Quarterly report pursuant to Section 13 or 15(d)

Research and Development Costs

v3.22.2
Research and Development Costs
6 Months Ended
Jun. 30, 2022
Research and Development Costs  
Note 5. Research And Development Costs

Note 5. Research and Development Costs

 

On December 19, 2019, the Company was awarded a voucher from the DOE’s GAIN program to support development of Lightbridge Fuel™ in collaboration with Idaho National Laboratory (INL). The scope of the project included experiment design for irradiation of Lightbridge metallic fuel material samples in the Advanced Test Reactor at INL. On April 22, 2020, the Company entered into a Cooperative Research and Development Agreement (CRADA) with Battelle Energy Alliance, LLC (Battelle), the operating contractor of INL, in collaboration with DOE. Signing the CRADA was the last step in the contracting process to formalize a voucher award from the GAIN program. The voucher award can only be used to conduct the experiment defined in the CRADA. All work was completed on this GAIN voucher in the third quarter of 2021. This experiment design forms the basis of the Company’s current and future efforts with the INL. The Company had no cash payment obligations related to the GAIN voucher, but did provide in-kind services consisting of project management, quality assurance, and technical oversight under the CRADA. The DOE incurred payment obligations to Battelle, related to the work done under the GAIN voucher. As of December 31, 2021, the total final project amount recorded as contributed services - research and development was approximately $0.5 million. During the three and six months ended June 30, 2021, the Company recorded approximately $0.1 million and $0.2 million of contributed services - research and development for the work that was completed by Battelle.

 

On March 25, 2021, the Company was awarded a second voucher from the DOE’s GAIN program to support development of Lightbridge Fuel™ in collaboration with the Pacific Northwest National Laboratory (PNNL). The scope of this project is to demonstrate Lightbridge’s nuclear fuel casting process using depleted uranium, a key step in the manufacture of Lightbridge Fuel™. On July 14, 2021, the Company executed a CRADA with the Battelle Memorial Institute, Pacific Northwest Division, the operating contractor of the PNNL, in collaboration with the DOE. The total project value is approximately $0.7 million, with three-quarters of this amount expected to be paid by DOE for the scope of work performed by Battelle and the remaining amount provided by Lightbridge, by providing in-kind services to the project. The project commenced in the third quarter of 2021 and is expected to be completed by the end of 2022. During the three and six months ended June 30, 2022, the Company recorded approximately $0.1 million and $0.2 million of contributed services - research and development, respectively, for the work that was completed by Battelle.

The contributed services - research and development for both GAIN vouchers were recorded in the Other Operating Income section of the condensed consolidated statement of operations and the corresponding amount was recorded as research and development expenses.

 

The R&D services provided under the GAIN vouchers are utilized by the Company in its ongoing development of its next generation nuclear fuel technology. The Company believes that the amounts paid by the DOE to Battelle for the service provided does not differ materially from what the Company would have paid had it directly contracted for these services for its R&D activity.

 

Recent Change in U.S. Tax Law 

 

Prior to 2022, Internal Revenue Code Section 174 allowed taxpayers to deduct R&D expenditures in the year in which they were incurred. The 2017 tax reform act amended Section 174, effective for amounts paid or incurred in tax years beginning after December 31, 2021, to require taxpayers to charge their R&D expenditures to a capital account. Capitalized costs are required to be amortized over five years (15 years for expenditures attributable to foreign research).

 

Due to the Company’s future significant R&D expenses, the impact of this tax law change will mean that a significant portion of our total operating expenses will be taken as a deduction over a 5-year period rather than be currently deductible. The Company does not expect to pay cash taxes as a result of this change as our remaining operating expenses after excluding R&D expenses are significant and the Company expects to continue to generate losses for tax purposes.