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1. DESCRIPTION OF BUSINESS
Rare Element Resources Ltd. (collectively referred to as “Rare Element,” the “Company,” “our,” “we” or
“us”) operates in the mining industry and is focused on advancing its Bear Lodge REE Project. The Company
recently announced extensive cost cutting measures intended to position us to be able to move the Project forward
expeditiously when market conditions improve, while allowing us in the interim to pursue potential strategic
alternatives like off-take agreements, joint ventures or mergers.
The financial statements have been prepared on a going concern basis, which assumes the Company will be
able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The
Company has incurred losses since inception and further losses are anticipated in the development of its business,
raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a
going concern is dependent upon the Company obtaining the necessary financing to meet its obligations and pay its
liabilities arising from normal business operations when they come due. Management intends to finance operating
costs over the next 12 months with existing cash on hand, asset sales and potential issuance of common stock. There
can be no assurance that we will be able to raise the necessary financing or complete a strategic transaction on
acceptable terms or at all.
2. BASIS OF PRESENTATION
Principles of consolidation
These consolidated financial statements have been prepared in accordance with U.S. 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. Certain comparative figures have been reclassified to
conform to the financial statement presentation adopted for the current year. Rare Element Resources Ltd. was
incorporated under the laws of the Province of British Columbia on June 3, 1999.
Recent Accounting Pronouncements
In August 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-15, “Presentation of
Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to
Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 is intended to define management’s responsibility
to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to
provide related footnote disclosures. The amendments in this ASU are effective for reporting periods beginning
after December 15, 2016, with early adoption permitted. We are currently assessing the impact the adoption of ASU
2014-15 will have on our financial statements and related disclosures.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. 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 asset retirement obligations, stock-based compensation, derivative liabilities, 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, 2015 and 2014, cash and cash equivalents consisted of $3,881 and $10,139, respectively,
of funds held in bank accounts with financial institutions in both Canada and the United States.