Document and Entity Information
Document and Entity Information - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 19, 2018 | Jun. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | Rare Element Resources Ltd | ||
Entity Central Index Key | 1,419,806 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 8,943,000 | ||
Entity Common Stock, Shares Outstanding | 79,591,880 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 4,360 | $ 927 |
Prepaid expenses | 41 | 81 |
Total Current Assets | 4,401 | 1,008 |
Equipment, net | 88 | 106 |
Investment in land | 600 | 600 |
Total Assets | 5,089 | 1,714 |
CURRENT LIABILITIES: | ||
Accounts payable and accrued liabilities | 52 | 65 |
Asset retirement obligation | 0 | 152 |
Total Current Liabilities | 52 | 217 |
Asset retirement obligation | 132 | 205 |
Deferred intellectual property license income (Note 6) | 963 | 0 |
Option liability (Note 6) | 616 | |
Repurchase option | 600 | 600 |
Total Liabilities | 2,363 | 1,022 |
Commitments and Contingencies | ||
SHAREHOLDERS' EQUITY: | ||
Common shares, no par value – unlimited shares authorized; shares outstanding December 31, 2016 and 2015 – 52,941,880 | 106,494 | 103,640 |
Additional paid in capital | 23,659 | 23,626 |
Accumulated deficit | (127,427) | (126,574) |
Total Shareholders' Equity | 2,726 | 692 |
Total Liabilities and Shareholders' Equity | $ 5,089 | $ 1,714 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Statement of Financial Position [Abstract] | ||
Common Stock, Par Value | $ 0 | $ 0 |
Common Stock, Shares Authorized | Unlimited | Unlimited |
Common Stock, Shares Outstanding | 79,591,880 | 52,941,880 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Operating income and (expenses): | ||
Exploration and evaluation | $ (138) | $ (394) |
Corporate administration | (1,183) | (2,606) |
Depreciation | (18) | (38) |
Reclamation obligation revision | 225 | 0 |
Impairment of land and mineral property | 0 | (407) |
Total operating expenses | (1,114) | (3,445) |
Non-operating income and (expenses): | ||
Interest income | 4 | 0 |
Recognized deferred income on the sale of intellectual property (Note 6) | 64 | 0 |
Other income | (16) | 19 |
Gain/(loss) on derivatives | 209 | 0 |
Total non-operating expenses | 261 | 19 |
Net loss | $ 853 | $ 3,426 |
LOSS PER SHARE – BASIC AND DILUTED | $ (0.01) | $ (0.07) |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | 59,513,113 | 52,491,880 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss for the period | $ (853) | $ (3,426) |
Adjustments to reconcile loss for the period to net cash and cash equivalents used in operations: | ||
Depreciation | 18 | 38 |
Reclamation obligation | (225) | 0 |
Impairment of land and mineral property | 0 | 407 |
Unrealized (gain)/loss on derivatives | (209) | 0 |
Recognized deferred income on the sale of intellectual property | (64) | 0 |
Stock-based compensation | 33 | 97 |
Adjustments Total | (1,300) | (2,884) |
Changes in working capital: | ||
Prepaid expenses and other | 40 | 91 |
Accounts payable and accrued liabilities | (13) | (844) |
Net cash and cash equivalents used in operating activities | (1,273) | (3,637) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Proceeds from sale of equipment | 0 | 88 |
Net cash and cash equivalents provided by (used in) investing activities | 0 | 88 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Financing transaction, net (Note 6) | 4,706 | 0 |
Repurchase option | 0 | 595 |
Net cash and cash equivalents provided by (used in) financing activities | 4,706 | 595 |
Increase/(decrease) in cash and cash equivalents | 3,433 | (2,954) |
Cash and cash equivalents - beginning of the period | 927 | 3,881 |
Cash and cash equivalents - end of the period | $ 4,360 | $ 927 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid in Capital | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2015 | $ 103,640 | $ 23,529 | $ (123,148) | $ 4,021 |
Beginning Balance, Shares at Dec. 31, 2015 | 52,941,880 | |||
Stock-based compensation | 97 | 97 | ||
Net loss for the period | (3,426) | 3,426 | ||
Ending Balance, Amount at Dec. 31, 2016 | $ 103,640 | 23,626 | (126,574) | 692 |
Ending Balance, Shares at Dec. 31, 2016 | 52,941,880 | |||
Stock-based compensation | 33 | 33 | ||
Net loss for the period | (853) | 853 | ||
Ending Balance, Amount at Dec. 31, 2017 | $ 106,494 | $ 23,659 | $ (127,427) | $ 2,726 |
Ending Balance, Shares at Dec. 31, 2017 | 79,591,880 |
1. NATURE OF OPERATIONS
1. NATURE OF OPERATIONS | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS | Rare Element Resources Ltd. (“we,” “us,” “Rare Element” or the “Company”) was incorporated under the laws of the Province of British Columbia, Canada, on June 3, 1999. Rare Element has historically been focused on advancing the Bear Lodge REE Project and the Sundance Gold Project both located near the town of Sundance in northeast Wyoming. The Bear Lodge REE Project consists of several large disseminated REE deposits and a proposed hydrometallurgical plant to be located near Upton, Wyoming. The Sundance Gold Project contains an inferred mineral resource primarily composed of three main gold targets within the area of the Bear Lodge property. Because of the more recent focus on the REE deposit’s potential and volatile economic conditions for gold, no drilling or exploration on the Sundance Gold Project has been conducted since the end of 2011. The Company previously announced extensive cost-cutting measures and the placement of the Bear Lodge REE Project on care-and-maintenance to enable us to move the Bear Lodge REE Project forward when market conditions improve. The Company is considering an updated work plan to (i) further progress and enhance our proprietary technology for rare earth processing and separation through pilot plant testing, (ii) progress engineering work to optimize our mine plan, and (iii) determine the timing for the resumption of permitting efforts following receipt of the proceeds from the transaction with Synchron on October 2, 2017 (discussed in Note 6). In 2017, the Company began to further review the gold potential of the Bear Lodge property. The area with gold potential is mostly separate from the known rare earth deposits, including the Bull Hill deposit. There may be, however, significant gold occurrences in some of the identified satellite rare earth deposits. Only further exploration will define the extent of overlapping occurrences, if any. The Company previously reported substantial doubt about its ability to continue as a going concern in its financial statements for the year ended December 31, 2016 and subsequent quarterly financial statements in 2017. Due to the transaction with Synchron (Note 6), the management no longer believes there is substantial doubt as to its ability to continue as a going concern. However, even with the transaction with Synchron, we currently do not have sufficient funds to fully complete feasibility studies, permitting, development and construction of the Bear Lodge REE Project. Therefore, the achievement of these activities will be dependent upon future financings, off-take agreements, joint ventures, strategic transactions, or sales of various assets. There is no assurance, however, that we will be successful in completing any such a financings or transactions. |
2. BASIS OF PRESENTATION
2. BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2017 | |
Basis Of Presentation | |
BASIS OF PRESENTATION | Principles of Consolidation These consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and are inclusive of the accounts of Rare Element Resources Ltd. and its directly and indirectly held wholly owned subsidiaries, which consist of its wholly owned subsidiary Rare Element Holdings Ltd. (“Holdings”) and Holdings’ wholly owned subsidiary, Rare Element Resources, Inc. Rare Element Resources Ltd. was incorporated under the laws of the Province of British Columbia on June 3, 1999. |
3. SUMMARY OF SIGNIFICANT ACCOU
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP 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 expenses during the reporting period. Actual results could differ from those estimates. The amounts which involve significant estimates include reclamation obligations, stock-based compensation, valuation of the option liability, valuation of deferred income and impairments. Cash and Cash Equivalents Cash and cash equivalents consist of cash and liquid investments with an original maturity of three months or less. At December 31, 2017 and 2016, cash and cash equivalents consisted of $4,360 and $927, respectively, of funds held in bank accounts with financial institutions in both Canada and the United States. Mineral Properties Mineral property acquisition costs, including indirectly related acquisition costs, are capitalized when incurred. Acquisition costs include cash consideration and the fair market value of common shares issued as consideration. Properties acquired under option agreements, whereby payments are made at the sole discretion of the Company, are capitalized as mineral property acquisition costs at such time as the payments are made. Exploration costs are expensed as incurred. When it is determined that a mining deposit can be economically and legally extracted or produced based on established proven and probable reserves under SEC Industry Guide 7, development costs related to such reserves and incurred after such determination will be considered for capitalization. The establishment of proven and probable reserves is based on results of feasibility studies. Upon commencement of commercial production, capitalized costs will be amortized over their estimated useful lives or units of production, whichever is a more reliable measure. Capitalized amounts relating to a property that is abandoned or otherwise considered uneconomic for the foreseeable future will be written off. Reclamation Obligations Our mining and exploration activities are subject to various laws and regulations, including legal and contractual obligations to reclaim, remediate, or otherwise restore properties at the time the property is removed from service. Reclamation obligations are recognized when incurred and recorded as liabilities at fair value. The reclamation obligation is based on when spending for an existing disturbance will occur. We reclaim the disturbance from our exploration programs on an ongoing basis; therefore, the portion of our reclamation obligation corresponding to our exploration programs will be settled in the near term and is classified as a current liability. The remaining reclamation associated with environmental monitoring programs is classified as a long-term liability; however, because we have not declared proven and probable reserves as defined by SEC Industry Guide 7, the timing of these reclamation activities is uncertain as the reclamation areas will be utilized once the Project is operating. For exploration stage properties that do not qualify for asset capitalization, the costs associated with the obligation are charged to operations. For development and production stage properties, the costs are added to the capitalized costs of the property and amortized using the units-of-production method. We review, on a quarterly basis, unless otherwise deemed necessary, the reclamation obligation in connection with the Bear Lodge Property. Reclamation obligations are secured by surety bonds held for the benefit of the state of Wyoming in amounts determined by applicable federal and state regulatory agencies. Changes in our reclamation obligations are summarized in the following table: Year ended December 31, 2017 2016 Balance, beginning of period $ 357 $ 357 Completed reclamation and bonding released (225) – Balance, end of period $ 132 $ 357 Common shares Common shares issued for non-monetary consideration are recorded at fair market value based upon the trading price of our shares on the share issuance date. Common shares issued for monetary consideration are recorded at the amount received, less issuance costs. Depreciation Depreciation is computed using the straight-line method. We depreciate computer equipment, furniture and fixtures and geological equipment over a period of three years. We depreciate vehicles over a period of five years. Stock-based Compensation The fair value of stock-based compensation awards issued to employees and directors of the Company is measured at the date of grant and amortized over the requisite service period, which is generally the vesting period. The Company uses the Black-Scholes option valuation model to calculate the fair value of awards granted. The fair value of stock-based compensation awards issued to non-employees is determined on the grant date of such awards and marked to market at each reporting period until the grant vests. The fair value of share-based compensation awards issued to non-employees is calculated using the Black-Scholes option valuation model, and the amount is recorded as an expense with a corresponding increase in additional paid-in-capital. When a stock-based compensation award is exercised and the resulting common shares are issued, the fair value of such award as determined on the date of grant or date of vesting (in the case of a non-employee exercise) is transferred to common shares. In the case of a share-based compensation award that is either cancelled or forfeited prior to vesting, the amortized expense associated with the unvested awards is reversed. Income Taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 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. Under the asset and liability method, 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. A valuation allowance is recognized if it is more likely than not that the entire or some portion of the deferred tax asset will not be recognized. Loss per Share The loss per share is computed using the weighted average number of shares outstanding during the period. To calculate diluted loss per share, the Company uses the treasury stock method and the if-converted method. Diluted loss per share is not presented, as the effect on the basic loss per share would be anti-dilutive. At December 31, 2017 and 2016, we had 6,908,324 and 6,571,824 of potentially dilutive securities, respectively related to outstanding stock options and warrants. As of December 31, 2017, if Synchron exercised its option, this would result in approximately an additional 14,600,000 common shares, which equals approximately 15.49% of our common shares outstanding after issuance. Fair Value of Financial Instruments Our financial instruments may at times consist of cash and cash equivalents, short-term investments, accounts receivable, restricted cash, accounts payable and accrued liabilities. GAAP defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a fair-value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority): · Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. · Level 2 — Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means. · Level 3 — Prices or valuation techniques requiring inputs that are both significant to the fair-value measurement and unobservable. The Company continually monitors its cash positions with, and the credit quality of, the financial institutions with which it invests. The Company maintains balances in various U.S. financial institutions in excess of U.S. federally insured limits. The following table presents information about financial instruments recognized at fair value on a recurring basis as of December 31, 2017 and 2016, and indicates the fair value hierarchy: December 31, 2017 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 4,360 $ – $ – $ 4,360 Option liability $ – $ – $ 616 $ 616 The Deferred intellectual property license income fair value at October 2, 2017 was $1,027 based on an independent third-party valuation. This financial instrument is classified as a Level 3 within the fair value hierarchy and is non-recurring. December 31, 2016 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 927 $ – $ – $ 927 Recent Accounting Pronouncements Revenue Recognition The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09, as subsequently amended, supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, ASU No. 2014-09 supersedes some cost guidance included in Revenue Recognition-Construction-Type and Production-Type Contracts (Subtopic 605-35). Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. This includes significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The new guidance is effective for interim and annual periods beginning after December 15, 2017. As the Company’s current polices are substantially compliant with ASU No. 2014-09, we do not expect a material impact to our financial statements upon adoption. Stock-based Compensation The FASB issued ASU 2017-09, Compensation — Stock Compensation — Scope of Modification Accounting (“ASU 2017-09”), which provides guidance about the types of changes to terms or conditions of a share-based payment award that would require an entity to apply modification accounting. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The amendments in this update should be applied prospectively to an award modified on or after the adoption date. The Company will adopt this standard as of the effective date and does not expect a material impact to our financial statements upon adoption. The FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”) , which is intended to improve the accounting for employee share-based payments and which affects all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. For public companies, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any organization in any interim or annual period. For the year ended December 31, 2016, we adopted this guidance which did not have a material impact on our financial statements. Income taxes On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. We determine if the assessment of a particular income tax effect is “complete” or “incomplete” as of the due date of the financial statements. Those effects for which the accounting is determined to be complete are reported in the enactment period financial statements. For those effects determined to be incomplete, we determine whether a reasonable estimate of those effects can be made. If a reasonable estimate can be made, the estimate is recognized as a provisional amount. If a reasonable estimate cannot be made, no effects are recognized as provisional amounts until the first reporting period in which a reasonable estimate can be made. Provisional amounts are updated when additional information becomes available and the evaluation of such information is complete. We complete the accounting for all provisional amounts within a measurement period of up to one year from the enactment date. |
4. MINERAL PROPERTIES
4. MINERAL PROPERTIES | 12 Months Ended |
Dec. 31, 2017 | |
Extractive Industries [Abstract] | |
MINERAL PROPERTIES | The amounts shown represent acquisition costs, net of impairment charges, and do not necessarily represent present or future values as these are entirely dependent upon the economic recovery of future ore reserves. A summary of current property interests is as follows: Bear Lodge Property, Wyoming, USA The Company, through our indirectly held, wholly owned subsidiary, Rare Element Resources, Inc., holds a 100% interest in 499 unpatented mining claims located on land administered by the USFS and a repurchase option (see Note 5 for discussion) on approximately 640 acres (257 hectares) of fee property, together which contain (1) the Bear Lodge REE Project that contains REE mineralization; and (2) the Sundance Gold Project that contains gold mineralization. The property is situated in the Bear Lodge Mountains of Crook County, in northeast Wyoming. As the Bear Lodge property is on care -and-maintenance, we have recorded an impairment charge of $27 for the year ended December 31, 2016 to reduce the capitalized acquisition costs to zero. |
5. EQUIPMENT AND LAND
5. EQUIPMENT AND LAND | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
EQUIPMENT AND LAND | At December 31, 2017 and 2016, equipment consisted of the following: December 31, 2017 December 31, 2016 Cost Accumulated depreciation Net book value Cost Accumulated depreciation Net book value Computer equipment $ 61 $ 61 $ – $ 61 $ 61 $ – Furniture 13 13 – 13 13 – Geological equipment 437 357 80 437 344 93 Vehicles 87 79 8 87 74 13 $ 598 $ 510 $ 88 $ 598 $ 492 $ 106 Depreciation expense for the year ended December 31, 2017 and 2016 was $18 and $38, respectively. We evaluate the recoverability of the carrying value of equipment when events and circumstances indicate that such assets might be impaired. On April 29, 2013, we completed a land acquisition from the state of Wyoming in conjunction with a third-party land exchange, resulting in approximately 640 acres being owned by the Company and subject to a royalty retained by the state of Wyoming. The royalty is a non-participating interest at the royalty rate commensurate with the state or federal royalty rate, whichever is higher, for any such mineral(s), at the time of development. The property is immediately adjacent to our mine site, and the cash consideration paid was $980. On October 26, 2016, we sold the approximately 640 acres of non-core real property to Whitelaw Creek LLC, a Wyoming limited liability company (“Whitelaw Creek”), for net proceeds of $595 in cash (the “Land Sale”). We have the right to repurchase the land (i) for $900 within three years following the Land Sale or (ii) for $1,000 after the third anniversary following the Land Sale but on or before the fifth anniversary of the Land Sale, in each case subject to certain adjustments (the “Repurchase Price”). Payment of the Repurchase Price may be made, at Whitelaw Creek’s option, in the form of cash, common shares of the Company, or a combination of cash and common shares of the Company. Payment of any common shares of the Company is subject to a beneficial ownership limitation for Whitelaw Creek and its affiliates collectively of 9.9% of the then-current total number of outstanding common shares of the Company, and in no event may the portion of the Repurchase Price paid in common shares of the Company exceed 5 million shares. Valuation of the common shares of the Company for purposes of payment of the Repurchase Price is based on the 10-day volume-weighted average closing price of such shares as of the closing date of the Land Sale, subject to certain conditions. As a result, we reduced the carrying value of the land by $380 to $600. For accounting purposes, we are utilizing the profit-sharing method for real estate transactions under U.S. GAAP as it is unlikely we will repurchase the land in the near term. Under this method, we have classified our value in the land as an asset on our Consolidated Balance Sheet titled “Investment in land” and the value of the Repurchase Price as a liability on our Consolidated Balance Sheet titled “Repurchase option”. |
6. SHAREHOLDERS_ EQUITY
6. SHAREHOLDERS’ EQUITY | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
SHAREHOLDERS’ EQUITY | Transaction with Synchron On August 18, 2017, the Company and General Atomics Uranium Resources, LLC, executed a term sheet for the purchase of common shares of the Company and the grant of an option to purchase common shares, and intellectual property rights (the “Term Sheet”). The Term Sheet provided that, upon the terms and subject to the conditions set forth in the Term Sheet, among other things, (i) General Atomics Uranium Resources, LLC or one or more of its affiliates (“General Atomics”) would pay $500 in cash (the “Preliminary Payment”) to the Company within three business days of the execution of the Term Sheet; (ii) the Company and General Atomics would enter into an investment agreement (the “Investment Agreement”), an option agreement (the “Option Agreement”) and an intellectual property rights Agreement (the “IP Rights Agreement), all discussed below, for gross proceeds of $4,752 in cash, less the Preliminary Payment, at the closing of the transaction. On October 2, 2017, the Company and Synchron, a subsidiary of General Atomics Technologies Corporation (“Synchron”), completed the transaction in accordance with the following terms. Pursuant to an Investment Agreement the Company: (i) issued to Synchron 26,650,000 common shares of the Company (the “Acquired Shares”), which constituted approximately 33.5% of the issued and outstanding common shares of the Company; (ii) received gross proceeds of $4,752 in cash less the Preliminary Payment; and (iii) granted Synchron an option (the “Option”) to purchase approximately an additional 15.49% of the Company’s fully diluted common shares immediately after the exercise for an aggregate exercise price of an additional $5,040. Synchron’s ownership percentage, immediately after giving effect to such exercise, is limited to 49.9% of the Company’s common shares issued and outstanding. The Option is exercisable for a period up to four years from the initial investment. Additionally, the parties executed an IP Rights Agreement, whereby Synchron received rights to use and improve the Company’s intellectual property relating to our patents-pending and related technical information. The Company made customary representations and warranties in the Investment Agreement. The representations and warranties of the parties survive the closing of the transactions contemplated by the Investment Agreement until the earliest to occur of (i) the fourth anniversary of such closing and (ii) the exercise date of the Option. Pursuant to and subject to the terms and conditions of the Investment Agreement, Synchron is entitled to nominate two directors for appointment or election to the Company’s Board of Directors, where the Board is comprised of six or seven directors following such appointment. If the Option is exercised in full and Synchron continues to own the Acquired Shares, then Synchron is entitled to nominate one additional director for appointment or election to the Company’s Board of Directors. On November 17, 2017, two Synchron designees were appointed to the Company’s Board of Directors. Pursuant to and subject to the terms and conditions of the Investment Agreement, absent a waiver approved by the Company’s Board of Directors with the concurrence of a majority of Synchron’s director designees, the Company may not take the following major actions without the approval of the holders of a majority of the common shares then outstanding: (i) authorizing the issuance of additional shares of capital stock of the Company; (ii) incurring indebtedness in excess of $1,000; (iii) entering into any transaction or series of related transactions involving the acquisition of any assets or equity interests or the disposition of the Company’s assets, in each case involving consideration in excess of $1,000; or (iv) authorizing any dividend or distribution. In addition, pursuant to and subject to the terms and conditions of the Investment Agreement, Synchron has (A) the right to purchase its pro rata share of any common shares that are issued by the Company in connection with any financing, (B) certain customary piggyback registration rights for the common shares of the Company held by Synchron and (C) certain information and indemnification rights. Pursuant to the IP Rights Agreement, Synchron and its affiliates were granted certain rights to the Company’s intellectual property relating to our patents-pending and related technical information. Subject to the terms and conditions of the IP Rights Agreement, Synchron and its affiliates were granted a perpetual non-exclusive license in the Company’s intellectual property which, upon exercise of the Option, will become exclusive to Synchron and its affiliates, subject to all rights in the intellectual property retained by the Company. The Company made certain representations and warranties as to the current status of its intellectual property at the time of the license grant. In addition, pursuant to and subject to the terms and conditions of the IP Rights Agreement, Synchron (i) will receive a royalty-free exclusive right to the Company’s rare earth intellectual property if the Option is exercised in full but (ii) will be required to pay a commercially reasonable royalty to the Company for its intellectual property if Synchron does not exercise the Option prior to its expiration. The Company engaged a third-party valuation firm to determine the fair value of each component of the transaction: the Investment Agreement, the Option Agreement and the IP Rights Agreement. As of the close of the transaction, the gross value of each component was determined to be as follows: Investment Agreement $2,900, Option Agreement $825 and the IP Rights Agreement $1,027. The costs incurred to complete the transaction were allocated to each component based on relative fair value to cost of equity, operating expenses and reduction to deferred income as they related to each component, respectively. The value of the common shares was determined using a Probability-Weighted Expected Return Method (“PWERM”) analysis, which included six different probability weighted scenarios based on the calculated enterprise value of the Company utilizing assumptions from the pre-feasibility study completed in 2014 and current rare earth pricing in a discounted cash flow analysis. Due to the variability in the number of common shares that may be issued upon exercised of the Option Agreement, the Option Agreement is considered a derivative liability, as a result we revalue the option liability at the end of each reporting period, until the Option is exercised or expired. Any gains or losses from the revaluation are recorded to the Consolidated Statements of Operations. The fair value of the Option Agreement as of December 31, 2017 was $616. Gain on the revaluation of the option liability was $209 for the year ended December 31, 2017. The Option was valued at the date of the transaction utilizing the Black-Scholes valuation model on October 2, 2017 and December 31, 2017. The significant assumptions are as follows: October 2, 2017 December 31, 2017 Risk-free interest rate 1.79% 2.06% Expected volatility 75% 75% Expected dividend yield Nil Nil Expected term in years 4.0 3.8 Estimated forfeiture rate Nil Nil Estimated exercise price $0.34 $0.34 Estimated enterprise value per common share $0.11 $0.07 The incremental difference between the estimated value of the exclusive and non-exclusive IP Rights Agreement was added to the value from the Black-Scholes value to arrive at the total value of the option. Because Synchron will obtain exclusive rights to the intellectual property if it exercises the Option, the value of the IP Rights Agreement is considered deferred income as the Company retains title to the rare earth intellectual property until Synchron exercises the Option. We amortize the deferred income using the straight-line method over a period of four years (the term of the option agreement) as this is the period of the Company’s performance obligation related to the IP Rights Agreement. During the year ended December 31, 2017, we amortized $64 of deferred intellectual property income. The value of the IP Rights Agreement was determined using a PWERM analysis for six different probability weighted scenarios using the relief from royalty method based on market royalty rates for similar agreements. Stock-based Compensation We have options outstanding and exercisable that were issued under the . The terms of the RSOP were approved by our shareholders at the annual meeting of shareholders on December 2, 2011. The RSOP established the maximum number of common shares which may be issued under the RSOP as a variable amount equal to 10% of the issued and outstanding common shares on a non-diluted basis. Under the RSOP, our Board of Directors may from time to time grant stock options to individual eligible directors, officers, employees or consultants. The maximum term of any stock option is 10 years. The exercise price of a stock option is not less than the closing price on the last trading day preceding the grant date. The Board retains the discretion to impose vesting periods on any options granted The fair value of stock option awards granted to directors, officers, employees and/or consultants of the Company are estimated on the grant date using the Black-Scholes option valuation model and the closing price of our common shares on the grant date. The significant assumptions used to estimate the fair value of stock option awards using the Black-Scholes option valuation model are as follows: For the years ended December 31, 2017 2016 Risk-free interest rate 0.8 – 2.0% 1.9% Expected volatility 113 – 133% 91 – 109% Expected dividend yield Nil Nil Expected term in years 5.0 5.0 Estimated forfeiture rate Nil Nil The following table summarizes stock option activity for each of the years ended December 31, 2017 and 2016: For the years ended December 31, 2017 2016 Number of Stock Options Weighted Average Exercise Price Number of Stock Options Weighted Average Exercise Price Outstanding, beginning of period 3,694,900 $4.61 4,578,700 $4.61 Granted 900,000 0.23 1,600,000 0.04 Cancelled/Expired (563,500) 1.34 (2,483,800) 6.12 Outstanding, end of period 4,031,400 $0.44 3,694,900 $0.94 Exercisable, end of period 3,281,400 $0.49 3,232,400 $1.06 A summary of stock option activity as of December 31, 2017 and changes during the year then ended are presented below. Non-vested Stock Options Number Outstanding Weighted Average Grant Date Fair Value Non-vested at December 31, 2016 462,500 $ 0.03 Granted 900,000 Vested (612,500) Non-vested at December 31, 2017 750,000 $ 0.25 The stock-based compensation cost recognized in our Consolidated Statements of Operations for the years ended December 31, 2017 and 2016 was $33 and $97, respectively. As of December 31, 2017, there was $137 of unrecognized compensation cost related to 750,000 unvested stock options. This cost is expected to be recognized over a weighted-average remaining period of approximately 1.5 years. At December 31, 2017, the intrinsic value of outstanding and exercisable stock options was $297. Warrants Each outstanding warrant is exercisable for one of the Company’s common shares and was issued to investors in connection with the registered direct offering of the Company that closed on April 29, 2015. In addition, the Company issued warrants to a placement agent in connection with the offering, under the same terms as those issued to investors. The exercise price and exercise period of the warrants are outlined below: Financing Investor Warrants Placement Agent Warrants Total Warrants Exercise Price per Share Expiration Date April 29, 2015 offering 2,615,385 261,539 2,876,924 $0.85 4/29/18 The value of the warrants issued to the placement agent (non-employee) for its services in connection with the April 29, 2015 offering was offset against the proceeds of the financing. On September 27, 2016, 1,472,557 warrants that were issued as part of the September 27, 2013 registered direct offering of the Company expired unexercised. The following table summarizes activity for warrants for the years ended December 31, 2017 and 2016: For the year ended December 31, For the year ended December 31, 2016 2017 Number of Options and Warrants Weighted-Average Exercise Price (USD$) Number of Options and Warrants Weighted-Average Exercise Price (USD$) Outstanding, beginning of period 2,876,924 $ 0.85 4,349,481 $ 1.97 Expired – – 1,472,557 4.15 Outstanding, end of period 2,876,924 $ 0.85 2,876,924 $ 0.85 |
7. INCOME TAX
7. INCOME TAX | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAX | We recognize future tax assets and liabilities for each tax jurisdiction based on the difference between the financial reporting and tax bases of assets and liabilities using the enacted tax rates expected to be in effect when the taxes are paid or recovered. A valuation allowance is provided against net future tax assets for which we do not consider the realization of such assets to meet the required “more likely than not” standard. Our future tax assets and liabilities at December 31, 2017 and 2016 include the following components: As of December 31, As of December 31, 2017 2016 Deferred tax assets: Non-current: Accrued vacation and deferred revenue $ 6 $ 10 Noncapital loss carryforwards, Canada 2,709 2,671 Capital loss carryforwards, Canada 7 7 Net operating loss carryforwards, U.S. 12,581 17,743 Mineral properties 5,763 11,076 Reclamation provision 28 122 Equipment 165 254 Share based compensation 624 1,032 Research and development 1,456 2,358 Deferred tax assets 23,339 35,273 Valuation allowance (23,285) (35,273) Net $ 54 $ - Deferred tax liabilities: Non-Current: Option liability $ (54) $ - Deferred tax liabilities $ (54) $ - Net deferred tax asset/(liability) $ - $ - The composition of our valuation allowance by tax jurisdiction is summarized as follows: As of December 31, 2017 2016 Canada $ 3,171 $ 3,186 United States 20,114 32,087 Total valuation allowance $ 23,285 $ 35,273 On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act of 2017 (“TCJA”). The passage of this legislation resulted in the change in the U.S. statutory rate from 35% to 21% beginning in January of 2018, the elimination of the corporate alternative minimum tax (“AMT”), the acceleration of depreciation for US tax purposes, limitations on deductibility of interest expense, the elimination of net operating loss carrybacks, and limitations on the use of future losses. In accordance with ASC 740, Income Taxes, the impact of a change in tax law is recorded in the period of enactment. Consequently, the Company has recorded a decrease to its net deferred tax assets of $12,414 with a corresponding net adjustment to the valuation allowance for the year ended December 31, 2017. Based on the Company's current interpretation and subject to the release of the related regulations and any future interpretive guidance, the Company believes the effects of the change in tax law incorporated herein are substantially complete. The valuation allowance decreased $11,988 from the year ended December 31, 2016 to the year ended December 31, 2017. There was a decrease in the net deferred tax assets, primarily net operating loss carryforwards (“NOL's”), recognition of previous excess tax benefits pursuant to ASU 2016-09 and exploration spending on mineral properties. The decrease in net deferred tax assets resulted primarily from amortization of capitalized exploration costs, decrease in net deferred tax asset for share based compensation resulting from expirations and cancellations, and the decrease in US tax rate under the TJCA. Because we are unable to determine whether it is more likely than not that the net deferred tax assets will be realized, we continue to record a 100% valuation against the net deferred tax assets. At December 31, 2017, we had U.S. NOL carryforwards of approximately $59,912, which expire from 2018 to 2037. As a result of the TCJA, US NOLs generated in years ending after 2017 have an indefinite carryforward rather than the previous 20 year carryforward. This does not affect losses incurred in years ended in 2017 or earlier. In addition, we had Canadian non-capital loss carryforwards of approximately $10,444, which expire from 2018 to 2037. As of December 31, 2017, there were Canadian capital loss carryforwards of $28. A full valuation allowance has been recorded against the tax effected US and Canadian loss carryforwards as we do not consider realization of such assets to meet the required 'more likely than not' standard. Section 382 of the Internal Revenue Code could apply and limit our ability to utilize a portion of the U.S. NOL carryforwards. No Section 382 study has been completed; therefore, the actual usage of U.S. NOL carryforwards has not been determined. For financial reporting purposes, income/(loss) from continuing operations before income taxes consists of the following components: For the years ended December 31, 2017 2016 Canada $ 80 $ (38) United States (933) (3,388) $ (853) $ (3,426) A reconciliation of expected income tax on net income at statutory rates is as follows: As of December 31, As of December 31, 2017 2016 Net income (loss) $ (853) $ (3,426) Statutory tax rate 26.00% 26.00% Tax expense (recovery) at statutory rate (222) (891) Foreign tax rates (65) (266) Change in tax rates 12,414 548 Share issuance costs amortization (24) (21) Stock-based compensation 25 1,807 Recognition of excess tax benefits (140) – Prior year true-up for loss carryovers – 4 Prior year true-up for property basis adjustments – (7) Change in valuation allowance (11,988) (1,174) Income tax expense (recovery) $ - $ - We do not have any unrecognized income tax benefits. Should we incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of the interest expense and operating expense, respectively. Rare Element and its wholly owned subsidiary, Rare Element Holdings Ltd., file income tax returns in the Canadian federal jurisdiction and provincial jurisdictions, and its wholly owned subsidiary, Rare Element Resources, Inc., files in the U.S. federal jurisdiction and various state jurisdictions. The years still open for audit are generally the current year plus the previous three. However, because we have NOLs carrying forward, certain items attributable to closed tax years are still subject to adjustment by applicable taxing authorities through an adjustment to tax losses carried forward to open years. |
8. COMMITMENTS AND CONTINGENCIE
8. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Potential Environmental Contingency Our exploration and development activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally have become more restrictive. The Company conducts its operations to protect public health and the environment and believes that its operations are materially in compliance with all applicable laws and regulations. We have made, and expect to make in the future, expenditures to comply with such laws and regulations. The ultimate amount of reclamation and other future site-restoration costs to be incurred for existing mining interests is uncertain. |
9. SUPPLEMENTAL DISCLOSURE WITH
9. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS | 12 Months Ended |
Dec. 31, 2017 | |
Supplemental Cash Flow Elements [Abstract] | |
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS | The Company did not have any significant non-cash transactions during the years ended December 31, 2017 or 2016. |
10. SEGMENT INFORMATION
10. SEGMENT INFORMATION | 12 Months Ended |
Dec. 31, 2017 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | The Company operates in a single reportable operating segment, being the exploration of mineral properties. |
11. RECLAMATION OBLIGATION REVI
11. RECLAMATION OBLIGATION REVISION | 12 Months Ended |
Dec. 31, 2017 | |
Reclamation Obligation Revision | |
RECLAMATION OBLIGATION REVISION | During the year ended December 31, 2017, we reduced our reclamation obligation by $225 based on a revision of our previous estimate. The Wyoming Department of Environmental Quality concurred that the completed reclamation work was in compliance with its standards and the estimated amount for the remainder of the reclamation activities was $132. As we do not expect to incur any reclamation obligation activities which would further reduce our obligation during the next 12 months, we have reclassified the current portion of our reclamation obligation to long-term. |
3. SUMMARY OF SIGNIFICANT ACC18
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Use of estimates | The preparation of consolidated financial statements in conformity with GAAP 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 expenses during the reporting period. Actual results could differ from those estimates. The amounts which involve significant estimates include reclamation obligations, stock-based compensation, valuation of the option liability, valuation of deferred income and impairments. |
Cash and cash equivalents | Cash and cash equivalents consist of cash and liquid investments with an original maturity of three months or less. At December 31, 2017 and 2016, cash and cash equivalents consisted of $4,360 and $927, respectively, of funds held in bank accounts with financial institutions in both Canada and the United States. |
Mineral properties | Mineral property acquisition costs, including indirectly related acquisition costs, are capitalized when incurred. Acquisition costs include cash consideration and the fair market value of common shares issued as consideration. Properties acquired under option agreements, whereby payments are made at the sole discretion of the Company, are capitalized as mineral property acquisition costs at such time as the payments are made. Exploration costs are expensed as incurred. When it is determined that a mining deposit can be economically and legally extracted or produced based on established proven and probable reserves under SEC Industry Guide 7, development costs related to such reserves and incurred after such determination will be considered for capitalization. The establishment of proven and probable reserves is based on results of feasibility studies. Upon commencement of commercial production, capitalized costs will be amortized over their estimated useful lives or units of production, whichever is a more reliable measure. Capitalized amounts relating to a property that is abandoned or otherwise considered uneconomic for the foreseeable future will be written off. |
Asset retirement obligations | Our mining and exploration activities are subject to various laws and regulations, including legal and contractual obligations to reclaim, remediate, or otherwise restore properties at the time the property is removed from service. Reclamation obligations are recognized when incurred and recorded as liabilities at fair value. The reclamation obligation is based on when spending for an existing disturbance will occur. We reclaim the disturbance from our exploration programs on an ongoing basis; therefore, the portion of our reclamation obligation corresponding to our exploration programs will be settled in the near term and is classified as a current liability. The remaining reclamation associated with environmental monitoring programs is classified as a long-term liability; however, because we have not declared proven and probable reserves as defined by SEC Industry Guide 7, the timing of these reclamation activities is uncertain as the reclamation areas will be utilized once the Project is operating. For exploration stage properties that do not qualify for asset capitalization, the costs associated with the obligation are charged to operations. For development and production stage properties, the costs are added to the capitalized costs of the property and amortized using the units-of-production method. We review, on a quarterly basis, unless otherwise deemed necessary, the reclamation obligation in connection with the Bear Lodge Property. Reclamation obligations are secured by surety bonds held for the benefit of the state of Wyoming in amounts determined by applicable federal and state regulatory agencies. Changes in our reclamation obligations are summarized in the following table: Year ended December 31, 2017 2016 Balance, beginning of period $ 357 $ 357 Completed reclamation and bonding released (225) – Balance, end of period $ 132 $ 357 |
Common shares | Common shares issued for non-monetary consideration are recorded at fair market value based upon the trading price of our shares on the share issuance date. Common shares issued for monetary consideration are recorded at the amount received, less issuance costs. |
Depreciation | Depreciation is computed using the straight-line method. We depreciate computer equipment, furniture and fixtures and geological equipment over a period of three years. We depreciate vehicles over a period of five years. |
Stock-based compensation | The fair value of stock-based compensation awards issued to employees and directors of the Company is measured at the date of grant and amortized over the requisite service period, which is generally the vesting period. The Company uses the Black-Scholes option valuation model to calculate the fair value of awards granted. The fair value of stock-based compensation awards issued to non-employees is determined on the grant date of such awards and marked to market at each reporting period until the grant vests. The fair value of share-based compensation awards issued to non-employees is calculated using the Black-Scholes option valuation model, and the amount is recorded as an expense with a corresponding increase in additional paid-in-capital. When a stock-based compensation award is exercised and the resulting common shares are issued, the fair value of such award as determined on the date of grant or date of vesting (in the case of a non-employee exercise) is transferred to common shares. In the case of a share-based compensation award that is either cancelled or forfeited prior to vesting, the amortized expense associated with the unvested awards is reversed. |
Income taxes | The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 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. Under the asset and liability method, 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. A valuation allowance is recognized if it is more likely than not that the entire or some portion of the deferred tax asset will not be recognized. |
Loss per share | The loss per share is computed using the weighted average number of shares outstanding during the period. To calculate diluted loss per share, the Company uses the treasury stock method and the if-converted method. Diluted loss per share is not presented, as the effect on the basic loss per share would be anti-dilutive. At December 31, 2017 and 2016, we had 6,908,324 and 6,571,824 of potentially dilutive securities, respectively related to outstanding stock options and warrants. As of December 31, 2017, if Synchron exercised its option, this would result in approximately an additional 14,600,000 common shares, which equals approximately 15.49% of our common shares outstanding after issuance. |
Fair value of financial instruments | Our financial instruments may at times consist of cash and cash equivalents, short-term investments, accounts receivable, restricted cash, accounts payable and accrued liabilities. GAAP defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a fair-value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority): · Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. · Level 2 — Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means. · Level 3 — Prices or valuation techniques requiring inputs that are both significant to the fair-value measurement and unobservable. The Company continually monitors its cash positions with, and the credit quality of, the financial institutions with which it invests. The Company maintains balances in various U.S. financial institutions in excess of U.S. federally insured limits. The following table presents information about financial instruments recognized at fair value on a recurring basis as of December 31, 2017 and 2016, and indicates the fair value hierarchy: December 31, 2017 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 4,360 $ – $ – $ 4,360 Option liability $ – $ – $ 616 $ 616 The Deferred intellectual property license income fair value at October 2, 2017 was $1,027 based on an independent third-party valuation. This financial instrument is classified as a Level 3 within the fair value hierarchy and is non-recurring. December 31, 2016 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 927 $ – $ – $ 927 |
Recent accounting pronouncements | Revenue Recognition The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09, as subsequently amended, supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, ASU No. 2014-09 supersedes some cost guidance included in Revenue Recognition-Construction-Type and Production-Type Contracts (Subtopic 605-35). Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. This includes significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The new guidance is effective for interim and annual periods beginning after December 15, 2017. As the Company’s current polices are substantially compliant with ASU No. 2014-09, we do not expect a material impact to our financial statements upon adoption. Stock-based Compensation The FASB issued ASU 2017-09, Compensation — Stock Compensation — Scope of Modification Accounting (“ASU 2017-09”), which provides guidance about the types of changes to terms or conditions of a share-based payment award that would require an entity to apply modification accounting. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The amendments in this update should be applied prospectively to an award modified on or after the adoption date. The Company will adopt this standard as of the effective date and does not expect a material impact to our financial statements upon adoption. The FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”) , which is intended to improve the accounting for employee share-based payments and which affects all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. For public companies, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any organization in any interim or annual period. For the year ended December 31, 2016, we adopted this guidance which did not have a material impact on our financial statements. Income taxes On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. We determine if the assessment of a particular income tax effect is “complete” or “incomplete” as of the due date of the financial statements. Those effects for which the accounting is determined to be complete are reported in the enactment period financial statements. For those effects determined to be incomplete, we determine whether a reasonable estimate of those effects can be made. If a reasonable estimate can be made, the estimate is recognized as a provisional amount. If a reasonable estimate cannot be made, no effects are recognized as provisional amounts until the first reporting period in which a reasonable estimate can be made. Provisional amounts are updated when additional information becomes available and the evaluation of such information is complete. We complete the accounting for all provisional amounts within a measurement period of up to one year from the enactment date. |
3. SUMMARY OF SIGNIFICANT ACC19
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Current and non-current asset retirement obligations | Year ended December 31, 2017 2016 Balance, beginning of period $ 357 $ 357 Completed reclamation and bonding released (225) – Balance, end of period $ 132 $ 357 |
Financial instruments recognized at fair value on a recurring basis | December 31, 2017 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 4,360 $ – $ – $ 4,360 Option liability $ – $ – $ 616 $ 616 December 31, 2016 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 927 $ – $ – $ 927 |
5. EQUIPMENT AND LAND (Tables)
5. EQUIPMENT AND LAND (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
SCHEDULE OF EQUIPMENT AND LAND | December 31, 2017 December 31, 2016 Cost Accumulated depreciation Net book value Cost Accumulated depreciation Net book value Computer equipment $ 61 $ 61 $ – $ 61 $ 61 $ – Furniture 13 13 – 13 13 – Geological equipment 437 357 80 437 344 93 Vehicles 87 79 8 87 74 13 $ 598 $ 510 $ 88 $ 598 $ 492 $ 106 |
6. SHAREHOLDERS_ EQUITY (Tables
6. SHAREHOLDERS’ EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
ScheduleOfAssumptionsUsedTableTextBlock | October 2, 2017 December 31, 2017 Risk-free interest rate 1.79% 2.06% Expected volatility 75% 75% Expected dividend yield Nil Nil Expected term in years 4.0 3.8 Estimated forfeiture rate Nil Nil Estimated exercise price $0.34 $0.34 Estimated enterprise value per common share $0.11 $0.07 |
Fair value assumptions | For the years ended December 31, 2017 2016 Risk-free interest rate 0.8 – 2.0% 1.9% Expected volatility 113 – 133% 91 – 109% Expected dividend yield Nil Nil Expected term in years 5.0 5.0 Estimated forfeiture rate Nil Nil |
Stock option activity | For the years ended December 31, 2017 2016 Number of Stock Options Weighted Average Exercise Price Number of Stock Options Weighted Average Exercise Price Outstanding, beginning of period 3,694,900 $4.61 4,578,700 $4.61 Granted 900,000 0.23 1,600,000 0.04 Cancelled/Expired (563,500) 1.34 (2,483,800) 6.12 Outstanding, end of period 4,031,400 $0.44 3,694,900 $0.94 Exercisable, end of period 3,281,400 $0.49 3,232,400 $1.06 |
Non-vested Stock option activity | Non-vested Stock Options Number Outstanding Weighted Average Grant Date Fair Value Non-vested at December 31, 2016 462,500 $ 0.03 Granted 900,000 Vested (612,500) Non-vested at December 31, 2017 750,000 $ 0.25 |
Exercise price and exercise period | Financing Investor Warrants Placement Agent Warrants Total Warrants Exercise Price per Share Expiration Date April 29, 2015 offering 2,615,385 261,539 2,876,924 $0.85 4/29/18 |
Options and warrants | For the year ended December 31, For the year ended December 31, 2016 2017 Number of Options and Warrants Weighted-Average Exercise Price (USD$) Number of Options and Warrants Weighted-Average Exercise Price (USD$) Outstanding, beginning of period 2,876,924 $ 0.85 4,349,481 $ 1.97 Expired – – 1,472,557 4.15 Outstanding, end of period 2,876,924 $ 0.85 2,876,924 $ 0.85 |
7. INCOME TAX (Tables)
7. INCOME TAX (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Deferred tax assets and liabilities | As of December 31, As of December 31, 2017 2016 Deferred tax assets: Non-current: Accrued vacation and deferred revenue $ 6 $ 10 Noncapital loss carryforwards, Canada 2,709 2,671 Capital loss carryforwards, Canada 7 7 Net operating loss carryforwards, U.S. 12,581 17,743 Mineral properties 5,763 11,076 Reclamation provision 28 122 Equipment 165 254 Share based compensation 624 1,032 Research and development 1,456 2,358 Deferred tax assets 23,339 35,273 Valuation allowance (23,285) (35,273) Net $ 54 $ - Deferred tax liabilities: Non-Current: Option liability $ (54) $ - Deferred tax liabilities $ (54) $ - Net deferred tax asset/(liability) $ - $ - |
Valuation allowance by tax jurisdiction | As of December 31, 2017 2016 Canada $ 3,171 $ 3,186 United States 20,114 32,087 Total valuation allowance $ 23,285 $ 35,273 |
Income/(loss) from continuing operations before income taxes | For the years ended December 31, 2017 2016 Canada $ 80 $ (38) United States (933) (3,388) $ (853) $ (3,426) |
Income tax reconciliation | As of December 31, As of December 31, 2017 2016 Net income (loss) $ (853) $ (3,426) Statutory tax rate 26.00% 26.00% Tax expense (recovery) at statutory rate (222) (891) Foreign tax rates (65) (266) Change in tax rates 12,414 548 Share issuance costs amortization (24) (21) Stock-based compensation 25 1,807 Recognition of excess tax benefits (140) – Prior year true-up for loss carryovers – 4 Prior year true-up for property basis adjustments – (7) Change in valuation allowance (11,988) (1,174) Income tax expense (recovery) $ - $ - |
3. SUMMARY OF SIGNIFICANT ACC23
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Asset Retirement Obligation [Abstract] | ||
Balance, beginning of period | $ 357 | $ 357 |
Completed reclamation and bonding released | (225) | 0 |
Balance, end of period | $ 132 | $ 357 |
3. SUMMARY OF SIGNIFICANT ACC24
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Assets | |||
Cash and cash equivalents | $ 4,360 | $ 927 | $ 3,881 |
Option liability | 616 | ||
Level 1 | |||
Assets | |||
Cash and cash equivalents | 4,360 | 927 | |
Option liability | 0 | ||
Level 2 | |||
Assets | |||
Cash and cash equivalents | 0 | $ 0 | |
Option liability | 0 | ||
Level 3 | |||
Assets | |||
Cash and cash equivalents | 0 | ||
Option liability | $ 616 |
3. SUMMARY OF SIGNIFICANT ACC25
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Accounting Policies [Abstract] | |||
Cash and cash equivalents | $ 4,360 | $ 927 | $ 3,881 |
Potentially dilutive securities | 6,908,324 | 6,571,824 |
5. EQUIPMENT AND LAND (Details)
5. EQUIPMENT AND LAND (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Cost | $ 598 | $ 598 |
Accumulated depreciation | 510 | 492 |
Net book value | 88 | 106 |
Computer equipment | ||
Cost | 61 | 61 |
Accumulated depreciation | 61 | 61 |
Net book value | 0 | 0 |
Furniture | ||
Cost | 13 | 13 |
Accumulated depreciation | 13 | 13 |
Net book value | 0 | 0 |
Geological equipment | ||
Cost | 437 | 437 |
Accumulated depreciation | 357 | 344 |
Net book value | 80 | 93 |
Vehicles | ||
Cost | 87 | 87 |
Accumulated depreciation | 79 | 74 |
Net book value | $ 8 | $ 13 |
5. EQUIPMENT AND LAND (Details
5. EQUIPMENT AND LAND (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 18 | $ 38 |
6. SHAREHOLDERS_ EQUITY (Detail
6. SHAREHOLDERS’ EQUITY (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Estimated enterprise value per common share | $ 0 | $ 0 |
Directors, Officers or Employees | ||
Risk free interest rate | 1.90% | |
Risk free interest rate, minimum | 0.80% | |
Risk free interest rate, maximum | 2.00% | |
Expected volatiility, minimum | 113.00% | 91.00% |
Expected volatiility, maximum | 133.00% | 109.00% |
Expected dividend yield | 0.00% | 0.00% |
Expected term in years | 5 years | 5 years |
Estimated forfeiture rate | 0.00% | 0.00% |
Synchron | ||
Risk free interest rate | 2.06% | |
Expected volatiility | 75.00% | |
Expected dividend yield | 0.00% | |
Expected term in years | 3 years 9 months 18 days | |
Estimated forfeiture rate | 0.00% | |
Estimated exercise price | $ 0.34 | |
Estimated enterprise value per common share | $ 0.07 | |
Synchron | October 2, 2017 | ||
Risk free interest rate | 1.79% | |
Expected volatiility | 75.00% | |
Expected dividend yield | 0.00% | |
Expected term in years | 4 years | |
Estimated forfeiture rate | 0.00% | |
Estimated exercise price | $ 0.34 | |
Estimated enterprise value per common share | $ 0.11 |
6. SHAREHOLDERS_ EQUITY (Deta29
6. SHAREHOLDERS’ EQUITY (Details 1) - Stock Option [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Number of Options | ||
Number of Options Outstanding, Beginning | 3,694,900 | 4,578,700 |
Number of Options Granted | 900,000 | 1,600,000 |
Number of Options Exercised | 0 | |
Number of Options Cancelled/Forfeited/Expired | (563,500) | (2,483,800) |
Number of Options Outstanding, Ending | 4,031,400 | 3,694,900 |
Number of Options Exercisable | 3,281,400 | 3,232,400 |
Weighted Average Exercise Price | ||
Weighted Average Exercise Price Outstanding, Beginning | $ 4.61 | $ 4.61 |
Weighted Average Exercise Price Granted | 0.23 | 0.04 |
Weighted Average Exercise Price Exercised | 0 | |
Weighted Average Exercise Price Cancelled/Forfeited/Expired | 1.34 | 6.12 |
Weighted Average Exercise Price Outstanding, Ending | 0.44 | 4.61 |
Weighted Average Exercise Price Exercisable | $ 0.49 | $ 1.06 |
6. SHAREHOLDERS_ EQUITY (Deta30
6. SHAREHOLDERS’ EQUITY (Details 2) | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Number Outstanding | |
Non-vested at December 31, 2016 | 462,500 |
Granted | 900,000 |
Vested | (612,500) |
Non-vested at December 31, 2017 | 750,000 |
Weighted Average Grant Date Fair Value | |
Non-vested at December 31, 2016 | $ / shares | $ 0.33 |
Non-vested at December 31, 2017 | $ / shares | $ 0.25 |
6. SHAREHOLDERS_ EQUITY (Deta31
6. SHAREHOLDERS’ EQUITY (Details 3) | 1 Months Ended |
Apr. 29, 2015$ / sharesshares | |
Total Warrants | 2,876,924 |
Exercise Price | $ / shares | $ 0.85 |
Expiration Date | Apr. 29, 2018 |
Investor Warrants | |
Total Warrants | 2,615,385 |
Placement Agent Warrants | |
Total Warrants | 261,539 |
6. SHAREHOLDERS_ EQUITY (Deta32
6. SHAREHOLDERS’ EQUITY (Details 4) - Option and Warrants [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Number of Options | ||
Number of Options Outstanding, Beginning | 2,876,924 | 4,349,481 |
Number of Options Granted | 0 | |
Number of Options Expired | 0 | 1,472,557 |
Number of Options Outstanding, Ending | 2,876,924 | 2,876,924 |
Weighted Average Exercise Price | ||
Weighted Average Exercise Price Outstanding, Beginning | $ 0.85 | $ 1.97 |
Weighted Average Exercise Price Granted | 0 | |
Weighted Average Exercise Price Expired | 0 | 4.15 |
Weighted Average Exercise Price Outstanding, Ending | $ 0.85 | $ 0.85 |
6. SHAREHOLDERS_ EQUITY (Detai
6. SHAREHOLDERS’ EQUITY (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Equity [Abstract] | ||
Stock-based compensation cost | $ 33 | $ 97 |
Unvested stock options | 750,000 | |
Unrecognized compensation cost | $ 137 | |
Period for recognition of compensation cost | 1 year 6 months | |
Total intrinsic value of options exercised | $ 32 |
7. INCOME TAX (Details)
7. INCOME TAX (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Current: | ||
Accrued vacation | $ 6 | $ 10 |
Reclamation provision | 52 | |
Total Deferred tax assets current | 62 | |
Non-Current: | ||
Mineral properties | 5,763 | 11,076 |
Reclamation provision | 28 | 122 |
Equipment | 165 | 254 |
Share based compensation | 624 | 1,032 |
Research and development | 1,456 | 2,358 |
Deferred tax assets | 23,339 | 35,273 |
Valuation allowance | (23,285) | (35,273) |
Net | 54 | 0 |
Deferred tax liabilities Non-Current: | ||
Other | (54) | 0 |
Deferred tax liabilities | (54) | 0 |
Net deferred tax asset/(liability) | 0 | 0 |
Canada | ||
Non-Current: | ||
Noncapital loss carryforwards, Canada | 2,709 | 2,671 |
Capital loss, carryforwards, Canada | 7 | 7 |
US | ||
Non-Current: | ||
Net operating loss carryforwards, US | $ 12,581 | $ 17,743 |
7. INCOME TAX (Details 1)
7. INCOME TAX (Details 1) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Income Tax Disclosure [Abstract] | ||
Canada | $ 3,171 | $ 3,186 |
United States | 20,114 | 32,087 |
Total valuation allowance | $ 23,285 | $ 35,273 |
7. INCOME TAX (Details 2)
7. INCOME TAX (Details 2) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Noncontrolling Interest [Abstract] | ||
Canada | $ 80 | $ (38) |
United States | (933) | (3,388) |
Net loss | $ 853 | $ 3,426 |
7. INCOME TAX (Details 3)
7. INCOME TAX (Details 3) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Net income (loss) | $ 853 | $ 3,426 |
Statutory tax rate | 26.00% | 26.00% |
Tax expense (recovery) at statutoy rate | $ (222) | $ (891) |
Foreign tax rates | (65) | (266) |
Change in tax rates | 12,414 | 548 |
Share issuance costs amortization | (24) | (21) |
Stock based compensation | 25 | 1,807 |
Recognition of excess tax benefits | (140) | 0 |
Prior year true-up for loss carryovers | 0 | 4 |
Prior year true-up for property basis adjustments | 0 | (7) |
Change in valuation allowance | (11,988) | (1,174) |
Income tax expense (recovery) | $ 0 | $ 0 |
7. INCOME TAX (Details Narrativ
7. INCOME TAX (Details Narrative) $ in Thousands | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Decrease in valuation allowance | $ (11,988) |
Net operating loss carryforwards | 59,912 |
Canadian Dollars | |
Net operating loss carryforwards | 10,444 |
Capital carryforward | $ 28 |