Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 16, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | Rare Element Resources Ltd | |
Entity Central Index Key | 0001419806 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity Incorporation, State or Country Code | A1 | |
Entity File Number | 001-34852 | |
Entity Common Stock, Shares Outstanding | 104,370,245 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 3,485 | $ 5,664 |
Prepaid expenses and other | 84 | 40 |
Total current assets | 3,569 | 5,704 |
Equipment, net | 52 | 56 |
Investment in land | 600 | 600 |
Total assets | 4,221 | 6,360 |
CURRENT LIABILITIES | ||
Accounts payable and accrued liabilities | 133 | 470 |
Total current liabilities | 133 | 470 |
Reclamation obligation | 132 | 132 |
Repurchase option (Note 2) | 913 | 853 |
Total liabilities | 1,178 | 1,455 |
Commitments and contingencies (Note 5) | ||
SHAREHOLDERS' EQUITY: | ||
Common shares, no par value - unlimited shares authorized; shares outstanding September 30, 2020 and December 31, 2019 - 104,301,767 and 103,966,880, respectively | 112,314 | 112,208 |
Additional paid in capital | 24,108 | 23,831 |
Accumulated deficit | (133,379) | (131,134) |
Total shareholders' equity | 3,043 | 4,905 |
Total liabilities and shareholders' equity | $ 4,221 | $ 6,360 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Statement of Financial Position [Abstract] | ||
Common shares, par value | $ 0 | $ 0 |
Common shares, authorized | Unlimited | Unlimited |
Common shares, outstanding | 104,301,767 | 103,966,880 |
CONDENSED CONSOLIDATED UNAUDITE
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Operating expenses: | ||||
Exploration and evaluation | $ (397) | $ (284) | $ (921) | $ (738) |
Corporate administration | (443) | (137) | (1,287) | (616) |
Depreciation | (1) | (1) | (4) | (4) |
Total operating expenses | (841) | (422) | (2,212) | (1,358) |
Non-operating income: | ||||
Interest income | 1 | 7 | 26 | 26 |
Accretion expense (Note 2) | (20) | (20) | (60) | (60) |
Recognized deferred income on the sale of intellectual property | 0 | 60 | 0 | 178 |
Gain on revaluation of option liability (Note 4) | 0 | 11 | 0 | 19 |
Other income | 0 | 0 | 1 | 0 |
Total non-operating income | (19) | 58 | (33) | 163 |
Net loss | $ (860) | $ (364) | $ (2,245) | $ (1,195) |
Loss per share - basic and diluted | $ (0.01) | $ 0 | $ (0.02) | $ (0.01) |
Weighted average number of shares outstanding | 104,301,767 | 79,591,880 | 104,080,693 | 79,591,880 |
CONDENSED CONSOLIDATED UNAUDI_2
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss for the period | $ (2,245) | $ (1,195) |
Adjustments to reconcile net loss for the period to net cash and cash equivalents used in operating activities: | ||
Depreciation | 4 | 4 |
Gain on revaluation of option liability | 0 | (19) |
Recognized deferred income on the sale of intellectual property | 0 | (178) |
Noncash accretion expense - repurchase option | 60 | 60 |
Stock-based compensation | 277 | 54 |
Total adjustments | (1,904) | (1,274) |
Changes in working capital | ||
Prepaid expenses and other | (44) | (34) |
Accounts payable and accrued liabilities | (337) | (145) |
Net cash and cash equivalents used in operating activities | (2,285) | (1,453) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from stock option exercises | 106 | 0 |
Net cash and cash equivalents provided by financing activities | 106 | 0 |
Decrease in cash and cash equivalents | (2,179) | (1,453) |
Cash and cash equivalents - beginning of the period | 5,664 | 2,523 |
Cash and cash equivalents - end of the period | $ 3,485 | $ 1,070 |
CONDENSED CONSOLIDATED UNAUDI_3
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid in Capital | Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2018 | 79,591,880 | |||
Beginning balance, amount at Dec. 31, 2018 | $ 106,494 | $ 23,763 | $ (129,191) | $ 1,066 |
Adjustment January 1, 2019 (Note 2) | 313 | (430) | (117) | |
Stock-based compensation | 54 | 54 | ||
Net loss | (1,195) | (1,195) | ||
Ending balance, shares at Sep. 30, 2019 | 79,591,880 | |||
Ending balance, amount at Sep. 30, 2019 | $ 106,807 | 23,817 | (130,816) | (192) |
Beginning balance, shares at Jun. 30, 2019 | 79,591,880 | |||
Beginning balance, amount at Jun. 30, 2019 | $ 106,807 | 23,797 | (130,452) | 152 |
Stock-based compensation | 20 | 20 | ||
Net loss | (364) | (364) | ||
Ending balance, shares at Sep. 30, 2019 | 79,591,880 | |||
Ending balance, amount at Sep. 30, 2019 | $ 106,807 | 23,817 | (130,816) | (192) |
Beginning balance, shares at Dec. 31, 2019 | 103,966,880 | |||
Beginning balance, amount at Dec. 31, 2019 | $ 112,208 | 23,831 | (131,134) | 4,905 |
Stock option exercise, shares | 334,887 | |||
Stock option exercise, amount | $ 106 | 106 | ||
Stock-based compensation | 277 | 277 | ||
Net loss | (2,245) | (2,245) | ||
Ending balance, shares at Sep. 30, 2020 | 104,301,767 | |||
Ending balance, amount at Sep. 30, 2020 | $ 112,314 | 24,108 | (133,379) | 3,043 |
Beginning balance, shares at Jun. 30, 2020 | 104,301,767 | |||
Beginning balance, amount at Jun. 30, 2020 | $ 112,314 | 23,996 | (132,519) | 3,791 |
Stock-based compensation | 112 | 112 | ||
Net loss | (860) | (860) | ||
Ending balance, shares at Sep. 30, 2020 | 104,301,767 | |||
Ending balance, amount at Sep. 30, 2020 | $ 112,314 | $ 24,108 | $ (133,379) | $ 3,043 |
1. NATURE OF OPERATIONS
1. NATURE OF OPERATIONS | 9 Months Ended |
Sep. 30, 2020 | |
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 been focused on advancing the Bear Lodge REE Project 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. Additionally, the Company holds a 100% interest in the Sundance Gold Project, adjacent to the Bear Lodge REE Project, which contains a historical inferred mineral resource primarily composed of three gold targets within the area of the Bear Lodge property. As a result of the Company’s current focus on the Bear Lodge REE Project, advancement of the Sundance Gold Project has been on hold since 2011. During the nine months ended September 30, 2020, the Company focused on continuing the confirmation and enhancement of our proprietary technology for rare earth processing and separation through pilot testing. Additionally, during 2020, we continued our formal engagement with Umwelt- und Ingenieurtechnik GmbH Dresden (“UIT”), an affiliate of General Atomic Technologies Corporation and Synchron, by entering into a new agreement for the pilot testing (see Note 5 to the Condensed Consolidated Financial Statements for complete discussion regarding the engagement). Further, in 2020, the Company continues to monitor the general U.S. political climate and actions taken by the U.S. government to secure a domestic rare earth supply chain. The Company also is pursuing funding opportunities, including potential government support and assistance, for the development of a demonstration scale recovery and separation plant. In December 2019, a novel strain of coronavirus known as COVID-19 surfaced in China and has since spread around the world with resulting economic, business and social disruption. COVID-19 was declared a worldwide pandemic by the World Health Organization on March 11, 2020. The speed and extent of the spread of COVID-19, and the duration and intensity of resulting economic, business and social disruption and related financial impact are uncertain. Further, the extent and manner to which COVID-19 may affect the Company, and measures taken by governments, the Company or others to attempt to reduce the spread of COVID-19 and its impact on the Company’s operations, cannot be predicted at this time. Prior to COVID-19, the Company’s employee and consultants were already working remotely and have not been materially impacted at this time. The Company has implemented travel restrictions, both domestically and internationally, and the Company’s employees have abided by government shelter-in-place orders. However, the Company has seen delays from certain third party contractors with respect to the pilot plant studies being conducted by UIT (see Note 5), which has slowed the progression of the planned work due to COVID-19 related worker restrictions in Germany. Although the slower progression is not material to the Company’s plans at this time, any continued impact may be material to the completion of the test work planned for this year and our ability to progress our current business plans. Additionally, the economic downturn triggered by COVID-19 and resulting direct and indirect negative impact to the Company cannot be fully determined but could have a prospective material impact to the Company’s future activities, cash flows and liquidity. Further, it is unknown, what, if any, impact COVID-19 and resulting economic slowdown will have on rare earth prices and market supply and demand fundamentals. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act has not had a material impact on the Company as of September 30, 2020; however, we will continue to examine the impacts the CARES Act may have on our business. |
2. BASIS OF PRESENTATION
2. BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | In accordance with U.S. GAAP for interim financial statements, these condensed consolidated financial statements do not include certain information and note disclosures that are normally included in annual financial statements prepared in conformity with U.S. GAAP. Accordingly, these unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements as of December 31, 2019, which were included in our Annual Report on Form 10-K for the year ended December 31, 2019. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (which are of a normal, recurring nature) necessary to present fairly in all material respects our financial position as of September 30, 2020, and the results of our operations and cash flows for the three and nine months ended September 30, 2020 and 2019 in conformity with U.S. GAAP. Interim results of operations for the three and nine months ended September 30, 2020 may not be indicative of results that will be realized for the full year ending December 31, 2020. The financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business beyond the next 12 months following the filing date of this Quarterly Report on Form 10-Q. The Company has incurred losses since inception and further losses are anticipated in the development of its business, however, management does not believe there is substantial doubt as to its ability to continue as a going concern. As of September 30, 2020, the Company has cash and cash equivalents of $3,485 and our rolling 12-month historical cash used in operations was $2,767, a portion of which is related to costs associated with pilot plant testing. However, even with the past transactions with Synchron in 2017 and 2019 (Note 4), we do not have sufficient funds to fully complete feasibility studies, permitting, licensing, demonstration projects, 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 financing, agreement or transaction. Correction of immaterial errors Repurchase Option Liability During October 2020, we identified an error to the consolidated financial statements for the year 2019 and all quarterly periods through September 30, 2020 related to the Repurchase Option Liability. We determined that the Repurchase Option liability was understated for the periods from January 1, 2018 through September 30, 2020 as a result of the incorrect application of ASC 606: Revenue from Contracts with Customers Other Income On October 26, 2016, we sold 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”). Pursuant to the Land Sale agreement, we have the right to repurchase the land for $1,000 after the third anniversary following the Land Sale but on or before the fifth anniversary of the Land Sale (the “Repurchase Option”), 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. At the time of the transaction, for accounting purposes, we were utilizing the profit-sharing method for real estate transactions under U.S. GAAP as it was thought to be unlikely that we would repurchase the land in the near term. Under this method, we classified our value in the land of $600 as an asset on our Consolidated Balance Sheet titled “Investment in land” and the value of the Repurchase Price of $600 as a liability on our Consolidated Balance Sheet titled “Repurchase option”. Under ASC 606 and 610, which were effective January 1, 2018, we should linearly increase the value of the Repurchase Option liability over time until the liability accumulates to the $1,000 at the time of exercise. This results in an accumulated deficit adjustment of $173 as of January 1, 2019 including accretion expense for the year ended December 31, 2018 of $80. For each quarterly period since January 1, 2019, we should have recorded accretion expense of $20 and a corresponding increase to the Repurchase Option liability of $20. See the table below for the impact to the Condensed Consolidated Unaudited Statements of Operations for the three and nine months ended September 30, 2019. Three Months Ended September 30, Nine Months Ended September 30, 2019 (as reported) 2019 (revised) 2019 (as reported) 2019 (revised) Total operating expenses $ (422 ) $ (422 ) $ (1,358 ) $ (1,358 ) Non-operating income (expense) Accretion expense — (20 ) — (60 ) All other income 78 78 223 223 Total non-operating income 78 58 223 163 Net loss $ (344 ) $ (364 ) $ (1,135 ) $ (1,195 ) Loss per share – basic and diluted $ (0.00 ) $ (0.00 ) $ (0.01 ) $ (0.01 ) For the three months ended March 31, 2020 and June 30, 2020, we revised the Condensed Consolidated Unaudited Statements of Operations with an additional $20 of accretion, increased net loss by $20, and noted no impact on loss per share – basic and diluted, for each period. For the six months ended June 30, 2020, we revised the Condensed Consolidated Unaudited Statements of Operations with an additional $40 of accretion, increased net loss by $40, and noted no impact on loss per share – basic and diluted, for the period. Additionally, as of December 31, 2019, we reported the value of the Repurchase Option liability of $600 in our December 31, 2019 Form 10-K as filed on March 17, 2020. As a result of the correct adoption of ASC 606 and 610, the value of the Repurchase Option liability as of December 31, 2019 is $853 rather than $600. Subsequent to December 31, 2019, the Repurchase Option liability and Accumulated deficit should have increased $20 each quarter. Therefore, the previously reported repurchase option liability, total liabilities, and accumulated deficit were understated by $273 and $293 as of March 31, 2020 and June 30, 2020 and total shareholders’ equity was overstated by the same amount in the respective periods. Finally, as a result of the correct adoption of ASC 606 and 610, we record the accretion expense as a noncash item in operating activities of the cash flow statement for each period presented. There is no change to cash used in operating activities for the nine months ended September 30, 2019 of $1,453. Management evaluated the materiality of the error described above from a qualitative and quantitative perspective. Based on such evaluation, we have concluded that while the accumulation of this error was significant as of January 1, 2019, the correction would not be material to any individual prior period, nor did it have a material effect on the trend of financial results, taking into account the requirements of the SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Accordingly, we are correcting this error as of January 1, 2019 and have correctly stated the amounts for the three and nine months ended September 30, 2020 and 2019 Consolidated Financial Statements included in this Form 10-Q. Valuation of Synchron Option Liability As previously disclosed, during October 2019, we identified an error to the consolidated financial statements for the years 2017 and all quarterly periods through September 30, 2019 related to the valuation of the Synchron Option Liability (see Note 4 for complete discussion of the transaction). We were utilizing an incorrect estimated number of common shares to be issued upon Synchron’s exercise of its Option. The valuation utilized approximately 14,600,000 common shares estimated to be issued upon exercise of the Option, The Company disclosed in its annual report on Form 10-K for the years ended December 31, 2018 and 2017, this amount was potentially dilutive to its Shareholders. In each of its interim quarterly disclosures on Form 0-Q, the Company disclosed the number of common shares to be issued would be equivalent to approximately an additional 15.49% of the Company’s fully diluted outstanding common shares immediately after the exercise of the Option. However, the Company issued 24,175,000 Common shares upon exercise of the Option which is consistent with other public disclosures and the intention of the parties under the Option Agreement. The Company had properly disclosed the potential issuance of 24,175,000 common shares in its 2018 proxy statement and the August 21, 2017 8-K filing announcing the term sheet for the transaction. Synchron additionally disclosed 24,175,000 beneficial ownership shares in its 13D filing on October 19, 2017. The effect of correcting this error as of January 1, 2019 to consolidated financial statements was to decrease Deferred intellectual property license income by $56, increase Common shares by $313 and increase Accumulated deficit by $257. Management evaluated the materiality of the error described above from a qualitative and quantitative perspective. Based on such evaluation, we have concluded that while the accumulation of this error was significant to the year ended December 31, 2017, the correction would not be material to any individual prior period, nor did it have a material effect on the trend of financial results, taking into account the requirements of the SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Accordingly, we are correcting this error as of January 1, 2019 and have correctly stated the amounts for the three and nine months ended September 30, 2019 Consolidated Financial Statements included in the Company’s Form 10Q filed on November 18, 2019 and this Form 10-Q. |
3. EQUIPMENT
3. EQUIPMENT | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
EQUIPMENT | September 30, 2020 December 31, 2019 Cost Accumulated depreciation Net book value Cost Accumulated depreciation Net book value Computer equipment $ 1 $ 1 $ $ 1 $ 1 $ Furniture 13 13 13 13 Geological equipment 346 295 51 346 292 54 Vehicles 87 86 1 87 85 2 $ 447 $ 395 $ 52 $ 447 $ 391 $ 56 |
4. SHAREHOLDERS' EQUITY
4. SHAREHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | Transaction with Synchron On October 2, 2017, the Company and Synchron, an affiliate of General Atomic Technologies Corporation (“Synchron”), completed a transaction in accordance with the following terms. Pursuant to an investment agreement (the “Investment Agreement”), the Company (i) issued to Synchron 26,650,000 common shares of the Company, which constituted approximately 34% of the issued and outstanding common shares of the Company; (ii) received gross proceeds of $4,752 in cash, less a $500 preliminary payment received in August 2017; and (iii) granted Synchron an option (the “Option”) to purchase approximately an additional 15% of the Company’s fully diluted common shares for an aggregate exercise price of an additional $5,040. Pursuant to an option agreement (the “Option Agreement”), the Option term was for a period of up to four years from the initial investment. Additionally, the parties executed an intellectual property rights agreement (the “IP Rights Agreement”), whereby Synchron received rights to use and improve the Company’s intellectual property relating to the Company’s patents and patents-pending and related technical information. The Company retains the right to use any such improvements. On October 16, 2019, the Company issued to Synchron 24,175,000 common shares of the Company for a purchase price of $5,040 in connection with the exercise by Synchron of the Option. Accordingly, (i) Synchron’s ownership of outstanding common shares of the Company increased from approximately 34% to approximately 49%, and (ii) Synchron obtained the right to nominate an additional board member and (iii) the intellectual property rights granted to Synchron pursuant to the IP Rights Agreement became exclusive for a perpetual term, free from a licensing fee. The Company retains the right to use the intellectual property and any improvements made by Synchron. The Company engaged a third-party valuation firm to determine the fair value of the three components of the initial Synchron transaction, namely: (i) the Investment Agreement, (ii) the Option Agreement and (iii) the IP Rights Agreement. As of the 2017 closing date of the Synchron transaction, the gross value of each component was determined to be as follows: $2,900 for the Investment Agreement, $825 for the Option Agreement and $1,027 for the IP Rights Agreement. 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 trailing five-year average rare earth pricing in a discounted cash flow analysis. Due to the variability in the number of common shares that could have been be issued upon exercise, the Option was considered a derivative liability. As a result, we revalued the Option liability at the end of each reporting period, until the Option was exercised. Any gains or losses from the revaluation were recorded to the Consolidated Statements of Operations. The gain on the revaluation of the Option liability was $11 and $19 for the three and nine months ended September 30, 2019, respectively. Due to the Option exercise in October 2019, the Company no longer has a liability related to the Option and will no longer have any gains or losses from the revaluation of the Option liability. On September 30, 2019, the Option was valued utilizing the Black-Scholes valuation model. The significant assumptions are as follows: September 30, 2019 Risk-free interest rate 1.63% Expected volatility 75% Expected dividend yield Nil Expected term in years 2.0 Estimated forfeiture rate Nil Estimated exercise price $0.34 Estimated enterprise value per common share $0.00 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 model to arrive at the total value of the Option. Because Synchron and its affiliates would obtain exclusive rights to the intellectual property upon exercise of the Option, the value of the IP Rights Agreement was considered deferred income as the Company retains exclusive title to the intellectual property until Synchron exercises the Option. We amortized the deferred income using the straight-line method over the term of the Option Agreement as this was the period of the Company’s performance obligation related to the IP Rights Agreement. During the three and nine months ended September 30, 2019, we amortized $60 and $178, respectively, of deferred intellectual property income. The value of the IP Rights Agreement at the transaction date 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 As of September 30, 2020, we have 3,700,000 options outstanding that were issued under the 10% Rolling Stock Option Plan. The compensation expense for stock option awards recognized in our consolidated financial statements for the three months ended September 30, 2020 and 2019 was $112 and $20, respectively. The compensation expense for stock option awards recognized in our consolidated financial statements for the nine months ended September 30, 2020 and 2019 was $277 and $54, respectively. As of September 30, 2020, there was approximately $305 of total unrecognized compensation cost related to 1,175,000 unvested stock options that is expected to be recognized over a weighted-average remaining vesting period of 1.1 years. 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 business day prior to the grant date. There were 750,000 and 850,000 options granted during the nine months ended September 30, 2020 and 2019, respectively. 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 nine months ended September 30, 2020 and 2019: Nine months ended September 30, 2020 2019 Risk-free interest rate 1.45% 2.49% Expected volatility 148% 141% Expected dividend yield Nil Nil Expected term in years 5.0 5.0 Estimated forfeiture rate Nil Nil The following table summarizes our stock option activity for each of the nine months ended September 30, 2020 and 2019: 2020 2019 Number of Stock Options Weighted Average Exercise Price Number of Stock Options Weighted Average Exercise Price Outstanding, beginning of period 3,450,000 $ 0.16 3,385,400 $ 0.44 Granted 750,000 0.83 850,000 0.07 Exercised (500,000 ) 0.32 Cancelled/Expired (585,400 ) 0.27 Outstanding, end of period 3,700,000 $ 0.25 3,650,000 $ 0.16 Exercisable, end of period 2,525,000 $ 0.11 2,425,000 $ 0.18 Weighted-average fair value per share of options $ 0.75 $ 0.07 |
5. COMMITMENTS AND CONTINGENCIE
5. COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2020 | |
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, although changes are highly dependent on the current U.S. government’s administration and legislative objectives. 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. Contract commitment – related party On February 14, 2019, the Company executed a technology test work agreement with UIT to further validate the Company’s rare earth processing technology at pilot plant scale. Because Synchron is a significant shareholder of the Company, the two members of the Board of Directors of Rare Element who were appointed by Synchron abstained, and the remaining members of the Board approved the UIT engagement. The UIT pilot plant agreement was for an amount not to exceed $700. Additionally, on September 9, 2019, the Company entered into an agreement to amend the scope terms and conditions related to the February 2019 agreement which resulted in additional estimated costs of $70. The UIT pilot plant test work was completed in December 2019, with test work reports subsequently provided to the Company. On March 9, 2020, the Board of Directors approved the engagement of UIT for further pilot plant test work in an amount not to exceed $650. Under the 2020 engagement, UIT will optimize certain process steps, develop scale-up design criteria for a planned demonstration plant, and confirm operating and capital cost estimates. Consistent with the prior Board action engaging UIT, the three directors of Rare Element appointed by Synchron abstained because Synchron is a significant shareholder of the Company and is an affiliate of UIT. During August 2020 and November 2020, the Company entered into agreements to amend the scope of the March 2020 engagement which will result in additional estimated costs of $131. For the nine months ended September 30, 2020 and 2019, the Company paid $223 and $863, respectively, for services rendered under these agreements. |
2. BASIS OF PRESENTATION (Table
2. BASIS OF PRESENTATION (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Restatement | Three Months Ended September 30, Nine Months Ended September 30, 2019 (as reported) 2019 (revised) 2019 (as reported) 2019 (revised) Total operating expenses $ (422 ) $ (422 ) $ (1,358 ) $ (1,358 ) Non-operating income (expense) Accretion expense — (20 ) — (60 ) All other income 78 78 223 223 Total non-operating income 78 58 223 163 Net loss $ (344 ) $ (364 ) $ (1,135 ) $ (1,195 ) Loss per share – basic and diluted $ (0.00 ) $ (0.00 ) $ (0.01 ) $ (0.01 ) |
3. EQUIPMENT (Tables)
3. EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Equipment | September 30, 2020 December 31, 2019 Cost Accumulated depreciation Net book value Cost Accumulated depreciation Net book value Computer equipment $ 1 $ 1 $ $ 1 $ 1 $ Furniture 13 13 13 13 Geological equipment 346 295 51 346 292 54 Vehicles 87 86 1 87 85 2 $ 447 $ 395 $ 52 $ 447 $ 391 $ 56 |
4. SHAREHOLDERS' EQUITY (Tables
4. SHAREHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Fair value assumptions | September 30, 2019 Risk-free interest rate 1.63% Expected volatility 75% Expected dividend yield Nil Expected term in years 2.0 Estimated forfeiture rate Nil Estimated exercise price $0.34 Estimated enterprise value per common share $0.00 Nine months ended September 30, 2020 2019 Risk-free interest rate 1.45% 2.49% Expected volatility 148% 141% Expected dividend yield Nil Nil Expected term in years 5.0 5.0 Estimated forfeiture rate Nil Nil |
Stock option activity | 2020 2019 Number of Stock Options Weighted Average Exercise Price Number of Stock Options Weighted Average Exercise Price Outstanding, beginning of period 3,450,000 $ 0.16 3,385,400 $ 0.44 Granted 750,000 0.83 850,000 0.07 Exercised (500,000 ) 0.32 Cancelled/Expired (585,400 ) 0.27 Outstanding, end of period 3,700,000 $ 0.25 3,650,000 $ 0.16 Exercisable, end of period 2,525,000 $ 0.11 2,425,000 $ 0.18 Weighted-average fair value per share of options $ 0.75 $ 0.07 |
2. BASIS OF PRESENTATION (Detai
2. BASIS OF PRESENTATION (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Total operating expenses | $ (841) | $ (422) | $ (2,212) | $ (1,358) |
Non-operating income (expense): | ||||
Accretion expense | (20) | (20) | (60) | (60) |
All other income | 78 | 223 | ||
Total non-operating income | (19) | 58 | (33) | 163 |
Net loss | $ (860) | $ (364) | $ (2,245) | $ (1,195) |
Loss per share - basic and diluted | $ (0.01) | $ 0 | $ (0.02) | $ (0.01) |
As Reported | ||||
Total operating expenses | $ (422) | $ (1,358) | ||
Non-operating income (expense): | ||||
Accretion expense | 0 | 0 | ||
All other income | 78 | 223 | ||
Total non-operating income | 78 | 223 | ||
Net loss | $ (344) | $ (1,135) | ||
Loss per share - basic and diluted | $ (.00) | $ (.01) |
2. BASIS OF PRESENTATION (Det_2
2. BASIS OF PRESENTATION (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||||||
Cash and cash equivalents | $ 3,485 | $ 1,070 | $ 3,485 | $ 1,070 | $ 5,664 | $ 2,523 |
Net cash and cash equivalents used in operating activities | (2,285) | (1,453) | ||||
Accretion expense | $ (20) | $ (20) | $ (60) | $ (60) |
3. EQUIPMENT (Details)
3. EQUIPMENT (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Cost | $ 447 | $ 447 |
Accumulated depreciation | 395 | 391 |
Net book value | 52 | 56 |
Computer Equipment | ||
Cost | 1 | 1 |
Accumulated depreciation | 1 | 1 |
Net book value | 0 | 0 |
Furniture | ||
Cost | 13 | 13 |
Accumulated depreciation | 13 | 13 |
Net book value | 0 | 0 |
Geological Equipment | ||
Cost | 346 | 346 |
Accumulated depreciation | 295 | 292 |
Net book value | 51 | 54 |
Vehicles | ||
Cost | 87 | 87 |
Accumulated depreciation | 86 | 85 |
Net book value | $ 1 | $ 2 |
4. SHAREHOLDERS' EQUITY (Detail
4. SHAREHOLDERS' EQUITY (Details) - $ / shares | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Risk-free interest rate | 1.63% | |
Expected volatility | 75.00% | |
Expected dividend yield | 0.00% | |
Expected term in years | 2 years | |
Estimated forfeiture rate | 0.00% | |
Estimated exercise price | $ .34 | |
Estimated enterprise value per common share | $ .00 | |
10% Rolling Stock Option Plan | ||
Risk-free interest rate | 1.45% | 2.49% |
Expected volatility | 148.00% | 141.00% |
Expected dividend yield | 0.00% | 0.00% |
Expected term in years | 5 years | 5 years |
Estimated forfeiture rate | 0.00% | 0.00% |
4. SHAREHOLDERS' EQUITY (Deta_2
4. SHAREHOLDERS' EQUITY (Details 1) - 10% Rolling Stock Option Plan - $ / shares | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Number of stock options | ||
Outstanding, beginning of period | 3,450,000 | 3,385,400 |
Granted | 750,000 | 850,000 |
Exercised | (500,000) | 0 |
Cancelled/expired | 0 | (585,400) |
Outstanding, end of period | 3,700,000 | 3,650,000 |
Exercisable, end of period | 2,525,000 | 2,425,000 |
Weighted average exercise price | ||
Outstanding, beginning of period | $ 0.16 | $ 0.44 |
Granted | 0.83 | 0.07 |
Exercised | 0.32 | 0 |
Cancelled/expired | 0 | 0.27 |
Outstanding, end of period | 0.25 | 0.16 |
Exercisable, end of period | 0.11 | 0.18 |
Weighted-average fair value per share of options granted during period | $ 0.75 | $ 0.07 |
4. SHAREHOLDERS' EQUITY (Deta_3
4. SHAREHOLDERS' EQUITY (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Gain on revaluation of option liability | $ 0 | $ 11 | $ 0 | $ 19 | ||
Amortization of deferred intellectual property | 60 | 178 | ||||
Compensation expense for stock option awards | 112 | $ 20 | 277 | $ 54 | ||
Unrecognized compensation cost | $ 305 | $ 305 | ||||
Unrecognized compensation cost period of recognition | 1 year 1 month 6 days | |||||
10% Rolling Stock Option Plan | ||||||
Options outstanding | 3,700,000 | 3,650,000 | 3,700,000 | 3,650,000 | 3,450,000 | 3,385,400 |
Option granted | 750,000 | 850,000 |