NOTE 3: RESEARCH AND DEVELOPMENT

Research and development consists of costs incurred related to the construction and testing of a 2-ton/hour test plant in Oklahoma. The estimated cost of moving the test facility to a permanent location and have it reassembled is $750,000. In quarter four 2015, the test plant was commissioned and testing of the plant started. Testing was successfully completed in April 2016. Following discussions with the US Government and with both domestic and international clients the company decided to restart the test facility in order to run specific additional tests at clients and US governments request. The test facility was prepared for testing in August 2017 and testing commenced in October 2017. The test facility was restarted for three specific reasons. Firstly to complete additional detailed tests, secondly to upgrade aspects of the process to further increase the British Thermal Unit value of the beneficiated coal and finally to enable Kiewit, our EPC contractors, to use the process of running the test facility to enable them improve their design of a commercial unit.  The Company plans on arranging for the plant to be moved to a permanent location in Wyoming in November 2017. Several potential locations for the test plant to be moved to have been visited and the company is working with local government and elected officials to determine the most appropriate location. During the nine months ended September 30, 2017 and 2016, we incurred $803,431 and $1,495,348 in research and development expenses, respectively. These costs are primarily related to the preparation of the test facility to restart the final additional tests.