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 (“ASC 606”) and ASC 610: Other Income (“ASC 610”) upon the required adoption date of January 1, 2018.

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.