NOTES
TO FINANCIAL STATEMENTS
(UNAUDITED)
Note
1. Basis of Presentation and Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying financial statements have been prepared on substantially the same basis as the audited financial statements included
in the Annual Report on Form 10-K for the year ended December 31, 2016. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to the Securities and Exchange Commission (SEC) rules and regulations regarding interim
financial statements. All amounts included herein related to the financial statements as of June 30, 2017 and the six months ended
June 30, 2017 and 2016 are unaudited and should be read in conjunction with the audited financial statements and the notes there
to included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
In
the opinion of management, the accompanying financial statements include all necessary adjustments for the fair presentation of
the Company’s financial position, results of operations and cash flows. The results of operations for the interim periods
presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the
full fiscal year ending December 31, 2017.
U.S.
Rare Earth Minerals, Inc. was incorporated in the state of Nevada on September 9, 2008.
As
used in these Notes to the Financial Statements, the terms the "Company", "we", "us", "our"
and similar terms refer to U. S. Rare Earth Minerals, Inc.
Going
Concern
The
accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. To date, the Company has generated minimal revenue and has a working capital deficiency
of $409,745 as of June 30, 2017. These factors, among others, raise substantial doubt about the Company’s ability to continue
as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification
of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. We will need
to raise funds or implement our business plan to continue operations.
In
order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s
plan is to obtain such resources for the Company by obtaining capital sufficient to meet its minimal operating expenses by seeking
equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing
any of its plans.
The
ability of the Company to continue as a going concern is dependent upon among other things; its ability to successfully accomplish
the plans described in the preceding paragraph and eventually begin operations in accordance with its business plan. The accompanying
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Recent
Accounting Pronouncements
From
time to time new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies
that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting
pronouncements and other authoritative guidance for which the effective date is in the future will not have an impact on its accounting
or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.
Note
2. Capital Stock
The
Company is authorized to issue 50,000,000 shares of its $0.001 par value preferred stock and 300,000,000 shares of its $0.001
par value common shares.
The preferred stock ranks senior to the
common stock of the Company in each case with respect to dividend distribution and distributions of assets upon liquidation, dissolution
or winding up of the Company whether voluntary or involuntary.
These shares are issued as Class “A”
6% Cumulative, Convertible Voting Preferred Stock. Each share is valued at $1.00 per share for purposes of calculating interest
and for conversion purposes and accrues interest at 6% per annum from the date of issue. Interest is cumulative for a maximum of
two years and compounds annually. Interest accrued thereon shall become due and payable and shall be paid by the Company on or
prior to thirty (30) days after the second anniversary of issue date and each consecutive two year period thereafter.
As
of June 30, 2017 and December 31, 2016, a total of $102,424
and
$86,610 has not been declared by the Company, respectively.
Each share is convertible at any time from
date of issue into five (5) shares of Company common stock. Each share shall be entitled to five (5) votes that may be cast by
the holder at any shareholder meeting or event requiring a shareholder vote. All interest accrued to date of conversion will be
paid by Company to holder within sixty (60) days of date of conversion by holder. These shares are callable by the Company at any
time after three (3) years from date of issue at $1.00 plus accrued but unpaid interest unless previously converted.
As of June 30, 2017 and December 31, 2016,
there were 440,500 and 440,500 shares of Class “A” 6% Cumulative, Convertible Voting Preferred Stock issued and outstanding,
respectively.
During
2016, at various times, an aggregate of 18,850,000 shares of common stock were issued in exchange for services and consideration.
2,500,000 shares were sold to investors at $0.02 per share; 800,000 shares valued at $0.05 per share were issued for settlement
of accounts payable – related party of $24,003 and a loss on settlement of debt in the amount $17,677 was recorded related
to this issuance; 6,000,000 shares, valued at $0.04 per share, 1,500,000 shares valued at $0.02 per share and 1,500,000 shares
valued at $0.05 per share were issued to Board members; 3,000,000 shares valued at $0.04 per share and 550,000 valued at $0.05
per share were issued to consultants; 3,000,000 shares were issued in error on August 29, 2016, cancelled on November 29, 2016
and returned to the treasury on February 15, 2017.
On
January 13, 2017, 4,350,000 shares were cancelled.
On
April 25, 2017, the Company issued 8,100,000 shares of common stock to 3 directors and various consultants for past services rendered
Also, on that date, the Company issued 3,000,000 shares of S-8 shares to two consultants.
There
were 34,916,350 shares of common stock outstanding as of June 30, 2017.
Note
3. Notes and Debentures Payable
As
of June 30, 2017 and December 31, 2016, the Company had one debenture of $5,000 and a note payable of $80,000 outstanding, respectively.
In 2009, the Company received a $5,000 note payable due upon demand and then in 2013 an $80,000 note bearing 6% per annum, simple
interest, payable on or before August 23, 2013. The Company and note holders are in discussions with respect to the payoff of
the notes as they are both in default.
At
June 30, 2017, the Company has recorded accrued interest of $11,347 related to the notes and debentures payable which is included
in the $30,676 accrued interest balance on the balance sheet.
At
December 31, 2016, the Company has recorded accrued interest of $8,698 related to the notes and debentures payable which is included
in the $26,776 accrued interest balance on the balance sheet.
Note
4. Loans Payable
We
have two short-term loans totaling $25,000 at June 30, 2017. These loans were due in 2012 and as of June 30, 2017, are in default.
These notes are accruing interest at a rate of 10% per annum. At June 30, 2017 and December 31, 2016, the Company has recorded
accrued interest of $19,328 and $18,078, respectively, related to the loans payable which is included in the $30,676 and $26,776
accrued interest balance on the balance sheet, respectively.
Note
5. Related Party Transactions
On
April 25, 2017, the Company issued 8,100,000 shares of common stock to 3 directors and various consultants for past services rendered.
The fair value of these shares is $0.02 per share based on the stock price; thus $162,000 was recognized as stock based compensation.
Also, on that date, the Company issued 3,000,000 shares of S-8 shares to two consultants. The fair market value of these shares
is $0.02 per share based on the stock price; thus $60,000 was recognized as stock based compensation.
At
June 30, 2017 and December 31, 2016, the Company has recorded accounts payable to related parties of $229,866 and $168,325, respectively.
Note
6. Subsequent Events
The
Board of Directors, on July 11, 2017, accepted the resignation of Director Daniel Potente.
On
July 11, 2017, the Board of Directors of the Company elected Nathan Marks a Director of the Company.
On
July 11, 2017, Nathan Marks (47) was elected to the Board of Directors. He is owner of M&M Ag Supply in, Nampa, ID. M&M
Ag Supply sells organic soil amendments and new & reconditioned spreaders to farmers throughout the United States. Excelerite®
in M&M Ag’s number one selling soil amendment.
Note
7. Commitments and Contingencies
The
Company has been advised by the Bureau of Land Management that it must prepare and submit an amended plan of remediation
for Eagle 4 and related areas where mining and related activities are being conducted and also will be required to submit an environmental
assessment as well which will interrupt mining activities. The amended plan of remediation to be submitted may result
in increasing the amount of the bond presently posted by the Company. In addition, the Company has been advised by the BLM
that it owes the BLM for materials removed from the mine site in prior years. The amounts have not been determined but estimated
to be approximately $4,000.00. The Company and the BLM are waiting also for the Army Corps of Engineers to determine if
a drainage ditch adjacent to the mine site is a stream, which is regulated by them. As of June 30, 2017 , no
determination has been made by the Army Corps of Engineers. No communication has been received from the Army Corps of Engineers
since May 2014.