemblies that go into the reactor core.

Uranium and zirconium are available to the fuel fabricators from various suppliers at market driven prices. The current demand for thorium is very low. Thorium is sometimes
used in government flares, camping lantern wicks and in other products in small quantities. If thorium-based fuels become commercially accepted in the nuclear power industry,
there would be a significant increase in the demand for thorium. According to the International Atomic Energy Agency, or IAEA, thorium is over three times more naturally
abundant than uranium and is found in large quantities in monazite sands in many countries, including, Australia, India, the United States of America, and China.

In certain countries, such as the U.S., nuclear fuel provision works as a tolling operation. Rather than ordering assembled nuclear fuel, reactor operators separately source (1)
uranium, (2) services to convert the uranium into uranium hexafluoride gas that is capable of being enriched, (3) uranium enrichment services, and then (4) pay a nuclear fuel
fabricating  company  to  fabricate  the  enriched  uranium  into  nuclear  fuel.  In  other  countries,  such  as  Russia,  reactor  operators  purchase  the  finished  nuclear  fuel  assemblies
directly from the fuel fabricator without separately procuring natural uranium material and conversion or enrichment services.

Our Nuclear Energy Consulting and Strategic Advisory Services Business Segment

The Nature of Our Consulting Services

We are primarily engaged in the business of assisting commercial and governmental entities  globally  with  developing  and  expanding  their  nuclear  industry  capabilities  and
infrastructure.  We  provide  integrated  strategic  advice  across  a  range  of  expertise  areas  including,  for  example,  regulatory  development,  nuclear  reactor  site  selection,
procurement and deployment, reactor and fuel technology, international relations and regulatory affairs.

Due to the relatively limited growth in the nuclear energy industry during the 1980’s and 1990’s, and corresponding limited recruitment into the industry, the cadre of engineers,
managers and other nuclear energy industry experts is aging. In any nuclear renaissance, we believe that the industry will be challenged in acquiring and retaining sufficient
qualified  expertise.  Moreover,  in  countries  studying  new  nuclear  energy  programs,  the  number  of  qualified  nuclear  energy  personnel  is  limited,  and  we  believe  that  those
countries will need to rely on significant support from non-domestic service providers and experts to ensure success in those programs.

Our emergence in the field of nuclear energy consulting is in direct response to the need for independent assessments and highly qualified technical consulting services from
countries  looking  to  establish  nuclear  energy  programs,  by  providing  a  blueprint  for  safe,  secure,  efficient  and  cost-effective  nuclear  power.  We  offer  full-scope  strategic
planning  and  advisory  services  for  new  and  growing  existing  markets.  Furthermore,  we  only  engage  with  commercial  entities  and  governments  that  are  dedicated  to  non-
proliferative and transparent nuclear programs.

Our consulting services are expert and relationship based, with particular emphasis on key decision makers in senior positions within governments or companies, as well as
focus on overall management of nuclear energy programs. To date, substantially all of our revenues are derived from our consulting and strategic advisory services business
segment, which primarily provides nuclear consulting services to entities within the United Arab Emirates, our first significant consulting and strategic advisory client. In April
2010 and December 2010 we began to provide consulting services in additional countries, including the member states of the Gulf Cooperation Council. We have also provided
nuclear safety consulting advice to U.S. nuclear utilities. We plan to continue and potentially expand this nuclear safety consulting work in the U.S.

4

 
Competition in Nuclear Industry Consulting

In general, the market for nuclear industry consulting services is competitive, fragmented and subject to rapid change. The market includes a large number of participants with a
variety  of  skills  and  industry  expertise,  including  local,  regional,  national  and  international  firms  that  specialize  in  political  assessment,  nuclear  technology  or  program
implementation.  Some  of  these  companies  are  global  in  scope  and  have  greater  personnel,  financial,  technical,  and  marketing  resources  than  we  do.  The  larger  companies
offering  similar  services  as  we  do  typically  are  also  active  in  the  delivery  of  nuclear  power  plant  equipment  and/or  provision  of  engineering  design  services.  However,  we
believe that our independence, experience, expertise, reputation and segment focus, enable us to compete effectively in this marketplace.

Overview of the Nuclear Power Industry

Potential Market

Presently,  nuclear  power  provides  approximately  7%  of  the  world’s  energy,  including  approximately  17%  of  the  world’s  electricity. According  to  the  International Atomic
Energy Agency,  there  are  over  440  nuclear  power  plants  in  operation  today,  mostly  light  water  reactors,  with  the  most  dominant  types  being  pressurized  water  reactors,  or
PWRs, boiling water reactors, or BWRs, and VVER reactors (a Russian equivalent of PWRs).

A majority of currently operating reactors around the world were built over 20 year ago. Many of these reactors have a licensed operating life of 40 years. Unless there is a
significant increase in new-build activity over the next two decades, it is possible that the majority of reactors in operation in 2030 are already in use today.

Due to substantial project risks and the significant upfront capital commitment associated with new-build, many nuclear utilities in deregulated markets choose to optimize their
existing generating capacity through increasing their capacity utilization factor, power uprates and plant life extensions. We expect that this trend will continue, particularly in
the mature nuclear markets with significant existing nuclear capacity, whereas most of the new-build activity would likely occur in emerging nuclear markets.

Of the world’s existing reactors currently in operation, PWRs account for more than half of the net operating capacity, with BWRs being second accounting for another 20%.

Of the nuclear reactors currently under construction, over 80% are either PWRs or VVERs with a rated power output of 1,000 MW or greater.

Utilities have utilized power uprates since the 1970s as a way to increase the power output of their nuclear plants. Typically more highly enriched uranium fuel and/or more
fresh fuel is needed to increase power output. This enables the reactor to produce more thermal energy and therefore more steam to drive the turbine generator and produce
electricity. In order to accomplish this, components such as pipes, valves, pumps, heat exchangers, electrical transformers and generators, must be able to accommodate the
conditions that would exist at the higher power level. For example, a higher power level usually involves higher steam and water flow through the systems used to convert
thermal power into electric power. These systems must be capable of accommodating the higher flows.

In some instances, utilities will modify and/or replace components in order to accommodate a higher power level. Technical analyses must demonstrate that the proposed plant
configuration remains safe and that measures to protect the health and safety of the public continue to be effective. These analyses, which span many technical disciplines, are
reviewed and approved by the regulator before a power uprate can be performed.

In addition to the technical analyses, the utility will conduct an economic analysis to evaluate the potential financial benefits of the proposed uprate. Typically, power uprates
enable utilities to increase their generating capability at a cost significantly less than the cost of building a new plant. Power uprates can be completed in months as opposed to
the several years required for new-build, thus the invested dollars begin producing revenue shortly after they are spent. Power uprates, therefore, represent an efficient use of
capital.

Utilities have embraced power uprates as a cost effective way to increase their generation capacity. While the efforts thus far have occurred mostly in the United States, there is
a large, untapped worldwide market for power uprates. There are about 150 PWRs operating outside the United States. If all of these plants had their power increased by 10%
the  generating  capacity  would  increase  by  about  14,500  MW.  This  is  equivalent  to  about  12  new  1,200  MW  reactors.  We  believe  that  the  incentive  to  proceed  with  power
uprates at the 10% level is significant since there are few changes required to implement the power uprate and the changes are relatively inexpensive. The limiting factor at the
moment is the fuel. We believe that our metallic fuel rod technology enables the 10% increase in power along with extending the fuel cycle to 24 months, and can be used to
support even greater power increases up to 30%.

5

 
Most nuclear power plants originally had a licensed lifetime of 25 to 40 years, but engineering assessments have established that many can operate much longer. In the U.S.
approximately 60 reactors have been granted license renewals which extend their operating lives by 50% to 60 years. Most of the plants that have not already requested a license
extension are expected to apply in the near future. A license extension at about the 30-year mark justifies additional capital expenditure for the replacement of worn equipment
and outdated control systems.

The technical and economic feasibility of replacing major reactor components, such as steam generators in PWRs, has been demonstrated. The increased revenue generated
from extending the lifetime of existing plants is attractive to utilities, especially in view of the difficulties in obtaining public acceptance of constructing replacement nuclear
capacity.

The loss of generating capacity by old plants being retired is balanced by new plants coming on line. There are no firm projections for retirements over the next two decades,
however  the  World  Nuclear  Association,  or  WNA,  estimates  that  at  least  60  of  those  now  operating  will  close  by  2030,  most  being  small  plants.  Using  conservative
assumptions about license renewal, the 2009 WNA Market Report anticipates that 143 reactors will be decommissioned by 2030.

According to the WNA, over 150 power reactors, with a total net capacity of almost 170,000 MW, are planned and over 340 more plants are proposed. Rising gas prices and
greenhouse constraints on coal, coupled with energy security concerns, have combined to put nuclear power back on the agenda for projected new capacity in both Europe and
North America.

Almost  all  of  the  new  build  reactor  designs  are  either  Generation  III  or  Generation  III+  type  reactors.  The  primary  difference  from  second-generation  designs  is  that  many
incorporate passive or inherent safety features which require no active controls or operational intervention to avoid accidents in the event of malfunction. Many of these passive
systems rely on gravity, natural convection or resistance to high temperatures.

Our Target Market

Presently, we are targeting Western-type PWR reactors with a net capacity of 900 MW or more that will be under 40 years of age by 2021. These reactors represent the largest
market segment, both in terms of operating reactors and new-build units under construction or planned. Our technology is applicable to many more reactors than those included
in  our  target  market.  The  current  target  market  was  selected  as  we  believe  that  it  represents  the  largest  commercial  market  segment  with  the  highest  potential  for  return  on
investment in the near-term.

Based on the WNA’s reactor database, we estimate that the current size of our target market is approximately 148 gigawatts, or GW, of net generating capacity that is expected
to grow to 184 GW by 2020 if all of the reactor units currently under construction are completed. Further, the projected size of the target market is expected to expand to 222
GW by 2020 and 269 GW by 2030 if all of the currently planned new-build and half of the proposed reactor units are completed.

Within the identified potential target market, France, China, United States, Korea and Japan represent the largest market segment, accounting for over 80% of the total projected
target market size in 2030. As a result, we believe that it is important for us, through technology license arrangements with major fuel vendors, to ultimately secure a footing in
one or more of these countries to be able to achieve meaningful market penetration rates.

Our Intellectual Property

Our nuclear fuel technologies are protected by multiple U.S. and international patents. Our current patent portfolio is comprised of the following patents:

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Issued Patents

U.S. patents:

Patent No. 6,026,136, a seed-blanket unit fuel assembly for a nuclear reactor

Patent No. 5,949,837, a nuclear reactor having a core including a plurality of seed-blanket units

Patent No. 5,864,593, a method for operating a nuclear reactor core comprised of at least first and second groups of seed-blanket units

Patent No. 5,737,375, a nuclear reactor having a core including a plurality of seed-blanket units

The U.S. patents expire August 16, 2014.

International patents:

Russia — Patent No. 2,176,826 – Expires August 16, 2014

Russia — Patent No. 2,222,837 – Expires August 16, 2014

South Korea — Patent No. 301,339 – Expires August 16, 2014

South Korea — Patent No. 336,214 – Expires August 16, 2014

China — Patent No. ZL 96196267.4 – Expires August 16, 2014

Pending Patents

PCT patent application NO. PCT/RU2008/000801 filed on December 25, 2008 entitled “A Light Water Reactor Fuel Assembly (Alternatives), A Light Water  Reactor
and A Fuel Assembly Fuel Element”.

Euroasian patent application NO. 200802041, Priority claimed based on PCT/RU 200732.

U.S.  provisional  patent  application  NO.  61/116,730  filed  on  November  21, 2008  entitled  “Nuclear  Reactor  (Alternatives),  Fuel  Assembly  of  Seed-Blanket
Subassemblies for Nuclear Reactor (Alternatives), and Fuel Element for Fuel Assembly”.

U.S.  utility  patent  application  No.  12340833  filed  on  December  22,  2008. Priority  claimed  on  PCT/RU  2007/000732  and  U.S.  provisional  patent  application No.
61/116,730.

European Patent Application No. EP08172834.7 filed on December 23, 2008  entitled “A Fuel Element, A Fuel Assembly and a Method of Using a Fuel  Assembly”.
Priority claimed on PCT/RU 2007/000732 and A U.S. provisional patent application No. 61/116,730.

Japan – Patent No. JP2010-540611 – Expires December 26, 2027

Australia – Patent No. 2007 363 064 – Expires December 26, 2027

South Korea – Patent No. 10-2010-7016627 – Expires December 26, 2027

Canada – Patent No. 2,710,432 – Expires December 26, 2027

China – Patent No. CN 20078102099.4 – Expires December 26, 2027

India – Patent No. 5244/DELNP/2010 – Expires December 26, 2027

We have recently filed trademark applications in the United States, European Union and Russia for the following trademarks:

Lightbridge corporate name

Lightbridge corporate logo

Thorium Power corporate name

We are continually executing a strategy aimed at further expanding our intellectual property portfolio.

Regulation

No safety regulatory approval is required to design nuclear fuels, although certain technology transfers may be subject to national and international export controls. However,
the testing, fabrication and use of nuclear fuels by our future partners, licensees and nuclear power generators, are heavily regulated. The test facilities and other locations where
our fuel designs may be tested before commercial use require governmental approvals from the host country’s nuclear regulatory authority. The responsibility for obtaining
necessary regulatory approvals will lie with our research and development contractors that conduct such tests and experiments. Nuclear fuel fabricators, which will ultimately
fabricate fuel using our technology under licenses from us, are similarly regulated. Nuclear power plants that may utilize the fuel produced by these fuel fabricators require
specific licenses relating to possession and use of nuclear materials as well as numerous other governmental approvals for the ownership and operation of nuclear power plants.

7

 
Employees

As of December 31, 2010, we had 20 employees, 16 of whom were full-time employees. We believe that our relationship with our employees is satisfactory.

Our  business  model  is  to  limit  full-time  employees  and  to  rely  on  consultants,  outside  agencies  and  technical  facilities  with  specific  skills  to  assist  with  various  business
functions including: corporate governance, research and development, and government relations. This model limits costly overhead and allows us to draw upon resources that
are specifically tailored to our internal and external (client) needs.

History and Corporate Structure

We were incorporated under the laws of the State of Nevada on February 2, 1999. During the period from inception until October 6, 2006, we were engaged in businesses other
than  our  current  business.  On  October  6,  2006,  we  acquired  our  wholly-owned  subsidiary  Thorium  Power,  Inc.  in  a  merger  transaction  and  changed  our  name  to  Thorium
Power,  Ltd.  Thorium  Power,  Inc.  was  incorporated  on  January  8,  1992.  The  merger  was  accounted  for  as  a  reverse  merger  and  Thorium  Power,  Inc.  was  treated  as  the
accounting acquirer. In 2008 we formed Lightbridge International Holding, LLC (a Delaware limited liability company). We formed a branch office in England in 2008 called
Lightbridge Advisors Limited, a branch office in Moscow, Russia in July 2009 and a branch office in the United Arab Emirates in January 2010. On September 21, 2009, we
changed our name from Thorium Power Ltd. to Lightbridge Corporation to more accurately reflect the varied nature of our business operations. Thorium Power, Inc. remains a
wholly-owned subsidiary of Lightbridge Corporation.

Available Information

Our Annual Report  on  Form  10-K,  Quarterly  Reports  on  Form  10-Q,  Current  Reports  on  Form  8-K,  including  exhibits,  and  amendments  to  those  reports  filed  or  furnished
pursuant to Sections 13(a) and 15(d) of the Exchange Act, are available free of charge on our website at  www.ltbridge.com as soon as reasonably practicable after such reports
are electronically filed with, or furnished to, the Securities and Exchange Commission. Copies of these reports may also be obtained free of charge by sending written requests
to Investor Relations, Lightbridge Corporation, 1600 Tysons Blvd, Suite 550 Mclean, VA 22102 USA. The information posted on our web site is not incorporated into this
Annual Report.

Item 1A. Risk Factors.

General Business Risks

If the price of non-nuclear energy sources falls, there could be an adverse impact on new-build nuclear reactor activities in certain markets, which would have a material
adverse effect on our operations.

In certain markets with a diversified energy base, decisions on new-build power plants are largely affected by the economics of various energy sources. If prices of non-nuclear
energy sources fall, it could limit the deployment of new-build nuclear power plants in such markets. As a result, this could reduce the size of the potential markets for both our
fuel technology and our consulting services.

We may be adversely affected by uncertainty in the global financial markets and worldwide economic downturn.

Our  future  results  may  be  impacted  by  the  worldwide  economic  downturn,  continued  volatility  or  further  deterioration  in  the  debt  and  equity  capital  markets,  inflation,
deflation,  or  other  adverse  economic  conditions  that  may  negatively  affect  us.  The  cost  of  raising  money  in  the  debt  and  equity  capital  markets  has  increased  substantially
during the current financial crisis while the availability of funds from those markets has diminished significantly. Even with the net proceeds of our July 2010 financing, we
may require additional capital in the future. However, due to the above listed factors, we cannot be certain that additional funding will be available on terms that are acceptable
to us, or at all.

8

 
Our limited operating history makes it difficult to judge our prospects.

Prior to 2008 we were a development stage company. We have only recently commenced the provision of nuclear consulting services and currently have only a limited number
of clients in this area of our business. Similarly, our fuel design patents and technology have not been commercially used and we have not received any royalty or sales revenue
from this area of our business. We are subject to the risks, expenses and problems frequently encountered by companies in the early stages of development.

We rely upon certain members of our senior management, including Seth Grae, and the loss of Mr. Grae or any of our senior management would have an adverse effect on
the Company.

Our success depends upon certain members of our senior management, including Seth Grae, Chief Executive Officer of the Company. Mr. Grae’s knowledge of the nuclear
power industry, his network of key contacts within that industry and in governments and, in particular, his expertise in the potential markets for the Company’s technologies, is
critical to the implementation of our business model. Mr. Grae is likely to be a significant factor in our future growth and success. The loss of the service of Mr. Grae would
likely have a material adverse effect on our Company.

Competition for highly skilled professionals could have a material adverse effect on our success.

We  rely  heavily  on  our  contractor  staff  and  management  team.  Our  success  depends,  in  large  part,  on  our  ability  to  hire,  retain,  develop  and  motivate  highly  skilled
professionals. Competition for these skilled professionals is intense and our inability to hire, retain and motivate adequate numbers of consultants and managers could have a
serious effect on our ability to meet client needs and to continue the development of our fuel designs. A loss of a significant number of our employees could have a serious
negative  effect  on  us.  In  addition,  any  significant  volatility  or  sustained  decline  in  the  market  price  of  our  common  stock  could  impair  our  ability  to  use  equity-based
compensation to attract, retain and motivate key employees and consultants.

Public opposition to nuclear power could increase, resulting in a slow down in new construction of nuclear power plants and an early shut down of existing power plants
and the narrowing of our potential target market.

Successful execution of our business model is dependent upon public support for nuclear power in the United States and other countries. Nuclear power faces strong opposition
from  certain  competitive  energy  sources,  individuals  and  organizations.  The  occurrence  of  another  major,  Chernobyl-like  nuclear  accident  could  have  a  significant  adverse
effect  on  public  opinion  about  nuclear  power  and  the  favorable  regulatory  climate  needed  to  introduce  new  nuclear  technologies.  Strong  public  opposition  could  hinder  the
construction of new nuclear power plants and lead to early shut-down of the existing nuclear power plants. Furthermore, nuclear fuel fabrication and the use of new nuclear fuels
in reactors must be licensed by the U.S. Nuclear Regulatory Commission and equivalent governmental authorities around the world. In many countries, the licensing process
includes public hearings in which opponents of the use of nuclear power might be able to cause the issuance of required licenses to be delayed or denied.

We may not be able to receive or retain authorizations that may be required for us to sell our services, or license our technology internationally.

The  sales  and  marketing  of  our  services  and  technology  internationally  may  be  subject  to  U.S.  export  control  regulations  and  the  export  control  laws  of  other  countries.
Governmental authorizations may be required before we can export our services or technology. If authorizations are required and not granted, our international business plans
could be materially affected. Furthermore, the export authorization process is often time consuming. Violation of export control regulations could subject us to fines and other
penalties, such as losing the ability to export for a period of years, which would limit our revenue growth opportunities and significantly hinder our attempts to expand our
business internationally.

Risks Associated with our Fuel Technology Business

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  they  can  be  offered  for  sale  in
commercial markets. Our fuel designs are still in the research and development stage and while certain testing on our fuel technologies has been completed, further testing and
experiments will be required in test facilities. Furthermore, the fuel technology has yet to be demonstrated in an existing commercial reactor. Until we are able to successfully
demonstrate operation of our fuel designs in an actual commercial reactor, we will not be certain about the ability of the fuel we design to perform as expected. In addition, there
is also a risk that suitable testing facilities may not be available to us on a timely basis, which could cause limited development program schedule delays.

9

 
We will also have to enter into a commercial arrangement 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.

We serve the nuclear power industry, which is highly regulated. 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.

The nuclear power industry is a highly regulated industry. All entities that operate nuclear facilities and transport nuclear materials are subject to the jurisdiction of the U.S.
Nuclear Regulatory Commission, or its counterparts around the world.

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 or its counterparts around the world that could cause development program schedule delays. Also,
entities within the nuclear industry may be hesitant to be the first to use our fuel, which has little or no history of successful commercial use. Furthermore, our research and
development program schedule relies on the transferability and applicability of the operating experience of the Russian icebreakers with metallic fuels for regulatory licensing
purposes  outside  of  Russia.  There  is  a  risk  that  if  this  fuel  performance  operating  experience  is  found  by  the  regulatory  authority  not  to  be  transferable,  more  extensive
experiments will be required which could cause program schedule delays and require more research and development funding.

Existing commercial nuclear infrastructure in many countries is limited to uranium material enrichments up to 5%. Our metallic fuel is enriched to higher levels which
would require modifications to existing commercial nuclear infrastructure and could impede commercialization of our technology.

Existing commercial nuclear infrastructure, including conversion facilities, enrichment facilities, fabrication facilities, fuel storage facilities, fuel handling procedures and fuel
operation at reactor sites, used fuel storage facilities and shipping containers, was designed and is currently licensed to handle uranium enrichment up to 5%. Our fuel designs
are  expected  to  have  enrichment  levels  up  to  19.7%  and  would  therefore  require  certain  modifications  to  existing  commercial  nuclear  infrastructure  to  enable  commercial
nuclear facilities to handle our fuels. In addition, those nuclear facilities will need to go through a regulatory licensing process and obtain regulatory approvals to be able to
handle uranium with enrichment levels up to 19.7% and operate commercial reactors using our fuel. There is a risk that some relevant entities within the nuclear power industry
may be slow in making any required facility infrastructure modifications or obtaining required licenses or approvals to handle our fuel or operate commercial reactors using our
fuel.

In addition, our nuclear fuel designs rely on fabrication technologies that in certain material ways are different from the fabrication techniques presently utilized by existing
commercial fuel fabricators. In particular, our metallic fuel rods must be produced using a co-extrusion fabrication process. Presently, most commercial nuclear fuel is produced
using  a  pellet  fabrication  technology,  whereby  uranium  oxide  is  packed  into  small  pellets  that  are  stacked  and  sealed  inside  metallic  tubes.  The  co-extrusion  fabrication
technology involves extrusion of a single-piece solid fuel rod from a metallic matrix containing uranium and zirconium alloy. Fabrication of full-length (approximately 3.5 to
4.5 meters) metallic fuel rods has yet to be demonstrated. There is a risk that the fuel fabrication process required to produce one meter long metallic fuel rods may not be
adaptable to the fabrication of full-length metallic fuel rods used in commercial reactors.

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.

10

 
We are currently conducting fuel assembly design and testing work in Russia through our Moscow office personnel as well as Russian research institutes and other nuclear
entities 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 our fuel assemblies. If we, or a fuel fabricator to whom we license our fuel technology,
desire to utilize such processes or methodologies in the future, a license or other right to use such technologies from the Russian entities that previously developed and own
such technologies would be required. Furthermore, nuclear operators typically seek diversity of fuel supply and may be hesitant to use a fuel product that is only available from
a single supplier. If we are unable to obtain a license or other right to acquire or utilize certain know-how required for the fabrication of our fuel assemblies on terms that the
Russian entities deem to be reasonable, or there is only a single supplier of our fuel assemblies, then we may not be able to fully exploit our intellectual property and may be
hindered in the sale of our fuel products and services.

Our research operations are conducted primarily in Russia, making them subject to political uncertainties relating to Russia and U.S.-Russian relations.

Much  of  our  present  research  activities  are  being  conducted  in  Russia.  Our  research  operations  conducted  in  Russia  are  subject  to  various  political  risks  and  uncertainties
inherent  in  the  country  of  Russia.  If  U.S.-Russia  relations  deteriorate,  the  Russian  government  may  decide  to  scale  back  or  even  cease  completely  its  cooperation  with  the
United States on various international projects, including nuclear power technology development programs. If this should happen, our research and development program in
Russia could be scaled back or shut down, which could cause development program schedule delays and may require additional funding to access alternative testing facilities
outside  of  Russia.  Furthermore,  the  Russian  institutes  or  nuclear  entities  engaged  in  our  project  are  highly  regulated  and,  in  many  instances,  are  controlled  by  the  Russian
government. The Russian government could decide that the nuclear scientists engaged in our project in Russia or testing facilities employed in our project should be redirected
to  other  high  priority  national  projects  in  the  nuclear  sector  which  could  lead  to  development  program  schedule  delays.  Finally,  certain  future  research  and  development
activities to be performed by Russian entities under contract with us will require formal authorization from the Russian State Atomic Energy Corporation, “Rosatom”, which
owns those entities and is the main Russian government agency that oversees Russia’s civil nuclear power industry.

Applicable Russian intellectual property law may be inadequate to protect our intellectual property, which could have a material adverse effect on our business.

Intellectual property rights are evolving in Russia, trending towards international norms, but are by no means fully developed. While we are continuing to diversify our research
and development activities with associated intellectual property, historically, we have worked closely with our Russian branch office employees and other Russian contractors
and entities to develop a significant portion 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.

11

 
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 other 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 elsewhere. 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.

Our  nuclear  fuel  process  is  dependent  on  outside  suppliers  of  nuclear  and  other  materials  and  any  difficulty  by  a  fuel  fabricator  in  obtaining  these  materials  could  be
detrimental to our ability to eventually market our fuel through a fuel fabricator.

Production of fuel assemblies using our nuclear fuel designs is dependent on the ability of fuel fabricators to obtain supplies of nuclear material utilized in our fuel assembly
design. Fabricators will also need to obtain metal for components, particularly zirconium or its alloys. These materials are regulated and can be difficult to obtain or may have
unfavorable  pricing  terms. Any  difficulties  in  obtaining  these  materials  by  fuel  fabricators  could  have  a  material  adverse  effect  on  their  ability  to  market  fuel  based  on  our
technology.

12

 
Risks Associated With Our Consulting Activities.

Our inability to attract business from new clients or the loss of any of our existing clients could have a material adverse effect on us.

We expect that many of our future client engagement agreements will be terminable by our clients with little or no notice and without penalty. Some of our work will involve
multiple engagements or stages. In those engagements, there is a risk that a client may choose not to retain us for additional stages of an engagement or that a client will cancel
or delay additional planned engagements. In addition, a small number of existing clients account for a majority of our consulting revenues, the loss of any one of which would
have a material adverse effect on our results of operations.

Our future profitability will suffer if we are not able to maintain current pricing and utilization rates.

Our revenue, and our profitability, will be largely based on the billing rates charged to clients and the number of hours our professionals will work on client engagements, which
we define as the “utilization” of our professionals. Accordingly, if we are not able to maintain the pricing for our services or an appropriate utilization rate for our professionals,
revenues, project profit margins and our future profitability will suffer. Bill rates and utilization rates are affected by a number of factors, including:

our ability to predict future demand for services and maintain the appropriate headcount and minimize the number of underutilized personnel;

our clients’ perceptions of our ability to add value through our services;

our competitors’ pricing for similar services;

the market demand for our services; and

our ability to manage significantly larger and more diverse workforces as we increase the number of our professionals and execute our growth strategies.

Unsuccessful future client engagements could result in damage to our professional reputation or legal liability, which could have a material adverse effect on us.

Our professional reputation and that of our personnel is critical to our ability to successfully compete for new client engagements and attract or retain professionals. Any factors
that damage our professional reputation could have a material adverse effect on our business.

In addition, any client engagements that we obtain will be subject to the risk of legal liability. Any public assertion or litigation alleging that our services were negligent or that
we  breached  any  of  our  obligations  to  a  client  could  expose  us  to  significant  legal  liabilities,  could  distract  our  management  and  could  damage  our  reputation.  We  carry
professional liability insurance, but our insurance may not cover every type of claim or liability that could potentially arise from our engagements. In addition, the limits of our
insurance coverage may not be enough to cover a particular claim or a group of claims, and the costs of defense.

Our results of operations could be adversely affected by disruptions in the marketplace caused by economic and political conditions.

Global economic and political conditions affect our clients’ businesses and the markets they serve. A severe and/or prolonged economic downturn or a negative or uncertain
political climate could adversely affect our clients’ financial condition and the levels of business activity engaged in by our clients and the industries we serve. Clients could
determine that discretionary projects are no longer viable or that new projects are not advisable. This may reduce demand for our services, depress pricing for our services or
render  certain  services  obsolete,  all  of  which  could  have  a  material  adverse  effect  on  our  results  of  operations.  Changes  in  global  economic  conditions  or  the  regulatory  or
legislative landscape could also shift demand to services for which we do not have competitive advantages, and this could negatively affect the amount of business that we are
able  to  obtain. Although  we  have  implemented  cost  management  measures,  if  we  are  unable  to  appropriately  manage  costs  or  if  we  are  unable  to  successfully  anticipate
changing economic and political conditions, we may be unable to effectively plan for and respond to those changes, and our business could be negatively affected.

Risks Relating to the Ownership of Our Securities

There may be volatility in our stock price, which could negatively affect investments, and stockholders may not be able to resell their shares at or above the value they
originally purchased such shares.

13

 
The market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond its control, including:

quarterly variations in operating results,

changes in financial estimates by securities analysts,

changes in market valuations of other similar companies,

announcements  by  us  or  our  competitors  of  new  products  or  of  significant technical  innovations,  contracts,  receipt  of  (or  failure  to  obtain)  government funding  or
support, acquisitions, strategic partnerships or joint ventures,

additions or departures of key personnel,

any deviations in net sales or in losses from levels expected by securities analysts, or any reduction in political support from levels expected by securities analysts,

future sales of common stock, and

results of analyses of mining and resources assets.

In addition, the stock market may experience extreme volatility that is often unrelated to the performance of particular companies. These market fluctuations may cause our
stock price to fall regardless of its performance.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Description of Property.

We are obligated to pay approximately $43,000 per month for office rent and approximately another $2,000 per month for other fees for the rented office space located at 1600
Tysons Boulevard, Suite 550, McLean, Virginia 22102. The space is used by our executives, employees and contractors for administrative purposes. The term of the lease for
our offices expires on December 31, 2013 and is renewable for additional one-year terms.

We are obligated to pay approximately US$9,000 per month for office rent and approximately another US$1,500 per month for other fees for the rented office space located at
Zemlyanoi Val, 9, Moscow, Russia, 105064. The space is used by our Moscow staff for administrative purposes. The term of the lease for our offices expires on April 30, 2011
and is renewable for additional one-year terms.

Our branch offices in London and Abu Dhabi are maintained via corporate agents, and fees that we pay our agents include rental expense. The address for our branch in London
is Lightbridge Advisors Limited, High Street Partners, 83 Victoria Street, London, SW1H OHW. The address for our branch in Abu Dhabi is Fotouh Al Khair Center (Marks &
Spencer) Tower No. 3, ‘0’ floor, next to Etisalat Head office, PO Box 44183, Abu Dhabi.

Item 3. 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 4. [Removed and Reserved.]

PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.

Market Information

14

 
Our common stock is quoted on the NASDAQ Capital Market under the symbol “LTBR”.

The following table sets forth, for the periods indicated, the high and low sales prices of our common stock. These prices reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.

The quotations for all periods prior to and including September 30, 2009 have been adjusted to account for our 30-for-1 reverse stock split which was effective as of September
21, 2009.

Fiscal Year

2010

2009

Quarter Ending

High

Low

  December 31
  September 30
  June 30
  March 31
  December 31
  September 30
  June 30
  March 31

$
$
$
$
$
$
$
$

 6.23 
 8.31 
 11.15 
 9.00 
 12.05 
 10.95 
 7.35 
 8.40 

$
$
$
$
$
$
$
$

 5.00 
 5.31 
 5.26 
 5.99 
 5.03 
 5.46 
 5.40 
 4.08 

In addition, our common stock is included in the World Nuclear Association’s Nuclear Energy Index, which tracks the overall performance of globally traded companies that
are engaged in the nuclear energy industry.

Holders

As of February 18, 2011, our common stock was held by 168 stockholders of record. This number excludes the shares of our common stock owned by stockholders holding
stock under nominee security position listings.

Reports to Stockholders

We plan to furnish our stockholders with an annual report for each fiscal year ending December 31, containing financial statements audited by our independent certified public
accountants. Additionally, we may in our sole discretion, issue unaudited quarterly or other interim reports to our stockholders as we deem appropriate. We intend to maintain
compliance with the periodic reporting requirements of the Exchange Act.

Dividends

We  have  never  paid  dividends.  While  any  future  dividends  will  be  determined  by  our  directors  after  consideration  of  the  earnings,  financial  condition,  and  other  relevant
factors, it is currently expected that available cash resources will be utilized in connection with our ongoing operations.

Transfer Agent

Our  transfer  agent  and  registrar  for  our  common  stock  is  Computershare  Trust  Company,  350  Indiana  Street,  Suite  800,  Golden,  Colorado,  80401.  Its  telephone  number  is
800.962.4284 and facsimile is 303.262.0604.

Recent Sales of Unregistered Securities

Except for sales previously disclosed in quarterly reports on Form 10-Q or in a current report on Form 8-K filed by us with the Securities and Exchange Commission, we have
not sold any securities without registration under the Securities Act of 1933.

Securities Authorized for Issuance Under Equity Compensation Plans

The information under the heading “Equity Compensation Plan Information” in our definitive proxy statement for the annual meeting of shareholders to be filed with the SEC is
incorporated herein by reference.

15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 6. Selected Financial Information.

Not applicable

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview

The  following  Management’s  Discussion  and Analysis  of  Financial  Condition  and  Results  of  Operations,  or  MD&A,  is  intended  to  help  the  reader  understand  Lightbridge
Corporation, our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial
statements  and  the  accompanying  notes  thereto  contained  in  “Item  8.  Financial  Statements  and  Supplementary  Data”  of  this  report.  This  overview  summarizes  the  MD&A,
which includes the following sections:

Our Business — a general overview of our two business segments, the material opportunities and challenges of our business;

Critical Accounting Policies and Estimates — a discussion of accounting policies that require critical judgments and estimates;

Operations Review — an analysis of our Company’s consolidated  results of operations for the two years presented in our consolidated financial statements. Except to
the extent that differences among our operating segments are material to an understanding of our business as a whole, we present the discussion in the MD&A on a
consolidated basis; and

Liquidity, Capital Resources and Financial Position — an analysis of cash flows; an overview of financial position.

As  discussed  in  more  detail  at  the  beginning  of  this  Annual  Report,  the  following  discussion  contains  forward-looking  statements  that  involve  risks,  uncertainties,  and
assumptions such as statements of our plans, objectives, expectations, and intentions. Our actual results may differ materially from those discussed in these forward-looking
statements because of the risks and uncertainties inherent in future events.

Our Business

General Overview

We are a leading nuclear fuel technology company, and participate in the nuclear power industry in the U.S. and internationally. Our business operations can be categorized into
two segments: (i) we are a developer of next generation nuclear fuel technology that has the potential to significantly uprate the power output of reactors, reducing the per-
megawatt-hour  cost  of  generating  nuclear  energy,  and  reduce  nuclear  waste  and  proliferation,  and  (ii)  we  are  a  provider  of  nuclear  power  consulting  and  strategic  advisory
services to commercial and governmental entities worldwide.

Our Nuclear Fuel Technology Business Segment

The Nature of Our Proprietary Technology Development Activities

We are developing innovative, proprietary nuclear fuel designs which we expect will significantly enhance the nuclear power industry’s economics and increase power output
by: (1) Extending the fuel cycle length to 24 months or longer while simultaneously increasing the power output by up to 17% in existing pressurized water reactors (including
Westinghouse 4-loop reactors, which are currently limited to an 18-month fuel cycle); (2) Enabling increased reactor power output (up to 30% increase) without changing the
core size in new-build PWRs; and (3) Addressing concerns relating to the back-end of the fuel cycle including the volume of used fuel per kilowatt-hour as well as proliferation
of weapons-usable materials. Significant technological synergies exist among our primary fuel products due to utilization of the proprietary metallic fuel rod technology that is
at the core of each of these products. As a result, once completed, full-scale demonstration and qualification of the metallic fuel rod technology will simultaneously advance all
of our product families currently under development.

In response to the challenges associated with conventional oxide fuels, we are developing an innovative, proprietary metallic fuel technology, that is capable of significantly
higher burnup and power density compared to conventional oxide fuels, which we believe will allow current and new-build nuclear reactors to safely increase power production
and reduce the initial capital investment as well as operations and maintenance costs on a per kilowatt-hour basis. As a result, in addition to the projected electricity production
cost savings, we believe that our technology can result in utilities or countries needing to deploy fewer new reactors to generate the same amount of electricity. For utilities or
countries that already have operating reactors, our technology could be utilized to increase the power output of those reactors instead of to building new reactors. Further, we
believe that the fuel fabrication, or manufacturing process for this new fuel design is simpler, which we expect could lower fuel fabrication costs.

16

 
We intend to license our intellectual property for our nuclear fuel designs to existing major nuclear fuel fabricators that own and operate fuel fabrication facilities and have long-
term fuel supply contracts with nuclear power plants. We believe that this partnering strategy would also allow us to take advantage of the existing customer base of such major
fuel  fabricators,  thus  enabling  our  fuel  products  to  achieve  high  market  penetration  rates  in  a  relatively  short  period  of  time.  We  are  currently  pursuing  a  research  and
development  strategy  aimed  at  generating  sufficient  interest  and  confidence  in  our  fuel  technology  among  major  fuel  fabricators  with  a  view  of  entering  into  a  commercial
arrangement with one or more of them within the next 2-3 years. In addition to a fuel design license agreement, we believe that there may be manufacturing technology licenses
or manufacturing support fees that we may be able to receive from the fuel fabricator.

Consulting and Strategic Advisory Services Business Segment

We  are  primarily  engaged  in  the  business  of  assisting  commercial  and  governmental  entities  with  developing  and  expanding  their  nuclear  industry  capabilities  and
infrastructure.  We  provide  integrated  strategic  advice  across  a  range  of  expertise  areas  including,  for  example,  regulatory  development,  nuclear  reactor  site  selection,
procurement and deployment, reactor and fuel technology, international relations and regulatory affairs.

Due to the relatively limited growth in the nuclear energy industry during the 1980’s and 1990’s, and corresponding limited recruitment into the industry, the cadre of engineers,
managers and other nuclear energy industry experts is aging. In any nuclear renaissance, we believe that the industry will be challenged in acquiring and retaining sufficient
qualified  expertise.  Moreover,  in  countries  studying  new  nuclear  energy  programs,  the  number  of  qualified  nuclear  energy  personnel  is  limited,  and  we  believe  that  those
countries will need to rely on significant support from non-domestic service providers and experts to ensure success in those programs.

Our emergence in the field of nuclear energy consulting is in direct response to the need for independent assessments and highly qualified technical consulting services from
countries  looking  to  establish  nuclear  energy  programs,  by  providing  a  blueprint  for  safe,  secure,  efficient  and  cost-effective  nuclear  power.  We  offer  full-scope  strategic
planning  and  advisory  services  for  new  and  growing  existing  markets.  Furthermore,  we  only  engage  with  commercial  entities  and  governments  that  are  dedicated  to  non-
proliferative and transparent nuclear programs.

Our consulting services are expert and relationship based, with particular emphasis on key decision makers in senior positions within governments or companies, as well as
focus on overall management of nuclear energy programs. To date, substantially all of our revenues are derived from our consulting and strategic advisory services business
segment, which primarily provides nuclear consulting services to entities within the United Arab Emirates, our first significant consulting and strategic advisory client. In April
2010 and December 2010, we began to provide consulting services in additional countries, including the member states of the Gulf Cooperation Council. We have also provided
nuclear safety consulting advice to U.S. nuclear utilities. We plan to continue and potentially expand this nuclear safety consulting work in the U.S.

Factors Affecting Our Financial Performance

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. Light water reactors are the dominant reactor types currently used in the world, and fuels for such reactors constitute the
majority of the commercial market for nuclear fuel.

Various industry efforts currently underway to meet the growing demand for more electric power output from the same reactor core size, and to create a more efficient fuel
cycle, with improved safety, reliability and extended fuel cycle length, are largely focused on stretching the limits of conventional oxide fuels. While this strategy has worked
well in the past, now almost all of the available fuel performance margins with conventional oxide fuels have been utilized. However, due to the risk-averse nature of the major
industry players and a significant capital investment made in existing infrastructure supporting conventional oxide fuels, major fuel vendors are reluctant to take on early risks
associated  with  fuel  development  programs  on  next  generation  nuclear  fuel  designs. As  a  result,  we  are  well  positioned  to  take  advantage  of  this  market  opportunity  by
developing next generation fuel designs that can meet the needs of the power generator.

17

 
Our commercialization strategy is not to compete with the major fuel fabricators that collectively fabricate a large majority of the fuel used in the world’s nuclear power plants.
Instead, we are pursuing a commercialization strategy aimed at generating interest in our nuclear fuel designs from one or more of these major nuclear fuel fabricators that could
lead to a technology licensing or other teaming arrangement over the next three years. Our ultimate commercial success depends on how soon and what kind of a commercial
arrangement we are able to negotiate with one or more of these potential partner companies.

In addition, we recognize that a successful commercialization strategy is highly dependent upon the interest in our nuclear fuel designs from nuclear power plants which are the
ultimate fuel product user. If we are successful in generating sufficient interest from one or more nuclear power plants n evaluating our fuel technology for potential use, we
believe it would make it easier to find a major fuel fabricator that would be willing to partner with us in order to offer that fuel product to the nuclear power generator.

It is also important to generate public, industry and government awareness of our nuclear fuel technology that could help build technology confidence and increase credibility
among fuel fabricators and nuclear power plants. As a result, we are pursuing a public outreach effort by seeking publication of technical papers highlighting progress on our
fuel designs in peer-reviewed technical journals and presentations at major international nuclear conferences.

Competition with respect to the design of commercially viable fuel products is limited to conventional uranium oxide fuels, which, as discussed above, are reaching the limits in
terms  of  their  capability  to  provide  increased  power  output  or  longer  fuel  cycles.  We  believe  that  the  industry  needs  fuel  products  that  can  provide  these  benefits.  To  our
knowledge, our nuclear fuel development project is the only commercially viable program that could achieve these goals. Due to the long-term product development timelines,
significant nuclear regulatory requirements, and our comprehensive patent portfolio, we believe that the barriers to entry prevent a viable competitor in the foreseeable future.

In addition, in certain markets with a diversified energy base, decisions on new-build power plants are largely affected by the economics of various energy sources. If prices of
non-nuclear energy sources fall, it could limit the deployment of new-build nuclear power plants in such markets. As a result, this could reduce the size of the potential markets
for our fuel technology. However, if prices or production costs of non-nuclear energy increase, there may be increased demand for the deployment of new-build nuclear power
plants.

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, secure, 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.

See also “Item 1A. Risk Factors” in Part I of this report for additional information about risks and uncertainties facing our Company.

Critical Accounting Policies

Critical Accounting Policies and Estimates

18

 
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 assets and 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.

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

We  adopted  the  requirements  for  stock-based  compensation,  where  all  forms  of  share-based  payments  to  employees  or  non-employees,  including  stock  options  and  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 for employees 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.

The stock-based compensation expense incurred by Lightbridge in connection with its employees is based on the employee model of ASC 718. Under ASC 718 employee is
defined  as  “An  individual  over  whom  the  grantor  of  a  share-based  compensation  award  exercises  or  has  the  right  to  exercise  sufficient  control  to  establish  an  employer-
employee relationship based on common law as illustrated in case law and currently under U.S. tax regulations. Our advisory board members and consultants do not meet the
employer-employee relationship as defined by the IRS and therefore are accounted for under ASC 505-50. Under these requirements, stock-based compensation expense for
non-employees is based on the fair value of the award on the measurement date which is the earlier of the date at which a commitment for performance by the counterparty to
earn  the  equity  instruments  is  reached  (a  performance  commitment),  or  the  date  at  which  the  counterparty’s  performance  is  complete.  For  all  grants  made,  we  recognize
compensation cost under the straight-line method.

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 we have continued
to use our historical stock price closing prices to determine our volatility.

19

 
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.

Income Taxes

We account for income taxes using the liability method in accordance with the accounting pronouncement “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 Accounting Interpretation “Accounting for Uncertainty in Income Taxes”, which 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 this requirement, 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 of this standard, we did not recognize any current tax liability for unrecognized tax benefits. We do not believe that there are any unrecognized tax positions
that would have a material effect on the net operating losses disclosed.

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 commercial and government owned entities outside the U.S. 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.

The two consulting agreements that we entered into in August 2008 were fixed-fee service contracts but were subsequently changed to time and expense contracts. We recognize
revenue associated with these contracts in accordance with the time and expense billed to our customer, which is subject to their review and approval. When a loss is anticipated
on a contract, the full amount of the anticipated loss is recognized immediately. Our management uses its judgment concerning the chargeable number of hours to bill under
each contract considering a number of factors, including the experience of the personnel that are performing the services, the value of the services provided and the overall
complexity of the project. Should changes in management’s estimates be required, due to business conditions that cause the actual financial results to differ significantly from
management’s present estimates, revenue recognized in future periods could be adversely affected.

The  revenue  recognition  from  two  other  governments  contracts  entered  into April  2010  and  December  2010  will  be  based  on  the  completion  and  acceptance  of  contractual
milestones.

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)
(2)
(3)
(4)

There is persuasive evidence of an arrangement;
The service has been provided to the customer;
The collection of the fees is reasonably assured; and
The amount of fees to be paid by the customer is fixed or determinable.

In situations where contracts include client acceptance provisions, we do not recognize revenue until such time as the client has confirmed its acceptance.

20

 
 
 
 
 
Intangibles

As presented on the accompanying balance sheet, we had patents with a net book value of approximately $377,000 as of December 31, 2010. 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.

Contingencies

Management assesses the probability of loss for certain contingencies and accrues a liability and/or discloses the relevant circumstances, as appropriate. Management believes
that any liability to the Company that may arise as a result of having to pay out additional expenses that may have a material adverse effect on the financial condition of the
Company taken as a whole should be disclosed. Refer to Note 9 of Notes to Consolidated Financial Statements.

Recent Accounting Standards and Pronouncements

Refer to Note 1 of Notes to Consolidated Financial Statements for a discussion of recent accounting standards and pronouncements.

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 years ended December 31, 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.

December 31, 2010
Revenue
Segment Profit (Loss) – Before Tax
Total Assets
Property Additions
Interest Expense
Depreciation

December 31, 2009
Revenue
Segment Profit (Loss) – Before Tax
Total Assets
Property Additions
Interest Expense
Depreciation

Technology Business

  Consulting  

  Technology 

  Corporate and  
  Eliminations 

Total
12 Months  

7,244,158 
1,703,301 
990,563 
— 
— 
— 

10,257,306 
3,771,974 
2,297,070 
— 
— 
— 

342,550 
(1,522,275)
329,640 
— 
— 
786 

259,072 
(1,597,699)
309,274 
— 
— 
206 

— 
(7,744,508)
13,990,609 
1,620 
— 
26,214 

— 
(9,407,586)
4,529,694 
14,920 
— 
25,276 

7,586,708 
(7,563,481)
15,310,812 
1,620 
— 
27,000 

10,516,378 
(7,233,312)
7,136,038 
14,920 
— 
25,482 

Over the next 12 to 15 months we expect to incur approximately $5 million in research and development expenses related to the development of our proprietary nuclear fuel
designs. We spent approximately $1.6 million for research and development during year ended December 31, 2010.

21

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
   
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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. For the year ended December 31, 2010, our total revenue from AREVA under this
agreement  was  approximately  $342,550,  including  billings  for  expense  reimbursements.  We  have  completed  the  scope  of  work  under  the  initial  phase  of  the  consulting
agreement.

Consulting and Strategic Advisory Services Business

At the present time, substantially all of our revenue for the year ended December 31, 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. The fee type and structure that we
offer for each client engagement is dependent on a number of variables, including the complexity of the services, the level of the opportunity for us to improve the client’s
electricity  generation  capabilities  using  nuclear  power  plants,  and  other  factors.  Our  revenues  totaling  approximately  $7.2  million  and  $10.3  million  for  the  years  ended
December 31, 2010 and 2009, 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 Emirates Nuclear Energy Corporation (“ENEC”), and the Federal Authority for Nuclear Regulation
(“FANR”), from our April 2010 contract with another non-U.S. government, and from our December 2010 contract with the Gulf Cooperation Council, 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 year ended December 31, 2010
for the ENEC and FANR contracts. For the April 2010 contract, as well as our December 2010 contract with the Gulf Cooperation Council, revenue is recognized upon the
achievement of contractual milestones and the acceptance by our customer of our work.

Consolidated Results of Operations

The following table presents our historical operating results as a percentage of revenues for the periods indicated:

Consolidated Statements of Income Data:
Revenues
Costs and expenses:
           Cost of revenues
Gross Profit
           Research and development
           General and administrative

Total costs and expenses

Loss from operations
Interest income and other, net

Loss before income taxes
Provision for income taxes

Net loss

Year Ended December 31,

2010

2009

100 % 

100 % 

65 
35 
21 
114 

135 

(100)
1 

(99)
0 

59 
41 
16 
94 

110 

(69)
0 

(69)
0 

22

(99) % 

(69)%

 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
 
   
 
   
 
 
 
 
 
 
 
 
 
 
   
 
   
 
 
 
 
   
 
   
 
 
 
 
 
 
   
 
   
 
 
 
 
 
 
   
 
   
 
 
Revenue

The following table presents our revenues, by business segment, for the periods presented (in millions):

Consulting Segment Revenues
           ENEC and FANR(UAE)
           Other (other countries)

Total
Technology Segment Revenues

Total Revenues

Year Ended December 31,

2010

2009

$

$

$

 6.4 
0.8 

7.2 
0.4 

 7.6 

$

 10.1 
0.2 

10.3 
0.2 

 10.5 

The decrease in our revenues from 2009 to 2010 resulted from the decrease in the work performed for our ENEC and FANR projects. Our consulting projects with ENEC and
FANR are being performed pursuant to ongoing requests to work on specific projects on a time and expense basis as needed. 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.

We  believe  that  in  2011  we  will  obtain  contracts  from  other  governments  interested  in  deploying  nuclear  power  in  their  countries,  based  on  our  commitment  to  providing
consulting services that are relevant and objective in exploring the use of nuclear power, which in turn we expect will increase our future consulting revenue.

See Note 1 and Note 3 of the Notes to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information about our
revenue.

Costs and Expenses

The following table presents our cost of services provided, by business segment, for the periods presented (in millions):

Consulting
Technology
Total

Cost of Services Provided

Year Ended December 31,

2010

2009

$

$

 4.7 
0.3 
 5.0 

$

$

 6.0 
0.2 
 6.2 

These  expenses  related  to  the  consulting,  professional,  administrative  and  other  support  costs  allocated  to  our  technology  and  consulting  projects,  which  were  incurred  to
perform  and  support  the  work  done  for  our  consulting  projects  with  ENEC,  FANR  and  another  government  and  our AREVA  contract.  The  billing  rates  to  us  from  our
consultants who provide services under our consulting contracts predominantly remained the same in 2010 and 2009. The decrease in the consulting costs was a result in the
decrease of work performed under the ENEC and FANR contracts.

See Note 1 and Note 3 of the Notes to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information about our cost
of services provided.

If consulting revenues increase in 2011, we expect cost of services provided will increase in dollar amount and may increase as a percentage of revenues in 2011 and in future
periods.

23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
 
 
 
   
 
   
 
 
 
 
 
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research and Development

The following table presents our research and development expenses, (in millions):

Year Ended
December 31,

2010

2009

Research and development expenses

$

 1.6 

$

 1.6 

Research and development expenses consist primarily of compensation and related costs for personnel responsible for the research and development of our fuel. Almost all of
our research and development activities are conducted in Russia. We expense research and development costs as they are incurred.

Research  and  development  expenses  remained  the  same  from  2009  to  2010.  Research  and  development  expenses  will  increase  in  dollar  amount  and  may  increase  as  a
percentage of revenues in 2011 and future periods because we expect to continue to invest in the development of our nuclear fuel products.

See  Note  10  of  the  Notes  to  our  Consolidated  Financial  Statements  included  in  Item  8  of  this Annual  Report  Form  10-K  for  additional  information  about  our  research  and
development costs.

General and Administrative Expenses

The following table presents our general and administrative expenses, (dollars in millions):

Year Ended
December 31,

2010

2009

General and administrative expenses

$

 8.7 

$

 9.9 

General  and  administrative  expenses  consist  primarily  of  compensation  and  related  costs  for  personnel  and  facilities,  stock-based  compensation,  finance,  human  resources,
information  technology,  and  fees  for  consulting  and  other  professional  services.  Professional  services  are  principally  comprised  of  outside  legal,  audit,  strategic  advisory
services and outsourcing services.

General and administrative expenses decreased $1.2 million from 2009 to 2010. This decrease was primarily related to the decrease in stock-based compensation expense of
$2.1 million as a result of a significant amount of equity awards which fully vested in 2009. This decrease was offset by an increase in consulting expenses and professional fees
of $0.2 million and a decrease in 2010 from 2009 in the support costs allocated from general and administrative expenses to cost of services provided, which increased the total
general and administrative expenses reported by $0.7 million. 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.

See Note 11 of the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our stock-based compensation.

Interest Income and Other, Net

Interest income and other, net increased $0.1 million from 2009 to 2010. This increase was primarily driven by an increase in interest income of $0.2 million due to our higher
cash and marketable securities balances resulting from our July 2010 fundraise.

Provision for Income Taxes

The following table presents our provision for income taxes. Our effective tax rate for the periods presented is 40%.

24

 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
Provision for income taxes

$

 0.0 

$

 0.0 

We incurred a net loss for both 2009 and 2010 and took a 100% valuation allowance against all deferred tax assets. Therefore we did not have a provision for taxes for both
2010 and 2009.

See Note 8 of the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our Income Taxes.

Liquidity and Capital Resources

As  of  December  31,  2010,  we  had  total  cash  and  cash  equivalents  of  approximately  $2.4  million  and  marketable  securities  of  $10.5  million.  The  following  table  provides
detailed information about our net cash flow for all financial statements periods presented in this Report.

Year Ended
December 31,

2009

2010

Cash Flow

Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Net cash inflow (outflow)

Operating Activities

December 31,

2010

2009

$
$
$
$

 (2,361,138)
 (10,714,881)
 12,420,649 
 (655,370)

$
$
$
$

 (2,560,733)
 (38,890)
 48,170 
 (2,551,453)

Net cash used in our operating activities decreased by approximately $0.2 million for the year ended December 31, 2010 as compared to 2009. This decrease in cash used was
primarily  due  to  the  decrease  in  cash  payments  made  toward  accounts  payable  of  $4.3  million.  The  decrease  was  primarily  offset  by  a  decrease  in  cash  collected  from  our
accounts receivable due to our lower revenue in 2010, of approximately $4.1 million, which increased our cash used in operations.

Investing Activities

Net cash used in our investing activities for the year ended December 31, 2010 as compared to 2009, increased by approximately $10.7 million, which was due to the purchase
of marketable securities in September 2010 of approximately $10.6 million, and an increase in patent costs in 2010 compared to 2009 for the filing of patent applications of $0.1
million. These patent applications are filed for the new developments resulting from our research and development activities in our technology business segment. We anticipate
these patent costs to increase in the future periods due to the research and development work we plan to perform on our all-metal fuel design.

Financing Activities

There was an increase in net cash provided by our financing activities for the year ended December 31, 2010 as compared to the same period in 2009 of approximately $12.4
million. This increase is primarily due to the securities offering that we completed on July 28, 2010 for which we received net proceeds of approximately $12.6 million. The
increase is also due to the return to us of restricted cash held by our credit card vendor of approximately $0.1 million. These increases were offset by the redemption of stock
from the exercise of stock options by an officer of approximately $0.3 million. See Note 11 of the Notes to our Consolidated Financial Statements included in this Annual
Report on Form 10-K for information regarding our securities offering.

We anticipate entering into other consulting and technology agreements with our existing and new potential clients that will generate additional revenues for us in 2011 and
beyond. If we do not enter into any new agreements, we anticipate that our cash position will meet our anticipated working capital needs until later in the year 2012.

25

 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In support of our long-term business plan with respect to our fuel technology business, we endeavor to create strategic alliances with major fuel vendors, fuel fabricators and/or
other strategic parties during the next three years, to support the remaining research and development activities required to further enhance and complete the development of our
fuel  products  to  a  commercial  stage.  We  may  be  unable  to  form  such  strategic  alliances  on  terms  acceptable  to  us  or  at  all.  Our  total  current  average  operating  expenses,
excluding the approximate $5 million of outside consulting research and development expenses we expect to incur over the next 12-15 months, is approximately $0.8 million
per month.

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.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

Not applicable.

Item 8. Financial Statements.

The full text of our audited consolidated financial statements as of December 31, 2010 and 2009 begins on page F-1 of this Report.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

There have been no disagreements regarding accounting and financial disclosure matters with our independent certified public accountants.

Item 9A. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be
disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is
accumulated  and  communicated  to  our  management,  including  to  our  Chief  Executive  Officer  and  Chief  Operating  Officer/Chief  Financial  Officer,  as  appropriate,  to  allow
timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Operating Officer/Chief Financial Officer, evaluated
the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2010. Based on that evaluation, our Chief Executive Officer and
Chief Operating Officer/Chief Financial Officer concluded that as of December 31, 2010, our disclosure controls and procedures were effective to satisfy the objectives for
which they are intended.

(b) Management’s annual report on internal control over financial reporting

26

 
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. The Exchange Act defines internal control over financial reporting as a process designed by, or under the supervision of, the Company’s principal
executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the
reliability  of  financial  reporting  and  the  preparation  of  financial  statements  for  external  purposes  in  accordance  with  accounting  principles  generally  accepted  in  the  United
States of America and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

Provide  reasonable  assurance  that  transactions  are  recorded  as  necessary to  permit  preparation  of  financial  statements  in  accordance  with  accounting principles
generally  accepted  in  the  United  States  of America,  and  that  receipts  and  expenditures  of  the  Company  are  being  made  only  in  accordance with  authorizations  of
management and directors of the Company; and

Provide  reasonable  assurance  regarding  prevention  or  timely  detection  of unauthorized  acquisition,  use  or  disposition  of  the  Company’s  assets  that could  have  a
material effect on the financial statements.

All  internal  control  systems,  no  matter  how  well  designed,  have  inherent  limitations.  Therefore,  even  those  systems  determined  to  be  effective  can  provide  only  reasonable
assurance  with  respect  to  financial  statement  preparation  and  presentation. Also,  projections  of  any  evaluation  of  effectiveness  to  future  periods  are  subject  to  the  risk  that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, management used the framework
set forth in the report entitled Internal Control - - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The
COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities,
(iv) information and communication, and (v) monitoring. Based on our assessment we determined that, as of December 31, 2010, the Company’s internal control over financial
reporting is effective based on those criteria.

Child, Van Wagoner & Bradshaw, PLLC, Certified Public Accountants (“CVB”), our independent registered public accounting firm, has performed an audit of the effectiveness
of  the  Company’s  internal  control  over  financial  reporting  as  of  December  31,  2010,  and,  as  part  of  its  audit,  has  issued  its  attestation  report  on  the  effectiveness  of  the
Company’s internal controls over financial reporting herein as of December 31, 2010. CVB’s attestation report is included in this Annual Report on Form 10-K on page F-2.
This audit is required to be performed in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our independent auditors were
given unrestricted access to all financial records and related data.

(c) Changes in internal control over financial reporting

During the fourth quarter of 2010, there were no changes in our internal control over financial reporting identified in connection with the evaluation performed during the fiscal
year covered by this report that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

Item 9B. Other Information.

None.

Item 10. Directors and Executive Officers of the Registrant.

PART III

The information required by Item 10 of Part III is included in our Proxy Statement relating to the 2011 Annual Meeting of Stockholders and is incorporated herein by reference.

27

 
Item 11. Executive Compensation.

The information required by Item 11 of Part III is included in our Proxy Statement relating to the 2011 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholders.

The information required by Item 12 of Part III is included in our Proxy Statement relating to the 2011 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information required by Item 13 of Part III is included in our Proxy Statement relating to the 2011 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services.

Information required by Item 14 of Part III is included in our Proxy Statement relating to the 2011 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 15. Exhibits and Financial Statement Schedules.

PART IV

The following exhibits are filed with this report, except those indicated as having previously been filed with the Securities and Exchange Commission 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

3.1

3.2

3.3

3.4

3.5
4.1

4.2

4.3
10.1

10.2

10.3

10.4

10.5

Description

  Articles of Incorporation of the registrant as filed with the Secretary of State of Nevada. (Incorporated by reference to Exhibit 3.1 to the Registrant’s registration

statement on Form SB-2 filed on December 11, 2001 in commission file number 333-74914)

  Certificate of Amendment to Articles of Incorporation. (Incorporated by reference to Exhibit 3.1 to the Registrant’s current report on 8-K filed on February 13,

2006)

  Certificate of Amendment to Articles of Incorporation. (Incorporated by reference to appendix A to the Registrant’s definitive information statement on

Schedule 14C filed on July 31, 2006)

  Certificate of Amendment to Articles of Incorporation. (Incorporated by reference to Exhibit 3.1 to the Registrant’s current report on 8-K filed on September 25,

2009)

  Amended and Restated Bylaws of the Registrant. (Incorporated by reference to Exhibit 3.2 to the Registrant’s current report on 8-K filed on July 9, 2007)
2005 Compensation Plan for Outside Consultants of Custom Brand Networks, Inc. dated March 1, 2005 (incorporated by reference from the Company’s
Registration Statement on Form S-8 filed on March 10, 2005).
2005 Augmented Compensation Plan for Outside Consultants of the Company dated August 15, 2005 (incorporated by reference from the Company’s
Registration Statement on Form S-8 filed on August 19, 2005).
2006 Stock Plan (incorporated by reference to Exhibit 10.1 of the current report of the Company on Form 8-K filed February 21, 2006).
Employment Agreement, dated as of February 14, 2006, between the Company and Seth Grae (incorporated by reference to Exhibit 10.2 of the current report of
the Company on Form 8-K filed February 21, 2006).
Teaming Agreement dated February 22, 2006 between The University of Texas System, The University of Texas of the Permian Basin, The University of Texas
at Austin, The University of Texas at Arlington, The University of Texas at Dallas, The University of Texas at El Paso, The City of Andrews, Texas, Andrews
County, Texas, the Midland Development Corporation, the Odessa Development Corporation, Thorium Power and General Atomics (incorporated by reference
from Exhibit 10. the Company’s Registration Statement on Form S-4 filed June 14, 2006).
Employment Agreement, dated July 27, 2006, between the Company and Andrey Mushakov (incorporated by reference to Exhibit 10.1 of the current report of
the Company on Form 8-K filed August 4, 2006).
Independent Director Contract, dated August 21, 2006, between the Company and Victor Alessi (incorporated by reference to Exhibit 10.1 of the current report
of the Company on Form 8-K filed August 25, 2006).
Independent Director Contract, dated October 23, 2006, between the Company and Jack D. Ladd (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed on October 23, 2006).

28

 
 
 
 
 
 
 
10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

14.1
31.1*
31.2*
32*

Independent Director Contract, dated October 23, 2006, between the Company and Daniel B. Magraw (incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K, filed on October 23, 2006).
Employment Agreement, dated February 1, 2007, between James Guerra and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed on October 23, 2007).
Agreement for Ampoule Irradiation Testing in 2006 – 2007, dated December 28, 2007, between Thorium Power, Inc. and Russian Research Centre Kurchatov
Institute (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K, filed on March 26, 2009).
Restricted Stock Grant Agreement, dated July 14, 2009, between Seth Grae and the Company (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed on July 20, 2009).
Stock Option Agreement, dated July 14, 2009, between Seth Grae and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K, filed on July 20, 2009).
Restricted Stock Grant Agreement, dated July 14, 2009, between James Guerra and the Company (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed on July 20, 2009).
Stock Option Agreement, dated July 14, 2009, between James Guerra and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed on July 20, 2009).
Initial Collaborative Agreement, dated July 23, 2009, between the Company and AREVA (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed on July 23, 2009).
Agreement for Consulting Services, dated August 3, 2009, between the Company and AREVA (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed on August 4, 2009).
Collaboration Framework Agreement, dated August 3, 2009, between the Company and AREVA (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed on August 6, 2009).
Agreement for Ampoule Irradiation Testing, effective as of August 21, 2009, between Thorium Power, Inc. and Russian Research Centre Kurchatov Institute
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on August 25, 2009).
Code of Ethics (incorporated by reference from the Company’s Annual Report on Form 10-KSB filed on November 25, 2005).

  Rule 13a-14(a)/15d-14(a) Certification — Principal Executive Officer.
  Rule 13a-14(a)/15d-14(a) Certification — Principal Accounting Officer.
  Section 1350 Certifications.

* Filed herewith

29

 
AUDITED FINANCIAL STATEMENTS

LIGHTBRIDGE CORPORATION

December 31, 2010 and 2009

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Stockholders’ Equity
Notes to Consolidated Financial Statements

F-1

Page
F-2
F-3
F-4
F-5
F-6
F-7- F-22

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Lightbridge Corporation

We have audited the accompanying consolidated balance  sheets of Lightbridge Corporation as of December 31, 2010 and 2009, and the related consolidated
statements of operations, changes in stockholders’ equity, and cash flows for each of the years then ended. We  also have audited Lightbridge Corporation’s
internal control over financial reporting as of December 31, 2010 and 2009, based on criteria established in Internal Control—Integrated Framework issued
by  the Committee  of  Sponsoring  Organizations  of  the  Treadway  Commission  (COSO). Lightbridge  Corporation’s  management  is  responsible  for  these
financial statements, for maintaining effective internal control over financial reporting,  and  for  its  assessment  of  the  effectiveness  of  internal  control over
financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express  an
opinion on these financial statements and an opinion on the company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards  of the Public Company Accounting Oversight Board (United States). Those  standards require that
we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included
obtaining  an  understanding  of  internal control  over  financial  reporting,  assessing  the  risk  that  a  material weakness  exists,  and  testing  and  evaluating  the
design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is  a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance

 
with the policies or procedures may deteriorate.

In  our  opinion,  the  consolidated  financial  statements referred  to  above  present  fairly,  in  all  material  respects,  the  financial position  of  Lightbridge
Corporation as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, Lightbridge Corporation  maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2010 and 2009, based on criteria established in Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

/s/ Child, Van Wagoner & Bradshaw, PLLC

Salt Lake City, Utah

February 15, 2011

F-2

LIGHTBRIDGE CORPORATION 
CONSOLIDATED BALANCE SHEETS 

ASSETS

Current Assets
   Cash and cash equivalents
   Marketable securities
   Restricted cash
   Accounts receivable - project revenue and reimbursable project costs
   Prepaid expenses & other current assets
         Total Current Assets

Property, Plant and Equipment -net

Other Assets
   Patent costs - net
   Security deposits
         Total Other Assets

Total Assets

LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities
   Accounts payable and accrued liabilities
   Deferred revenue
Total Liabilities

Commitments and contingencies

Stockholders' Equity
Preferred stock, $0.001 par value, 50,000,000 authorized shares, no shares issued and outstanding

Common stock, $0.001par value, 500,000,000 authorized, 12,430,058 shares issued, 12,345,840 shares outstanding at

December 31, 2010 and 10,168,412 shares issued and outstanding at December 31, 2009

Additional paid-in capital - stock and stock equivalents
Accumulated deficit

Common stock reserved for issuance, 6,451 shares and 5,721 shares at December 31, 2010 and December 31, 2009,

respectively

Total Stockholders' Equity

Total Liabilities and Stockholders' Equity

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

F-3

December 31,
2010

  December 31,

2009

$

$

$

$

 2,373,421 
10,461,357 
550,283 
990,563 
365,261 
14,740,885 

3,028,791 
- 
652,174 
2,421,088 
574,095 
6,676,148 

72,179 

97,559 

377,262 
120,486 
497,748 

241,845 
120,486 
362,331 

 15,310,812 

$

 7,136,038 

$

 2,088,362 
98,110 
2,186,472 

2,162,221 
- 
2,162,221 

- 

- 

12,346 
69,370,261 
(56,286,767)

10,168 
53,652,185 
(48,723,286)

28,500 
13,124,340 

34,750 
4,973,817 

$

 15,310,812 

$

7,136,038 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
 
   
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
 
 
 
   
 
   
 
   
 
   
 
 
 
 
 
 
 
 
   
 
   
 
 
   
 
   
 
   
 
   
 
 
   
 
   
 
   
 
   
 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
   
 
   
 
   
 
   
 
 
 
 
   
 
   
 
 
 
 
 
 
 
 
   
 
   
 
 
 
 
 
 
   
 
   
 
LIGHTBRIDGE CORPORATION 
CONSOLIDATED STATEMENTS OF OPERATIONS 

Revenue:
Revenue
Cost of Services Provided
Gross Margin
Operating Expenses
         General and administrative
         Research and development expenses
Total Operating Expenses
Operating loss
Other Income and (Expenses)
         Interest income
         Unrealized loss on marketable securities and other
Total Other Income and Expenses
Net loss before income taxes
Income taxes
Net loss

Net Loss Per Common Share, Basic and diluted
Weighted Average Number of shares outstanding

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

F-4

Years Ended
December 31,

2010

2009

$

7,586,708 
4,941,030 
2,645,678 

8,677,504 
1,607,886 
10,285,390 
(7,639,712)

193,208 
(116,977)
76,231 
(7,563,481)
- 
(7,563,481)

(0.68)
11,133,927 

$

$

 10,516,378 
6,228,046 
4,288,332 

9,896,027 
1,632,208 
11,528,235 
(7,239,903)

22,422 
(15,831)
6,591 
(7,233,312)
- 
 (7,233,312)

(0.72)
10,021,429 

$

$

$

 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
 
 
 
 
 
 
 
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
 
 
LIGHTBRIDGE CORPORATION 
CONSOLIDATED STATEMENTS OF CASH FLOWS

Operating Activities:
Net Loss
Adjustments to reconcile net loss from operations to net cash used in operating activities:
Stock-based compensation
Depreciation
Unrealized loss on marketable securities
Changes in non-cash operating working capital items:
       Accounts receivable - fees and reimbursable project costs
       Prepaid expenses and other assets
       Security deposits
       Accounts payable, accrued liabilities and other current liabilities
       Deferred revenue
Net Cash Used In Operating Activities

Investing Activities:
Marketable securities
Property, plant and equipment
Patent costs
Net Cash Used In Investing Activities

Financing Activities:
Proceeds from the issuance of common stock - net of offering costs
Redemption of common stock into treasury stock
Restricted cash
Net Cash Provided by Financing Activities

Net Decrease In Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Year

Cash and Cash Equivalents, End of Year

Supplemental Disclosure of Cash Flow Information
Cash paid during the year:
Interest paid
Income taxes paid

Non-Cash Financing Activity
Retirement of Treasury Stock
Grant of Common Stock for Payment of Accrued Liabilities

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

F-5

Years Ended
December 31,

2010

2009

$

 (7,563,481)

$

 (7,233,312)

2,691,509 
27,000 
116,487 

1,430,525 
208,834 
- 
629,878 
98,110 
(2,361,138)

(10,577,844)
(1,620)
(135,417)
(10,714,881)

12,562,310 
(243,552)
101,891 
12,420,649 

4,848,987 
25,482 
- 

2,936,716 
(179,780)
17,932 
(2,976,758)
- 
(2,560,733)

- 
(14,920)
(23,970)
(38,890)

50,344 
- 
(2,174)
48,170 

(655,370)

(2,551,453)

3,028,791 

5,580,244 

 2,373,421 

$

3,028,791 

 - 
 - 

 243,552 
 703,737 

$
$

$
$

- 
- 

- 
- 

$

$
$

$
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
   
 
   
 
 
 
 
   
 
   
 
 
 
 
   
 
   
 
 
   
 
   
 
   
 
   
 
   
 
   
 
 
   
 
   
 
   
 
   
 
LIGHTBRIDGE CORPORATION 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY 

Common Stock

  Additional 

Shares

Amount

Paid-in
Capital

  Accumulated
Deficit

Stock

  Committed

Future
Issuance

Deferred
  Stock-Based
  Compensation  

  Stockholders’
Equity

Balance - December 31, 2008
Stock-based compensation
Net loss for the year
Shares issued - non cash
Shares issued - cash (options exercised)
Balance - December 31, 2009 - originally reported
Reclassification of deferred stock-based compensation to

additional paid-in capital

Balance - December 31, 2009 – reclassified

Stock-based compensation
Shares issued - options exercised and stock redeemed and

retired

Net loss for the year
Shares issued - registered direct offering - net of offering

costs

Balance - December 31, 2010

$

10,049,769 
- 
- 
108,026 
10,617 
10,168,412 

- 
10,168,412 

77,102 

30,334 
- 

 10,050 
- 
- 
108 
10 
10,168 

- 
10,168 

78 

30 
- 

$

$

 48,898,894 
4,483,735 
- 
675,722 
50,334 
54,108,685 

(456,500)
53,652,185 

2,697,681 

$

(41,489,974)
- 
(7,233,312)
- 
- 
(48,723,286)

- 
(48,723,286)

- 

460,155 
- 

- 
(7,563,481)

$

 114,787 
139,000 
- 
(219,037)
- 
34,750 

- 
34,750 

(6,250)

- 
- 

2,069,992 
12,345,840 

$

2,070 
 12,346 

$

12,560,240 
 69,370,261 

$

- 
(56,286,767)

$

- 
28,500 

$

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

F-6

$

 (225,959)
226,252 
- 
(456,793)
- 
(456,500)

456,500 
- 

 7,307,798 
4,848,987 
(7,233,312)
- 
50,344 
4,973,817 

- 
4,973,817 

2,691,509 

460,185 
(7,563,481)

12,562,310 
13,124,340 

$

- 

- 
- 

- 
- 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIGHTBRIDGE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Lightbridge Corporation and Summary of Significant Accounting Policies Nature Of Operations

We  were  incorporated  in  the  state  of  Delaware  on  January  8,  1992,  and  changed  our  name  to  Thorium  Power,  Inc.  (“TPI”)  in April  2001.  On  February  14,  2006,
Novastar Resources Ltd. (“Novastar”), entered into an Agreement and merged on October 6, 2006 with TPI. After the merger, we were known as Thorium Power, Ltd. and TPI
became our wholly-owned subsidiary. On September 29, 2009 we changed our name from Thorium Power, Ltd. to Lightbridge Corporation (“Lightbridge” or the “Company”)
and we effected a 1-for-30 reverse stock split of the Company’s common stock, effective on September 29, 2009. We are now engaged in two operating business segments, our
Technology Business Segment and our Consulting Business Segment (see Note 12-Business Segment Results).

Technology Business Segment

We are working on the development, promotion and marketing of our patented nuclear fuel designs for new and existing pressurized water reactors. Currently, we have
two primary fuel products in the development stage: (1) All-metal fuel technology based on a uranium-zirconium alloy that has a potential to increase power output in a new
reactor  by  up  to  30%,  reduce  initial  capital  cost  per  megawatt  and  annual  operating  costs  per  kilowatt-hour,  and  may  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.

Within  the  thorium-based  fuel  product  family,  we  currently  have  three  types,  or  variants,  of  fuel  designs  in  various  stages  of  development. 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. Our focus in the future will be on the all-metal fuel product mentioned above.

Consulting Business Segment

Our business model expanded with a consulting business segment being established in 2007, providing consulting and strategic advisory services to companies and
governments  planning  to  create  or  expand  electricity  generation  capabilities  using  nuclear  power  plants.  We  had  secured  four  contracts  with  successively  larger  values  for
consulting and strategic advisory services in the United Arab Emirates (“UAE”). On August 1, 2008, we signed separate consulting services agreements with two government
entities Emirates Nuclear Energy Corporation (“ENEC”) and Federal Authority for Nuclear Regulation(“FANR”) formed by Abu Dhabi, one of the member Emirates of the
UAE. Under these two agreements, we are to provide consulting and strategic advisory services over a contract term of five years starting from June 23, 2008, with automatic
renewals of these contracts for one year periods.

In April 2010 and December 2010 we entered into agreements with two other governments 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.

We have also provided nuclear safety consulting advice to U.S. nuclear utilities. We plan to continue and potentially expand this nuclear safety consulting work in the

United States.

F-7

 
Accounting Policies and Pronouncements

Basis of Consolidation

These financial statements include the accounts of Lightbridge, a Nevada corporation, and our wholly-owned subsidiaries, TPI, a Delaware corporation, Lightbridge

International Holding, LLC, a Delaware limited liability company and our foreign branch offices.

All  significant  intercompany  transactions  and  balances  have  been  eliminated  in  consolidation.  We  formed  a  branch  office  in  the  United  Kingdom  in  2008  called
Lightbridge Advisors Limited, which is wholly-owned by Lightbridge International Holding, LLC. We also established a branch office in Moscow, Russia, established in July
2009 and a branch office in the UAE in January 2010, which are also both wholly-owned by Lightbridge International Holding, LLC.

Use of Estimates and Assumptions

The preparation of financial statements, in conformity with accounting principles generally accepted in the United 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  accompanying  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 on deferred tax assets and various contingent liabilities. It is reasonably possible that
these  above-mentioned  estimates  and  others  may  be  adjusted  as  more  current  information  becomes  available,  and  any  adjustment  could  be  significant  in  future  reporting
periods.

F-8

 
Certain Risks, Uncertainties and Concentrations

Our future operations and earnings currently depend on the results of the Company’s operations outside the United States. There can be no assurance that the Company
will  be  able  to  successfully  continue  to  conduct  such  operations,  and  a  failure  to  do  so  would  have  a  material  adverse  effect  on  the  Company’s  research  and  development
activities,  financial  position,  results  of  operations,  and  cash  flows. Also,  the  success  of  the  Company’s  operations  will  be  subject  to  other  numerous  contingencies,  some  of
which are beyond management’s control. These contingencies include general and regional economic conditions, competition, changes in regulations, changes in accounting
and  taxation  standards,  inability  to  achieve  our  overall  long-term  goals,  future  impairment  charges  and  global  or  regional  catastrophic  events.  Because  the  Company  is
dependent on its international operations for almost all its revenue, particularly in one country right now, the Company may be subject to various additional political, economic,
and other uncertainties.

We are currently finalizing our strategic plan for 2011 and are working on determining our future cash needs. Management anticipates, based on its current working
capital and projected working capital requirements, that it will have enough working capital funds to sustain its current operations at its current operating level until sometime
later in the year of 2012 or 2013. In support of our business plan regarding its research and development activities for developing its fuel, we will need to raise additional capital
by  way  of  an  offering  of  equity  securities,  an  offering  of  debt  securities,  a  financing  through  a  bank,  or  a  strategic  alliance  with  another  entity.  We  may  also  need  to  raise
additional capital sooner to support its overhead operation if the consulting business segment becomes non-sustaining. Currently, we are working on revenue opportunities with
the overall goal of increasing our profitability and cash flow.

We participate in a government regulated industry. Our operation results are affected by a wide variety of factors including decreases in  the  use  or  public  favor  of
nuclear power, the ability of our technology, the ability to safeguard the production of nuclear power and safeguarding our patents and intellectual property from competitors.
Due to these factors, we may experience substantial period-to-period fluctuations in our future operating results. Potentially, a loss of a key officer, key management, and other
personnel could impair our ability to successfully execute our business strategy, particularly when these individuals have acquired specialized knowledge and skills with respect
to nuclear power and our operations.

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents, marketable securities and accounts receivable.
Cash equivalents and marketable securities consist primarily of money market funds and mutual bond funds held with one major financial institution with a high credit standing.
The  underlying  fixed-income  investments  of  the  money  market  and  bond  mutual  funds  are  either  United  States  Treasury  securities  or  represent  a  diversified  portfolio  of
investments. Accounts  receivable  are  typically  unsecured  and  are  derived  from  revenues  earned  from  customers  located  around  the  world.  In  2010  and  2009,  we  generated
approximately all of our revenues from customers based outside the U.S., with the majority of customers in the UAE and France. We perform ongoing evaluations to determine
customer credit and we limit the amount of credit we extend, but generally we do not require collateral from our customers. We maintain reserves for estimated credit losses
however no reserve has been set up for 2010 and 2009 as we have not incurred any credit losses from our customers, to date. Our consulting revenues from the ENEC and
FANR contracts are 84% and 96% of our total revenue for 2010 and 2009, respectively.

Reclassifications

Certain prior period amounts have been reclassified to the current presentation. Such reclassifications had no impact on previously reported Net Income, Cash Used in
Operations,  Net  decrease  in  Cash  and  Cash  Equivalents  or  total  Stockholders’  Equity.  The  deferred  stock  compensation  amount  of  $456,500  that  was  presented  on  the
Company’s balance sheet at January 1, 2009 and December 31, 2009 represented the unamortized balance of non-vested stock grants and was a contra-equity offset to the value
of the stock issued under the balance sheet captions “Common Stock” or “Common stock reserved for issuance” until vesting occurs. In accordance with ASC 718-10-25-2,
these costs are not to be shown as deferred stock compensation but recognized as expense as services are provided. We have reclassified the deferred stock based compensation
by eliminating this balance sheet caption, “Deferred stock compensation” and recording a corresponding adjustment (reduction) to Additional paid in capital – stock and stock
equivalents in the amount of $456,500. Total Stockholders’ Equity reported on the accompanying consolidated balance sheet remains the same after this reclassification for
2009, as shown on the accompanying consolidated statement of changes in shareholders’ equity.

Revenue Recognition

The following table presents our revenues by business segment:

F-9

 
Revenues:
Consulting
Technology

Total

Consulting Business Segment

2010

2009

7,244,158 
342,550 

10,257,306 
259,072 

$

 7,586,708 

$

 10,516,378 

At  the  present  time  we  are  deriving  substantially  all  of  our  revenue  from  our  consulting  and  strategic  advisory  services  business  segment,  by  offering  consulting
services to governments outside the United States 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 and conditions of the specific
contract.

Substantially all of our consulting contracts in 2010 and 2009 are with the Executive Affairs Authority (“EAA”) of Abu Dhabi, one of the member Emirates of the

UAE, and the related entities, ENEC and FANR. Revenues recognized from these contracts for 2010 and 2009 were recognized on a time and expense basis.

The revenue recognition from two other government contracts we entered into in April 2010 and December 2010 will be based on the completion and acceptance of
defined  contractual  milestones.  Total  revenue  recognized  under  one  of  the  new  agreements  with  one  foreign  government  in  2010  was  $711,000.  Total  deferred  revenue  as
reported  on  the  accompanying  consolidated  balance  sheets  from  these  two  contracts  at  December  31,  2010  was  $98,110,  representing  deposits  for  consulting  work  to  be
performed in 2011.

Certain customer arrangements require evaluation of the criteria outlined in the accounting standards for reporting revenue “Gross  as  a  Principal  Versus  Net  as  an
Agent” in 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, latitude in establishing prices, our determination of service specifications and our involvement in the provision of services. We have determined,
based on the credit risk that we bear for collecting consulting fees, travel costs and other reimbursable costs from our customers, that in 2010 and 2009 we acted as a principal,
and therefore we are recognizing as revenue all travel costs and other reimbursable costs billed to our customers.

Cost of revenues also includes the expenses associated with the operation of our consulting services including labor, travel expenses and other related consulting costs.
All  costs  directly  related  to  producing  work  under  certain  consulting  agreements  where  revenue  is  recognized  upon  acceptance  of  certain  contractual  milestones  by  our
customer,  are  first  capitalized  as  deferred  project  costs  (reported  as  under  the  caption  prepaid  expenses  and  other  current  assets  on  the  accompanying  consolidated  balance
sheets). Deferred project costs are then recognized or amortized to an expense captioned “cost of consulting services provided” on the accompanying consolidated statement of
operations, when the revenue is to be recognized upon delivery and acceptance of the defined contractual milestones or deliverables.

Technology Business Segment

We recognized revenue from our technology agreement with AREVA upon the completion of certain defined contract deliverables that were accepted by AREVA.

Once our nuclear fuel designs have advanced to a commercially usable stage by either a fuel fabricator or nuclear plant owner/operator, we will seek to license our
technology to them or to major government contractors working for the U.S. or other governments. We expect that our revenue from these license fees will be recognized on a
straight-line basis over the expected period of the related license term.

F-10

 
 
 
 
 
 
   
 
   
 
 
 
 
 
 
   
 
   
 
Stock-Based Compensation

The stock-based compensation expense incurred by Lightbridge for employees and directors in connection with its stock option plan is based on the employee model of
ASC 718, and the fair market value of the options is measured at the grant date. Under ASC 718 employee is defined as “An individual over whom the grantor of a share-based
compensation award exercises or has the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in case law and
currently under U.S. tax regulations. Our advisory board members and consultants do not meet the employer-employee relationship as defined by the IRS and therefore are
accounted for under ASC 505-50.

ASC 505-50-30-11 (previously EITF 96-18) further provides that an issuer shall measure the fair value of the equity instruments in these transactions using the stock

price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date:

i.

ii.

The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); and

The date at which the counterparty’s performance is complete.

We have elected to use the Black-Scholes-Merton pricing model to determine the fair value of stock options on the dates of grant. Restricted stock units are measured
based on the fair market values of the underlying stock on the dates of grant. Shares that are issued to officers on the exercise dates of their stock options may be issued net of
the statutory withholding requirements to be paid by us on behalf of our employees. As a result, the actual number of shares issued will be fewer than the actual number of
shares exercised under the stock option. Also, we recognize stock-based compensation using the straight-line method.

In the years ended December 31, 2010 and 2009, we recognized stock-based compensation of $2.7 million and $4.8 million, respectively. Related income tax benefits

were not recognized, as we incurred a tax loss for both years.

Fair Value of Financial Instruments

The carrying amounts of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate fair

value because of their generally short maturities. We carry marketable securities at fair value.

Cash and Cash Equivalents, Restricted Cash and Marketable Securities

We invest our excess cash primarily in money market mutual funds, and four mutual bond funds. We classify all highly liquid investments with stated maturities of
three months or less from date of purchase as cash equivalents and all highly liquid investments with stated maturities of greater than three months as marketable securities. We
hold cash balances in excess of the federally insured limits of $250,000 with two prominent financial institutions. We deem this credit risk not to be significant. Total cash held
in checking accounts and a money market core cash account, as reported on the accompanying consolidated balance sheets, totaled approximately $2.4 million and $3.0 million
at December 31, 2010 and 2009, respectively.

Restricted cash represents cash being held by one prominent financial institution that is being used as collateral for our corporate credit cards and our letters of credit

issued to some of our customers. The total balance of restricted cash at December 31, 2010 and December 31, 2009 was approximately $550,000 and $652,000, respectively

We determine the appropriate classification of our investments in marketable securities at the time of purchase and reevaluate such designation at each balance sheet
date. We have classified and accounted for our marketable securities as available-for-sale, however we carry these securities at fair value (see below election made to value these
financial instruments at fair market value). The fair value of substantially all securities is determined by quoted market prices.

All marketable securities (consisting of four Vanguard mutual bond funds and one Fidelity mutual money market fund) were purchased in August 2010, were classified
as available-for-sale securities and were reported at their fair value (level 1). A level 1 measurement under the FASB pronouncements is the first tier of a three tier hierarchy for
fair value measurements used in valuation methodologies. This valuation level allows for fair value measurements where the inputs are the quoted prices for the assets in the
active markets. All of our marketable securities have quoted market prices.

F-11

 
 
 
 
 
 
The total quoted fair value of our marketable securities at December 31, 2010 was approximately $10.5 million. This amount was held in the following mutual funds,

Vanguard mutual money market fund - $0.4 million; Vanguard mutual bond funds - $10.1 million. We did not have any marketable securities at December 31, 2009.

The  amount  recorded  as  unrealized  loss,  capital  gain  or  loss,  interest  and  dividends  received,  as  reported  to  us  from  the  financial  institutions  in  which  they  were
reinvested, and that we reported under the caption of other income in the accompanying consolidated statement of operations, totaled approximately $77,000 for the year ended
December  31,  2010.  We  elected  the  fair  value  option  permitted  under  FASB  ASC  825  to  report  the  unrealized  gains  and  losses  from  our  marketable  securities  in  our
accompanying consolidated statement of operations instead of other comprehensive income and loss. The amount recorded as unrealized loss for the year ended December 31,
2010 totaled approximately $0.1 million. The total cost basis of our marketable securities was approximately $10.6 million at December 31, 2010. The difference between the
cost and fair market value of our marketable securities is the unrealized loss reported.

Trade Accounts Receivable

We record accounts receivable at the invoiced amount and we do not charge interest. We review the accounts receivable by amounts due from customers which are
past due, to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, we make judgments about the creditworthiness of
significant customers based on ongoing credit evaluations. We also maintain a sales allowance to reserve for potential credits issued to customers. We determine the amount of
the reserve based on historical credits issued.

There was no provision for doubtful accounts recorded at December 31, 2010 and 2009 as we have not experienced any bad debt write-offs from any of our customers.
Substantially all accounts receivable at December 31, 2010 and 2009are from the FANR and ENEC contracts (see Note 3-Accounts Receivable – Project Revenue and Project
Costs).

Property, Plant and Equipment

Property, plant and equipment is comprised of furniture, computers and office equipment and is stated at cost less accumulated depreciation. Depreciation of furniture,
computers and office equipment is recognized over the estimated useful life of the asset, generally five years utilizing the straight line balance methodology. Upon disposition
of assets, the related cost and accumulated depreciation are eliminated and any gain or loss is included in the statement of income. Expenditures for major improvements are
capitalized. Expenses related to maintenance and repairs are recognized as the costs are incurred.

Income Taxes

Income taxes are accounted for under the asset and liability method in accordance with the United States generally accepted accounting principles Deferred tax assets
and  liabilities  are  recognized  for  the  future  tax  consequences  attributable  to  differences  between  the  financial  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective tax bases as well as operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance to the extent that the recoverability of the asset is
unlikely  to  be  recognized.  We  did  not  provide  any  current  or  deferred  income  tax  provision  or  benefit  for  any  periods  presented  to  date  because  we  have  continued  to
experience a net operating loss since inception (see Note 8–Income Taxes).

The Company adopted the ASC accounting pronouncement “Accounting for Uncertainty in Income taxes”. This pronouncement provides guidance for recognizing and
measuring uncertain tax positions, as defined in the FASB accounting pronouncement “Accounting for Income Taxes”. This pronouncement prescribes a threshold condition that
a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial statements. This pronouncement also provides accounting guidance
on derecognizing, classification and disclosure of these uncertain tax positions.

F-12

 
Foreign Currency

The functional currency of our international subsidiaries is the local currency. We translate the financial statements of these subsidiaries to U.S. dollars using month-
end rates of exchange for assets and liabilities, and average rates of exchange for revenues, costs, and expenses. The translation gains/losses were not significant for the years
ended December 31, 2010 and 2009.

Patents and Legal Costs

Patents  are  stated  on  the  accompanying  consolidated  balance  sheets  at  cost  less  accumulated  amortization.  The  costs  of  the  patents,  once  placed  in  service,  will  be
amortized on a straight-line basis over their estimated useful lives. The amortization periods for our patents range between 17 and 20 years. Our patents have not been placed in
service for the years ended December 31, 2010 and 2009.

Legal costs are expensed as incurred except for legal costs to file for patent protection, which are capitalized and reported as patents on the accompanying consolidated

balance sheets.

Research, Development and Related Expenses

These costs from our Technology business segment are charged to operations in the year incurred and are shown on a separate line on the accompanying Consolidated

Statement of Operations. Research and development and related expenses totaled approximately $1.6 million for each of the years ended December 31, 2010 and 2009.

Segment Reporting

We use the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used
by our chief operating decision makers for making operating decisions and assessing performance, as the source for determining our reportable segments. We have determined
that  we  have  two  operating  segments  as  mentioned  above  and  defined  by  the  FASB  accounting  pronouncement,  “Disclosures  about  Segments  of  an  Enterprise  and  Related
Information”. The two reporting business segments are our technology business and our consulting services business.

Subsequent Events

In May 2009, the FASB issued a new accounting standard which established general accounting standards and disclosure for subsequent events. In accordance with this
standard, we evaluated subsequent events through the date we filed this Annual Report on Form 10-K with the Securities and Exchange Commission (“SEC”) and no subsequent
events occurred that required disclosure in the accompanying consolidated financial statements.

Commitments and Contingencies

Liabilities  for  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 assessment can be reasonably estimated.

Retirement 401K Plan

We have a 401(k) savings plan that was set up in 2006 covering substantially all of our employees. Eligible employees may contribute through payroll deductions.

There were no Company matching contributions made to the 401(k) savings plan in 2010 and 2009.

Recent Accounting Pronouncements

In June 2009, the FASB issued a standard that established the FASB Accounting Standards Codification™ (“ASC”) and amended the hierarchy of generally accepted
accounting principles (“GAAP”) such that the ASC became the single source of authoritative nongovernmental U.S. GAAP. The ASC did not change current U.S. GAAP, but
was intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All previously existing
accounting standard documents were superseded and all other accounting literature not included in the ASC is considered non-authoritative. New accounting standards issued
subsequent to June 30, 2009 are communicated by the FASB through Accounting Standards Updates. For our Company, the ASC was effective July 1, 2009. This standard did
not  have  an  impact  on  our  consolidated  results  of  operations  or  financial  condition.  However,  throughout  the  notes  to  the  accompanying  consolidated  financial  statements
references that were previously made to various former authoritative U.S. GAAP pronouncements have been changed to coincide with the appropriate section of the ASC.

F-13

 
In April 2009, the FASB issued a pronouncement regarding “Interim Disclosures about Fair Value of Financial Instruments Disclosures” to require disclosures about
fair value of financial instruments in interim financial statements as well as in annual financial statements. This new guidance requires these disclosures in all interim financial
statements. This guidance is effective for interim and annual periods ending after June 15, 2009, with early application permitted. The fair value of all cash, receivables and
payables are equal to the carrying amounts.

As of December 31, 2010, there were no other recently issued accounting standards not yet adopted which would have had a material effect on the Company’s financial

statements.

In  October  2009,  the  Financial Accounting  Standards  Board  (“FASB”)  issued Accounting  Standards  Update  (“ASU”)  No.  2009-13,  Multiple-Deliverable  Revenue
Arrangements, or “ASU 2009-13.” ASU 2009-13 establishes the accounting and reporting guidance for arrangements that include multiple revenue-generating activities, and
provides amendments to the criteria for separating deliverables, and measuring and allocating arrangement consideration to one or more units of accounting. The amendments in
ASU  2009-13  also  establish  a  hierarchy  for  determining  the  selling  price  of  a  deliverable.  Enhanced  disclosures  are  also  required  to  provide  information  about  a  vendor’s
multiple-deliverable revenue arrangements, including information about the nature and terms of the arrangement, significant deliverables, and the vendor’s performance within
arrangements. The amendments also require providing information about the significant judgments made and changes to those judgments and about how the application of the
relative  selling-price  method  affects  the  timing  or  amount  of  revenue  recognition.  The  amendments  in ASU  2009-13  are  effective  prospectively  for  revenue  arrangements
entered into or materially modified in fiscal years beginning on or after June 15, 2010, or January 1, 2011 for us. Early application is permitted. The adoption of ASU 2009-13
will not have a material impact on our financial position or results of operations.

Note 2. Net Loss Per Share

Basic  net  loss  per  share  is  computed  using  the  weighted-average  number  of  common  shares  outstanding  during  the  period  except  that  it  does  not  include  unvested
common shares subject to repurchase or cancellation. Diluted net income per share is computed using the weighted-average number of common shares and, if dilutive, potential
common  shares  outstanding  during  the  period.  Potential  common  shares  consist  of  the  incremental  common  shares  issuable  upon  the  exercise  of  stock  options,  warrants,
restricted shares, and unvested common shares subject to repurchase or cancellation. The dilutive effect of outstanding stock options, restricted shares, restricted stock units,
and warrants is not reflected in diluted earnings per share because we incurred net losses for the years ended December 31, 2010 and 2009 and the effect of including these
potential common shares in the diluted earnings per share calculations would be anti-dilutive and are therefore not included in the calculations.

The following table sets forth the computation of the basic and diluted loss per share:

Numerator:
Net loss

Denominator:
Weighted-average common shares outstanding

Basic and diluted net loss per share

F-14

2010

2009

$

$

 (7,563,481)

$

 (7,233,312)

11,133,927 

10,021,429 

 (0.68)

$

 (0.72)

 
 
 
 
 
 
 
 
 
   
 
 
   
 
   
 
 
 
 
   
 
 
   
 
   
 
 
 
 
 
 
   
 
 
Note 3. Accounts Receivable – Project Revenue and Project Costs

ENEC and FANR Projects

The revenue earned in 2010 and 2009 from these two consulting contracts entered into in August 2008 with ENEC and FANR, was approximately $6.4 million for the
year ended December 31, 2010 and was approximately $10.1 million for the year ended December 31, 2009. The variation in revenue reflects the uneven nature of the services
we provide under these consulting projects. The total accounts receivable from the ENEC and FANR was approximately $820,000 at December 31, 2010, and approximately
$2.4 million at December 31, 2009. These amounts represent 83 percent and 100 percent of the total accounts receivable reported of approximately $991,000 and $2.4 million
at December 31, 2010 and 2009, respectively.

We expect to continue to provide strategic advisory services to Abu Dhabi during the five-year term of these consulting agreements and also expect the variation of
revenue from these contracts to continue. Under these agreements, revenue will be recognized on a time and expense basis. We periodically discuss our consulting work with
ENEC and FANR, who will review the work we perform, and our reimbursable travel expenses, and accept our monthly invoicing for services and reimbursable 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 $802,000 and $917,000 for the years ended December 31, 2010 and 2009, respectively. The total travel and other reimbursable
expenses  that  have  not  been  reimbursed  are  being  presented  on  the  accompanying  consolidated  balance  sheets  and  included  in  total  accounts  receivable  in  the  amount  of
approximately$67,000 and $159,000 at December 31, 2010 and 2009, respectively.

The remaining accounts receivable reported at December 31, 2010 and December 31, 2009 from other contracts was approximately $171,000 and $0 at December 31,
2010 and 2009, respectively. Total unbilled accounts receivable reported on the accompanying consolidated balance sheets of approximately $456,000 and $610,000 are for the
months of December 2010 and 2009 respectively, for work that was billed to our clients in January 2011 and January 2010, respectively. Foreign currency exchange losses were
approximately  $1,000  and  $16,000  for  the  years  ended  December  31,  2010  and  2009,  respectively,  which  is  reported  in  the  caption  other  income  and  expense  on  the
accompanying consolidated statement of operations.

Note 4. Prepaid Expenses other Current Assets

Prepaid  Expenses  consists  primarily  of  prepayments  made  for  various  insurance  policies,  deferred  project  costs  relating  to  our  consulting  contracts  and  accounting
software  licensing  costs.  Total  prepaid  expenses  and  other  current  assets  reported  on  the  accompanying  consolidated  balance  sheets  at  December  31,  2010  and  2009  were
approximately $365,000 and $574,000, respectively.

Note 5. Property, Plant and Equipment, net

The following represents the detail of our property, plant and equipment, net at December 31, 2010 and 2009:

Furniture, computers and office equipment
Accumulated Depreciation

Net Book Value

2010

2009

$

$

 136,621 
(64,442)

$

 135,001 
(37,442)

 72,179 

$

 97,559 

Depreciation  expense  for  the  years  ended  December  31,  2010  and  2009  was  approximately  $27,000  and  $25,000,  respectively. Asset  lives  are  five  years  and  the

depreciation method is straight line for all of the above assets. There was no gain or loss on disposition of assets in 2010 and 2009.

F-15

 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
Note 6. Patents and Other Assets

Patents represent legal fees and filing costs that are capitalized and amortized over their estimated useful lives of 17 to 20 years, after they are placed in service. There
were no patents placed in service for the years ended December 31, 2010 and 2009. In 2009 we capitalized approximately $24,000 for patents filing costs, for a total investment
in  patents  of  approximately  $242,000  as  of  December  31,  2009.  In  2010  we  capitalized  approximately  $135,000  for  patent  filing  costs,  for  a  total  investment  in  patents  of
approximately $377,000 at December 31, 2010.

No amortization expense of patents was recorded in either of the years ended December 31, 2010 and 2009. These patents were not placed in service for the years

ended December 31, 2010 and 2009 or in prior years.

Security deposits at December 31, 2010 and 2009 of $120,486 represent the security deposit placed on the Mclean Virginia corporate offices.

Note 7. Accounts Payable and Accrued Liabilities

Accounts payable and accrued expenses consisted of the following:

Trade payables -
Accrued expenses and other
Accrued payroll liabilities

Total

Note 8. Income Taxes

2010

2009

$

$

$

 361,344 
694,531 
1,032,487 

 296,120 
928,054 
938,047 

 2,088,362 

$

 2,162,221 

Our tax provision 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.

The 2010 and 2009 annual effective tax rate is estimated to be at a combined 40% for the U.S. federal and states statutory tax rate.

As of December 31, 2010 and 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 December 31, 2010 and 2009 respectively,
are as follows:

Deferred Tax Assets

Capitalized start-up costs
Stock-based compensation
Net operating loss carryforward
Less: valuation allowance

Total Amount

2010

2009

Deferred Tax Asset Amount
2009
2010

$

$

$

 6,101,739 
20,073,918 
24,992,683 
(51,168,340)

$

6,613,773 
18,958,076 
17,756,315 
(43,328,164)

$

 2,440,696 
8,029,567 
9,997,073 
(20,467,336)

 2,645,509 
7,583,230 
7,102,526 
(17,331,265)

-  

$

- 

$

 - 

$

 - 

We have a net operating loss carry-forward for federal and state tax purposes of approximately $25 million at December 31, 2010  that  is  available  to  offset  future
taxable income, that will begin to expire in the year 2021. For financial reporting purposes, no deferred tax asset was recognized because at December 31, 2010 and 2009,
substantially all of the net operating losses are presently expected to expire unused. As a result, the amount of the deferred tax assets considered realizable was reduced 100% by
a valuation allowance. The change in the valuation allowance was approximately $3,136,000 and $2,893,000 for the years ended December 31, 2010 and 2009, respectively.
Many of the Company’s operating expenses in its 2007 and 2006 tax years were classified under the Internal Revenue Code as capitalized “Start-up Costs” which were not
deductible for tax purposes until 2008.

F-16

 
 
 
 
 
 
 
   
 
   
 
 
 
 
 
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
The Company files a consolidated tax return with its subsidiaries.

In 2009, we prepaid our federal and state income taxes in the amount of $266,000, for estimates for 2008 corporate income taxes that was refunded to the Company in

2009, as no corporate taxes were due in 2008.

Note 9. Commitments and Contingencies

Employment Agreements

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), if all provisions of the employment agreements are met, we
are committed to pay certain benefits, including specified monthly severance.

Operating Leases

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 approximately $43,000 in accordance with the sublease agreement plus parking
fees, and payments increase by a factor of 4% each year thereafter. The monthly straight-line rental expense from August 1, 2008 to December 1, 2013 is $45,189. As a result
of the straight-line rent calculation generated by the one free rent period and rent escalation, we have recorded in the accrued liabilities a deferred rent credit of $98,110 at
December 31, 2010.

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

Year ending - December 31, 2011
Year ending - December 31, 2012
Year ending - December 31, 2013
Total minimum lease payments

Letters of Credit

Total

 564,109 
586,136 
609,016 
 1,759,261 

$

$

At December 31, 2010 we had outstanding letters of credit of approximately $166,000 associated with our consulting contracts that we entered into in 2010 with two

new governments (see Note1-Revenue Recognition).

Note 10. Research and Development Costs

Research Costs

Research and development costs, included in the accompanying consolidated statement of operations amounted to approximately $1.6 million for each of the years
ended December 31, 2010 and 2009. Total cumulative research and development expenses amounted to approximately $9.5 million from January 8, 1992 (date of inception of
Lightbridge) to December 31, 2010.

F-17

 
 
 
 
 
   
 
 
 
Research Agreements

Effective on August 21, 2009, TPI entered into an agreement for ampoule irradiation testing, or the AIT Agreement, with Russian Research Centre Kurchatov Institute
(“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. As of the date hereof, all of the deliverables have been submitted and the entire amount due to Kurchatov Institute under
the TPI has been paid.

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 to 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 $234,161 for
certain R&D work to be completed and all deliverables to be submitted to TPI by December 31, 2010. As of December 31, 2010, a total of 2,832,000 Rubles (approximately
$94,000  at  the  September  30,  2010  exchange  rate)  worth  of  work  was  completed  by  SOSNY  and  its  subcontractors  and  paid.  The  remaining  portion  will  be  paid  upon
completion of the remaining milestones stipulated in the Task Order No. 1.

In addition to the above agreements, there are consulting agreements with several consultants working on various projects for us, which total approximately $10,000

per month.

Note 11. Stockholders’ Equity

At December 31, 2010 there are 500,000,000 shares of authorized common stock. Total common stock outstanding at December 31, 2010 and December 31, 2009 was
12,345,840 and 10,168,412, respectively. At December 31, 2010, there were 6,451 shares reserved for future issuance, 1,034,996 stock warrants and 1,772,348 stock options
outstanding, all totaling 15,159,635 of total stock and stock equivalents outstanding at December 31, 2010.

Registered Direct Offering

On July 22, 2010 we completed an offering (the “Offering”) with certain institutional investors on the sale of 2,069,992 shares of its common stock and warrants to
purchase a total of 1,034,996 shares of its common stock for aggregate gross proceeds, before deducting fees to the Placement Agent and other estimated offering expenses
payable by us, of approximately $13.7 million. The common stock and warrants were sold in fixed combinations, with each combination consisting of one share of common
stock and a warrant to purchase 0.5 shares of common stock. The purchase price was $6.60 per fixed combination. The warrants will become exercisable six months and one
day following the closing date (July 28, 2010) of the Offering and will remain exercisable for seven years from the date of issuance at an exercise price of $9.00 per share. The
exercise  price  of  the  warrants  is  subject  to  adjustment  in  the  case  of  stock  splits,  stock  dividends,  combinations  of  shares  and  similar  recapitalization  transactions.  The
exercisability of some of the warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 4.99% of our common stock. This
limit may be increased to up to 9.99% upon no fewer than 60 days' notice.

We received net proceeds of approximately $12.6 million after payment of certain fees and expenses related to the Offering. These fees and expenses related to this
Offering totaled approximately $1.1 million. Of the total fees and expenses paid, approximately $820,000 plus reimbursable expenses was paid to William Blair & Company,
L.L.C., who served as the placement agent for the Offering. The total fees and expenses of approximating $1.1 million were charged to additional paid-in capital. The allocation
of the proceeds from the offering, based on the relative fair value of the common stock and the warrants resulted in the allocation of approximately $9.0 million to the common
stock and approximately $3.6 million to the warrants which was recorded to additional paid-in capital.

F-18

 
The value of the warrants issued was calculated by using the Black Scholes Valuation Model using the following assumptions: volatility 99%; risk-free interest rate of
2.38%; dividend yield of 0%, and expected term of 7 years. The volatility of the Company’s common stock was estimated by management based on the historical volatility of
the trading history of the Company’s common stock. The risk-free interest rate was based on the Treasury Constant Maturity Rates published by the U.S. Federal Reserve for
periods applicable to the expected life of the warrants. The expected dividend yield was based on the Company’s current and expected dividend policy and the expected term is
equal to the contractual life of the warrants.

The Offering was effected as a takedown off the Company's shelf registration statement on Form S-3 (File No. 333-162671), which became effective on November 24,

2009 pursuant to a prospectus supplement to be filed with the SEC.

Stock-based Compensation – Stock Options and Restricted Stock

Stock Plan

We have a stock-based compensation plan to reward for services rendered by officers, directors, employees and consultants. On July 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)

(ii)

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;

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 December 31, 2010 were 1,772,348 of which 1,332,646 of these options were vested at December 31, 2010. Stock option expense

was approximately $2.1 million and approximately $4.5 million for the years ended December 31, 2010 and 2009, respectively.

Stock option transactions to the employees, directors, advisory board members and consultants are summarized as follows for the years ended December 31, 2010 and

2009 were as follows:

Beginning of the year
Granted
Exercised
Forfeited
Expired

End of year

Options exercisable

2011

1,785,204 
147,318 
(128,139)
- 
(32,035)

1,772,348 

1,332,646 

The above table includes options issued as of December 31, 2010 as follows:

i).

ii).

A total of 566,874 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.

A  total  of  1,076,849  non-qualified  5-10  year  options  have  been  issued,  and  are  outstanding,  to  our  directors,  officers  and  employees at  exercise  prices  of  $5.70  to
$23.85 per share. From this total, 622,484 options are outstanding to the Chief Executive Officer who is also a director, with remaining contractual lives of 4.9- 9.2
years. All other options issued have a remaining contractual life ranging from 0.8 years to 9.8 years.

iii). 

A total of 128,625 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.

F-19

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
   
 
 
 
 
 
 
The following table provides certain information with respect to the above-referenced stock options that are outstanding and exercisable at December 31, 2010:

Exercise Prices
$4.50 - $8.70
$9.00 - $12.90
$13.20-$18.90
$19.20-$23.85

Total

Stock Options Outstanding

Stock Options Vested

  Weighted
Average
Remaining
  Contractual Life  
- Years

Number of
Awards

Number of
Awards

  Weighted
Average
  Exercise Price  

7.83 
5.13 
3.82 
4.65 

5.88 

786,141 
185,674 
493,865 
306,668 

347,828 
184,285 
493,865 
306,668 

1,772,348 

1,332,646 

$
$
$
$

$

 6.70 
 10.46 
 13.95 
 22.84 

 13.62 

The aggregate intrinsic value of stock options outstanding at December 31, 2010 was $157,670 all of which 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 ($5.36 per share as of the close on
December 31, 2010).

In July 2010, two officers of the Company exercised stock option agreements. One agreement was exercised under a broker assisted cashless exercise at a strike price
of $4.68 that resulted in a net purchase of 13,752 shares. One agreement was exercised that allowed the sale of 28,710 shares received by the officer from the stock option
exercise, back to the Company to cover the income tax obligations resulting from the stock option exercise. As a result of this option exercise, 28,710 shares were issued to the
officer and 28,710 shares were purchased from the officer at the fair value of the stock at the date of the option exercise, which was $243,552. This stock purchase was recorded
by the Company as treasury stock, which was immediately retired upon purchase.

Restricted Stock Award Activity

The following summarizes our restricted stock unit activity:

Total awards outstanding at December 31, 2009
Units granted

Units Exercised/Released
Total awards outstanding at December 31, 2010

Total units vested
Total units non-vested
Total shares outstanding at December 31, 2010

F-20

Weighted
Average
Grant
Date Fair
Value

  Number of Units

95,658 
44,253 

(56,000)
83,911 

- 
83,911 
83,911 

$
$

$
$

$
$

 6.13 
 8.50 

 6.38 
 7.19 

 7.19 
 7.19 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
   
 
 
 
 
   
 
   
 
 
   
 
 
 
Scheduled vesting for outstanding restricted stock units at December 31, 2010 is as follows:

Year Ended December 31, 
2012 

2011 

2013 

2014 

Thereafter 

Total 

Scheduled vesting—restricted stock units

36,608 

35,081 

12,222 

-- 

-- 

83,911 

As of December 31, 2010, there was $0.46 million of net unrecognized compensation cost related to unvested restricted stock-based compensation arrangements. This
compensation is recognized on a straight line basis resulting in approximately $0.25 million of the compensation expected to be expensed in the next twelve months, and the
total unrecognized has a weighted average recognition period of 2.12 years.

We  use  the  historical  volatility  of  our  stock  price  since  January  5,  2006,  the  date  we  announced  that  we  were  becoming  a  public  company,  to  estimate  the  future
volatility of our stock. At this time we do not believe that there is a better objective method to predict the future volatility of our stock. We estimate the term of our option
awards based on the full term of the award. To date we have had very few exercises of our options, and those exercises have occurred just before the expiration date of the
awards. Since the strike price of most of our outstanding awards is greater than the price of our stock, generally awards have expired at the end of the term. We estimate the
effect of future forfeitures of our grants based on an analysis of historical forfeitures of unvested grants, as we have no better objective basis for that estimate. The expense that
we have recognized related to our grants of options and restricted stock includes the estimate for future pre-vest forfeitures. We will adjust the actual expense recognized as
future pre-vest forfeitures occur. We have estimated that 1.8% and 4.9% of our option and restricted stock grants respectively, will be forfeited prior to vesting.

Assumptions used in the Black Scholes option-pricing model for the year ended December 31 2010 and 2009 were as follows:

Average risk-free interest rate
Average expected life- years
Expected volatility
Expected dividends

Year ended

12/31/2010

12/31/2009

3.53% 
10 
99.08% 
0% 

2.99% 
10 
98.49% 
0% 

Stock-based compensation expense includes the expense related to (1) grants of stock options, (2) grants of restricted stock, (3) stock issued as consideration for some
of the services provided by our directors and strategic advisory council members, and (4) stock issued in lieu of cash to pay bonuses to our employees and contractors. We
record 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  years  ended  December  31,  2010  and  2009,  approximately  $2.7  million  and  $4.8  million  respectively,  were  recorded  as  total  stock-based  compensation.

Stock-based compensation expense is recorded under the caption general and administrative expenses in the accompanying consolidated statement of operations.

Common Stock reserved for Future Issuance

Common stock reserved for future issuance consists of:

Stock-based compensation

F-21

Shares of
Common
Stock

Amount

6,451 

$

 28,500 

 
 
 
   
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
   
 
   
 
 
Note 12. Business Segment Results

We have two principal business segments, which are (1) technology and (2) consulting services. These business 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  decision-makers,  in  deciding  how  to  allocate  resources  and  in  assessing  performance.  Our  Chief  Executive  Officer,  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.

The Company evaluates performance based on several factors, of which the primary financial measure is business segment income before taxes. The following tables

show the operations of the Company’s reportable business segments for the years ended December 31, 2010 and 2009.

Consulting

Technology

Corporate and
Eliminations

Total

2010

2009

2010

2009

2010

2009

2010

2009

Revenue

7,244,158 

  10,257,306 

342,550 

259,072 

0 

0 

7,586,708 

  10,516,378 

Segment Profit – Pre Tax

1,703,301 

3,771,974 

(1,522,275)

(1,597,699)

(7,744,507)

(9,407,587)

(7,563,481)

(7,233,312)

Total Assets

990,563 

2,297,070 

329,640 

309,274 

  13,990,609 

4,529,694 

  15,310,812 

7,136,038 

Property Additions

Interest Expense

Depreciation

Note 13. Subsequent Events

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

1,620 

14,920 

1,620 

14,920 

0 

0 

0 

0 

786 

206 

26,214 

25,276 

27,000 

25,482 

Effective  this  quarter,  the  Company  implemented  a  new  FASB  accounting  pronouncement,  Subsequent  Events.  This  standard  establishes  general  standards  of
accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The adoption of this accounting pronouncement did not
impact  our  financial  position  or  results  of  operations.  The  Company  evaluated  all  events  or  transactions  that  occurred  after  December  31,  2010  up  through  the  date  these
financial statements were issued. During this period the Company did not have any material recognizable subsequent events.

F-22

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

SIGNATURES

Date: February 22, 2011

LIGHTBRIDGE CORPORATION

By: /s/ Seth Grae                                                                    
       Seth Grae
       Chief Executive Officer,
       President and Director

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
February 22, 2011.

Signature

Title

/s/ Seth Grae
Seth Grae

/s/ James Guerra
James Guerra

/s/ Thomas Graham, Jr.
Thomas Graham, Jr.

/s/ Victor Alessi
Victor Alessi

/s/ Jack Ladd
Jack Ladd

/s/ Daniel B. Magraw, Jr.
Dan Magraw

Chief Executive Officer, President and Director
(Principal Executive Officer)

Chief Financial Officer, Chief Operating Officer and Treasurer
(Principal Financial Officer)

Director

Director

Director

Director

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EXHIBIT INDEX

Exhibit
Number

                                                                                                                       Description

31.1
31.2
32

  Rule 13a-14(a)/15d-14(a) Certification — Principal Executive Officer.
  Rule 13a-14(a)/15d-14(a) Certification — Principal Accounting Officer.
  Section 1350 Certifications.

 
 
 
 
 
 
 
Exhibit 31.1

I, Seth Grae, certify that:

1. I have reviewed this Annual Report on Form 10-K of Lightbridge Corporation;

Certification of Principal Executive Officer

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;

b.  Designed  such  internal  control  over  financial  reporting,  or  caused  such  internal  control  over  financial  reporting  to  be  designed  under  our  supervision,  to  provide
reasonable  assurance  regarding  the  reliability  of  financial  reporting  and  the  preparation  of  financial  statements  for  external  purposes  in  accordance  with  generally
accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.  Disclosed  in  this  report  any  change  in  the  registrant's  internal  control  over  financial  reporting  that  occurred  during  the  registrant's  most  recent  fiscal  quarter  (the
registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting.

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and report financial information; and

b. Any  fraud,  whether  or  not  material,  that  involves  management  or  other  employees  who  have  a  significant  role  in  the  registrant's  internal  control  over  financial
reporting.

Date: February 22, 2011

/s/ Seth Grae                                                           
Seth Grae, Principal Executive Officer 

 
Exhibit 31.2

I, James Guerra, certify that:

1. I have reviewed this Annual Report on Form 10-K of Lightbridge Corporation;

Certification of Principal Financial Officer

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;

b.  Designed  such  internal  control  over  financial  reporting,  or  caused  such  internal  control  over  financial  reporting  to  be  designed  under  our  supervision,  to  provide
reasonable  assurance  regarding  the  reliability  of  financial  reporting  and  the  preparation  of  financial  statements  for  external  purposes  in  accordance  with  generally
accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.  Disclosed  in  this  report  any  change  in  the  registrant's  internal  control  over  financial  reporting  that  occurred  during  the  registrant's  most  recent  fiscal  quarter  (the
registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting.

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and report financial information; and

b. Any  fraud,  whether  or  not  material,  that  involves  management  or  other  employees  who  have  a  significant  role  in  the  registrant's  internal  control  over  financial
reporting.

Date: February 22, 2011

/s/ James Guerra                                                         
James Guerra, Principal Financial Officer 

 
Section 1350 Certifications

STATEMENT FURNISHED PURSUANT TO 
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

Exhibit 32

The undersigned is the Chief Executive Officer and Treasurer or Principal Accounting Officer of Lightbridge Corporation. This Certification is made pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. This Certification accompanies the Annual Report on Form 10-K of Lightbridge Corporation for the year ended December 31, 2010.

The undersigned certifies that such 10-K Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information
contained in such 10-K Report fairly presents, in all material respects, the financial condition and results of operations of Lightbridge Corporation as of December 31, 2010.

This Certification is executed as of February 22, 2011.

By: /s/ Seth Grae                                                                                              
Name: Seth Grae 
Title: President, Chief Executive Officer and Director
(Principal Executive Officer) 

By: /s/ James Guerra                                                                                       
Name: James Guerra 
Title: Chief Financial Officer 
(Principal Financial Officer) 

A signed original of this written statement required by Section 906 has been provided to Lightbridge Corporation and will be retained by Lightbridge Corporation and furnished
to the Securities and Exchange Commission or its staff upon request.

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof,
regardless of any general incorporation language in such filing.