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 September 30, 2017 and the nine months ended September 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 $356,485 as of September 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 September 30, 2017 and December 31,
2016, a total of $110,330 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 September 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 November 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. 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.
As
of September 30, 2017 and December 31, 2016, there were 34,916,350 and 28,166,350 shares of common stock outstanding, respectively.
Note 3. Notes and Debentures Payable
As of September 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 November 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 September 30, 2017, the Company has
recorded accrued interest of $12,672 related to the notes and debentures payable which is included in the $32,626 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 September 30, 2017. These loans were due in 2012 and as of September 30, 2017, are in default. These notes are accruing interest
at a rate of 10% per annum. At September 30, 2017 and December 31, 2016, the Company has recorded accrued interest of $19,953 and
$18,078, respectively, related to the loans payable which is included in the $32,626 and $26,776 accrued interest balance on the
balance sheet, respectively.
Note
5. Related Party Transactions
At September 30, 2017 and December 31,
2016, the Company has recorded accounts payable to related parties of $254,315 and $168,325, respectively.
From July 11, 2017 through September 30, 2017
a Director of the Company has purchased and paid for $48,780 of the Company’s products for resale through his business.
Note 6. 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.
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 September 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.
Note 7. Subsequent Events
The Company's management has evaluated subsequent
events through the date these financial statements were issued and determined there were no events to disclose.