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EXCEL - IDEA: XBRL DOCUMENT - BIOXYTRAN, INCFinancial_Report.xls
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER FILED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - BIOXYTRAN, INCf10q0312ex31i_usrareearth.htm
EX-31.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER FILED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - BIOXYTRAN, INCf10q0312ex31ii_usrareearth.htm
EX-32.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER FURNISHED PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - BIOXYTRAN, INCf10q0312ex32ii_usrareearth.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER FURNISHED PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - BIOXYTRAN, INCf10q0312ex32i_usrareearth.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Quarter ended March 31, 2012

Commission File Number: 333-154912

U.S. RARE EARTH MINERALS, INC
(Formerly known as U.S. Natural Nutrients & Minerals, Inc)
 (Exact name of registrant as specified in its charter)

Nevada
 
26-2797630
(State or jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
     
6460 Medical Center St. Suite 230
Las Vegas, NV
 
 
89148
(Address of principal executive offices)
 
(Zip code)

(702) 888-1450, ext 281
(Registrant’s telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months and (2) has been subject to such filing requirements for the past 90 days.
Yes T  No  £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files); Yes T No £.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer
£
 
Accelerated Filer
£
Non-Accelerated Filer
£
 
Smaller Reporting Company
T

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No T

There were 119,161,470 shares of common stock outstanding as of March 31, 2012.
 
 
 

 

TABLE OF CONTENTS
_________________


 
Page
PART I - FINANCIAL INFORMATION
 
   
ITEM 1.     FINANCIAL STATEMENTS
3
ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
9
ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
13
ITEM 4A   (T).  CONTROLS AND PROCEDURES
13
   
PART II - OTHER INFORMATION
 
   
ITEM 1.     LEGAL PROCEEDINGS
14
ITEM 1A.  RISK FACTORS
14
ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
14
ITEM 3.     DEFAULTS UPON SENIOR SECURITIES
14
ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
14
ITEM 5.     OTHER INFORMATION
14
ITEM 6.     EXHIBITS
15
SIGNATURES
16

 
2

 

PART I – FINANCIAL INFORMATION

ITEM 1. INTERIM FINANCIAL STATEMENTS
U.S. RARE EARTH MINERALS, INC
(Formerly known as U.S. Natural Nutrients & Minerals, Inc)
 (A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS

   
March 31,
   
December 31,
 
   
2012
   
2011
 
   
(Unaudited)
   
(Audited)
 
ASSETS
 
             
CURRENT ASSETS
           
Cash
  $ 13,708     $ 16,513  
Accounts Receivable
    88,032       -  
Note Receivable
    -       -  
Inventory
    9,107       25,427  
Prepaid Expenses
    3,750       6,500  
    Total current assets
    114,597       48,440  
                 
Property and Equipment, Net
    158,801       167,646  
                 
          Total assets
  $ 273,398     $ 216,086  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
 
                 
CURRENT LIABILITIES
               
Accounts payable and accrued expenses
  $ 72,874     $ 10,143  
10% Series A Senior (non-subordinated) debentures
    10,000       10,000  
Accrued interest
    9,170       7,667  
Loan payable, current
    25,000       25,000  
     Total current liabilities
    117,044       52,810  
                 
     Total liabilities
    117,044       52,810  
                 
STOCKHOLDERS' DEFICIT
               
Common stock: $0.001 par value; 300,000,000 authorized,
               
    119,161,470 and 113,941,471 shares issued and outstanding
               
    as of March 31, 2012 and December 31, 2011, respectively
    119,161       113,942  
Additional paid-in capital
    3,056,669       3,044,889  
Common stock payable
    -       -  
Accumulated deficit during the development stage
    (3,019,476 )     (2,995,555 )
     Total stockholders' deficit
    156,354       163,276  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 273,398     $ 216,086  

The accompanying notes are an integral part of these interim financial statements.
 
 
3

 
 
U.S. RARE EARTH MINERALS, INC
(Formerly known as U.S. Natural Nutrients & Minerals, Inc)
 (A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

   
Three Months ended
   
From inception
 
   
March 31,
   
March 31,
   
June 9, 2008 to
 
   
2012
   
2011
   
March 31, 2012
 
                   
REVENUES
  $ 137,678     $ 7,931     $ 230,105  
Cost of goods sold
    38,986       1,983       62,093  
      98,692       5,948       168,012  
                         
                         
General, selling and administrative expenses
    131,110       728,734       3,179,849  
                         
Operating Loss
    (32,418 )     (722,786 )     (3,011,837 )
                         
Other income (expense):
                       
Interest income
    -       -       1,845  
Payment under distributorship agreement
    10,000       -       10,000  
Interest expense
    (1,503 )     (3,970 )     (19,484 )
      8,497       (3,970 )     (7,639 )
 Net Loss
  $ (23,921 )   $ (726,756 )   $ (3,019,476 )
                         
Net loss per common share - basic and diluted
  $ (0.00 )   $ (0.01 )        
                         
Weighted average of common shares outstanding
    117,164,137       58,926,999          
 
The accompanying notes are an integral part of these interim financial statements.
 
 
4

 
 
U.S. RARE EARTH MINERALS, INC
(Formerly known as U.S. Natural Nutrients & Minerals, Inc)
 (A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)

               
From inception
 
   
March 31,
   
March 31,
   
June 9, 2008 to
 
   
2012
   
2011
   
March 31, 2012
 
Cash Flows from Operating Activities:
                 
Net Loss
  $ (23,921 )   $ (726,756 )   $ (3,019,476 )
Depreciation
    10,145       4,541       44,213  
Stock for services
    5,000       673,750       2,229,275  
Stock issued for intangible asset
    -       -       -  
Accretion of debt premium and interest
    -       -       2,869  
Contributed capital to COGS
    -       -       690  
Expenses paid by stockholder contribution
    -       -       5,807  
Changes in assets and liabilities:
                       
   Increase accounts receivable
    (88,032 )     -       (88,032 )
   Decrease notes receivable
    -       -       200  
   (Increase) decrease prepaids
    2,750       -       (1,263 )
   (Increase) decrease inventory
    16,320       (984 )     (9,107 )
   Increase (decrease) in accounts payable & accrued expenses
    62,731       (5,103 )     87,888  
                         
Net cash used in operating activities
    (15,007 )     (54,552 )     (746,936 )
                         
Cash flows used in Investing Activities:
                       
Capital expenditures
    (1,300 )     (40,589 )     (162,413 )
                         
Net cash used in investing activities
    (1,300 )     (40,589 )     (162,413 )
 
The accompanying notes are an integral part of these interim financial statements
 
 
5

 
 
U.S. RARE EARTH MINERALS, INC
(Formerly known as U.S. Natural Nutrients & Minerals, Inc)
 (A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(UNAUDITED)
 
Cash flows from Financing Activities:
                 
Proceeds from Convertible debt
    -       -       15,000  
Proceeds from Series A Debentures
    -       -       52,250  
Payment of loan payable and debentures
    -       (17,132 )     (44,131 )
Accrued interest
    1,503       -       9,170  
Proceeds from Loans payable
    -       -       39,000  
Proceeds from Loan payable, related party
    -       -       2,232  
Common stock issued for cash
    11,999       167,787       849,536  
Net cash provided by financing activities
    13,502       150,655       923,057  
                         
Net increase (decrease) in cash
    (2,805 )     55,514       13,708  
Cash, beginning of year
    16,513       22,755       -  
Cash, end of year
  $ 13,708     $ 78,269     $ 13,708  
                         
Cash paid for:
                       
Interest
  $ -     $ -     $ 1,337  
                         
Supplemental schedule of non-cash investing and Financing Activities:
                 
Loan payable, related party reclassified as loan payable
  $ -     $ -     $ 100  
Loan reclassified to accounts payable
  $ -     $ -     $ 2,000  
Loan receivable reclassified to accounts payable
  $ -     $ -     $ 15,721  
Series A Debentures reclassified to Convertible Debenture
  $ -     $ -     $ 5,000  
Common stock issued for intangible - customer list
  $ -     $ -     $ 25,000  
Common stock issued for equipment
  $ -     $ -     $ 40,600  
Common stock issued for convertible debt, debentures
  $ -     $ -     $ 30,000  
Warrants issued for prepaid consulting services
  $ -     $ -     $ 24,750  
Stock payable issued
  $ -     $ -     $ 25,000  
Contributed capital by shareholder, used to pay expenses
  $ -     $ -     $ 5,807  
 
The accompanying notes are an integral part of these interim financial statements
 
 
6

 
 
 
US. RARE EARTH MINERALS, INC.
(Formerly known as U.S. Natural Nutrients & Minerals, Inc)
 (A DEVELOPMENT STAGE COMPANY)
CONDENSED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

Note 1. Basis of Presentation and Organization and Significant Accounting Policies

Basis of Presentation and Organization
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, 2011. 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 condensed financial statements as of March 31, 2012 and the three months ended March 31, 2012 and 2011 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, 2011.
     
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, 2012.

U.S. Rare Earth Minerals, Inc. (Formerly U.S. Natural Nutrients and Minerals, Inc.) was incorporated in the state of Nevada on June 9, 2008.

The Company currently has limited operations and, in accordance with Financial Accounting Standard Board Codification (“FASB ASC”) Development Stage Entities topic. The Company has been in the development stage since its formation and has realized minimal revenues from its operations.

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. (Formerly U.S. Natural Nutrients and 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 generated minimal revenue, is considered a development stage company, has experienced recurring net operating losses, had a net loss of $23,921 for the three months ended March 31, 2012, and a working capital deficiency of $2,447 at March 31, 2012.  These factors 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.

 
7

 
 
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually begin operations in accordance with our 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.
 
 
Note 2. Common Stock

The Company’s authorized preferred stock is 50,000,000 with a $0.001 par value and common stock is 300,000,000 common shares with $0.001 par value.

There were 119,161,470 shares of common stock outstanding as of March 31, 2012.
 
On April 12, 2011, the Company announced that the board of directors approved a 3 for 1 forward split of the shares of common stock issued and outstanding effective May 2, 2011.
 
 
Note 3. 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 4. Distributorship Agreement

In February 2012, the Company entered into a distributor agreement with a company to market its products in various countries.  Under the terms of the agreement, the Company will receive payments upon the attaining of certain sales goals by the distributor.  The agreement is for a period of 36 months and can be canceled by either party upon 30 days written notice.

 
Note 5.Subsquent Events

Management evaluated all activity of the Company through the issue date of the Financial Statements and noted that no subsequent events that would have a material impact on the financial statements as of and for the period ended March 31, 2012.
 
 
8

 
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

The following discussion should be read in conjunction with our unaudited financial statements and the notes thereto.

Forward-Looking Statements

This quarterly report contains forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. When used in this report, the words "believe," "anticipate," "expect," "estimate," “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements reflect management's current view of us concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: a general economic downturn; a downturn in the securities markets; federal or state laws or regulations having an adverse effect on proposed transactions that we desire to effect; Securities and Exchange Commission regulations which affect trading in the securities of "penny stocks,"; and other risks and uncertainties. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report as anticipated, estimated or expected. All forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement.

 
9

 
 
Overview
 
U.S. Rare Earth Minerals, Inc. (Formerly U.S. Natural Nutrients and Minerals, Inc.) (the “Company”), primary focus is on sales and distribution of certain products derived from the Company’s mining activities relating to natural mineral deposits commonly known as Calcium Montmorillonite. These activities will be carried out through a web-based and distributor-based sales program directed at agricultural, animal and human uses of the products.

To the extent that the company requires additional capital for operations which it cannot derive from profits from sales, the Company plans to sell additional shares of unregistered common stock to raise money for additional operating capital.  There is no guarantee the Company will be successful in selling additional shares to raise funds for additional operating capital, or if successful, it will raise the desired amount or be on terms and conditions which are beneficial to the Company.
 
Plan of Operation
 
The Company markets and sells the product extracted in the mining process under the name “EXCELERITE®”.  The Company believes that EXCELERITE® has broad applications for plants, animals and humans.  Specifically, the Company believes that by adding EXCELERITE® back into the soil, household and commercial farmers are replacing what has been lost by the use of man-made fertilizers over hundreds of years. Farmers using EXCELERITE®  are seeing higher yields and larger and more nutritious crops. In addition, studies suggest that animals whose feed is supplemented with Exceleriteâ grow healthier and produce more. The naturally chelated nutrients and minerals in EXCELERITE® may enhance the production of enzymes. Without enzymes living things cannot build protein and other vital processes.  “Micro-Excelerite ™”, a supplement form of  EXCELERITE® is believed to rejuvenate the health of the human body in many ways.  In addition to its natural supply of 78 essential nutrients and minerals, its ionic charge removes toxins as it works through the digestive tract.

The Company is marketing its products through various channels including but not limited to direct distribution, sales through third-party distributors and sales through the Company’s website.  The Company has also undertaken to develop a network of distributors, both in the United States and internationally.  Two of the Company’s directors, Paul Hait and Dennis Cullison, have been marketing the product to agricultural customers in Oregon and throughout the United States.  Mr. Cullison has also devoted substantial focus on the marketing of a human supplement utilizing the product named “Micro-Nutrilite” through the Company’s wholly-owned subsidary “Bio Multimin, Inc.”

The Company has been engaged in various testing programs with several major agriculture firms for the past two years.  Two of these firms are listed NYSE companies and do business worldwide.  Results of these test on strawberries, carrots, peaches, soy beans, sweet potatoes and grapes have been very positive.  EXCELERITE® has also been tested and proved to eliminate the odor from pig and cow manure which should lead to large orders from cattle and pig farmers worldwide.  The product is also being tested by poultry farmers.

Management believes that by partnering with these certain firms, long term business relationships will develop, deriving substantial future product sales.  The Company is bound by certain “Non-Disclosure Agreements” and therefore cannot divulge the names of partnering companies.  Announcements of the Company’s test results and identity of its partners will be forthcoming when certain test results are completed and the parties agree on the content of the disclosure.
 
 
 
10

 

RESULTS OF OPERATIONS

The following table shows the financial data of the consolidated statements of operations of the Company for the three-months ended March 31, 2012 and 2011.

THREE-MONTHS ENDED MARCH 31, 2012 COMPARED TO THREE-MONTHS ENDED MARCH 31, 2011.

   
March 31,
   
March 31,
             
   
2012
   
2011
   
$ Change
   
% Change
 
REVENUES
  $ 137,678     $ 7,931     $ 129,747       1636 %
Cost of sales
    (38,986 )     (1,983 )     (37,003 )     1866 %
      98,692       5,948       92,744       1559 %
General and administrative expenses
    (131,110 )     (728,734 )     597,624       (82 )%
Operating Loss
  $ (32,418 )   $ (722,786 )   $ 690,368       (95 )%

During the three months ended March 31, 2012, we recognized expenses of $131,110 a decrease of 82% from the three months ended March 31, 2011.  Professional and legal fees of approximately $56,602 were incurred in relation to the preparation, review, and filing of our financial statements with the Securities and Exchange Commission. Other professional fees consisted of clerical and start-up fees necessary to develop our business and investigate new business plans which resulted in our change of focus as of October 2009.

LIQUIDITY AND CAPITAL RESOURCES

   
March 31,
   
December 31,
             
   
2012
   
2011
   
$ Change
   
% Change
 
Cash
  $ 13,708     $ 16,513     $ (2,805 )     (17 )%
Accounts payable and accrued expenses
  $ 72,874     $ 10,143     $ 62,731       618 %
Total current liabilities
  $ 117,044     $ 52,810     $ 64,234       122 %
Cash proceeds from the sale of common stock
  $ 11,999     $ 575,737     $ (563,738 )     (98 )%
 
As of March 31, 2012, cash and cash equivalents totaled $13,708.  This cash position was the result of a result of net cash provided by financing activities in the amount of $13,502, offsetting net cash used in operating activities in the amount of $15,007.

We believe that the level of financial resources is a significant factor for our future development, and accordingly we may choose at any time to raise capital through private debt or equity financing to strengthen its financial position, facilitate growth and provide us with additional flexibility to take advantage of business opportunities.  While we are presently considering a limited private offering of our securities, we do not have immediate plans to have a public offering of our common stock and there is no guarantee that any such offering would be successful or be completed on terms which are beneficial to the Company.
 
 
11

 

CRITICAL ACCOUNTING POLICIES

In presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material adverse impact to our consolidated results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. Presented below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results. However, the majority of our businesses operate in environments where we pay a fee for a service performed, and therefore the results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex.

Revenue Recognition

Revenue from the sale of product obtained from our mining contractor is recognized when ownership passes to the purchaser at which time the following conditions are met:

i) persuasive evidence that an agreement exists;
ii) the risks and rewards of ownership pass to the purchaser including delivery of the product;
iii) the selling price is fixed and determinable; or,
iv) collectively is reasonably assured.

Stock Based Compensation

Stock based compensation is accounted for using the Equity-Based Payments to Non-Employee Topic of the FASB ASC, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. We determine the value of stock issued at the date of grant. We also determine at the date of grant the value of stock at fair market value or the value of services rendered (based on contract or otherwise) whichever is more readily determinable.

Shares issued to employees are expensed upon issuance.

If the Company issues stock for services which are performed over a period of time, the Company capitalizes the value paid in the equity section of the Company’s financial statements as it’s a non-cash equity transaction. The Company accretes the expense to stock based compensation expense on a monthly basis for services rendered within the period.

We use the fair value method for equity instruments granted to non-employees and will use the Black-Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
 
 
12

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 4.  INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

·  
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

·  
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

As of March 31, 2012, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments.  Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures may not be effective to detect the inappropriate application of US GAAP rules as more fully described below.  This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

The matter involving internal controls and procedures that our management considered may be a material weakness under the standards of the COSO was the lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in the potential for ineffective oversight in the establishment and monitoring of required internal controls and procedures.  The aforementioned material weakness was identified by our Chief Executive Officer in connection with the review of our financial statements as of  September 30, 2011.

Management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 
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Management’s Remediation Initiatives

In an effort to remediate the identified material weakness and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully-functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.

We anticipate that these initiatives will be at least partially, if not fully, implemented by December 31, 2012.  Additionally, we plan to test our updated controls and remediate our deficiencies by December 31, 2012.
 
Changes in internal controls over financial reporting

There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 PART II - OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

There are no legal proceedings which are pending or have been threatened against us or any of our officers, directors or control persons of which management is aware.

ITEM 1A.   RISK FACTORS.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item

ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES
 
None
 
ITEM 3.     DEFAULTS UPON SENIOR SECURITIES
 
None

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The name change and forward stock split were approved by consent of the shareholders owning a majority of the outstanding common stock of the Company

ITEM 5.     OTHER INFORMATION

On October 26, 2009, U.S. Rare Earth Minerals, Inc.(USMN) (formerly known as  U.S. Natural Nutrients and Minerals, Inc., a Nevada corporation (entered into an Agreement with M Strata, LLC, a Nevada limited liability company (“M Strata”) (“M Strata Agreement”) whereby M Strata granted to USMN permission and consent to mine the certain mineral products (the “Product”) from certain mining claims owned or controlled by M Strata located in Panaca, Nevada.  Pursuant to the terms of the M Strata Agreement, M Strata will designate which claims may be mined and USMN shall have the right to mine the Product and remove the Product from the mining claims so designated.
 
 
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The M Strata Agreement further provided that it was granting USMN the exclusive right to mine and purchase the Product from M Strata (“Exclusive Right”) and M Strata agreed that it will not sell Product or permit any other person or entity to purchase Product or mine on the claims controlled by M Strata other than USMN, on condition that USNNM meets certain Purchase Minimums (as defined in the agreement) (“Purchase Minimums”) and makes timely payments therefor.  In the event USMN fails to meet the Purchase Minimums for a period of one year, then such Exclusive Right shall terminate and M Strata shall be entitled to either (i) terminate the M Strata Agreement and cause USMN to terminate all mining operations on M Strata’s claims or (ii) sell Product to other purchasers in addition to USMN.   USMN may cure any default in the Purchase Minimum by paying for the difference between the amount actually purchased in any one calendar year which was less than the Purchase Minimum and the amount actually ordered and paid for. Nothing in the M Strata Agreement conferred on USMN or its agents any rights of ownership in any mining claims owned or controlled by M Strata now or in the future.  In addition, USMN agreed that it would only purchase Calcium Montmorillonite clay from M Strata and from no other source for the term of the M Strata Agreement or any extensions thereof..  No default has been declared by M Strata of any of the terms of the Agreement as of the date hereof.

The term of the M Strata Agreement is five (5) years and there is a provision for automatic extensions of the term for additional one (1) year terms thereafter.  The M Strata Agreement provides for payments by USMN of $24.00 per ton of Product removed from M Strata’s claims, subject to periodic adjustment for cost of living in accordance with the terms of the M Strata Agreement.  Payments for Product are to be made by USNNM to M Strata on a monthly basis, upon presentation of invoices and in accordance with the terms of the M Strata Agreement.

Fifty percent (50 %) of the beneficial ownership of M Strata is owned by Paul Hait and Dennis Cullison, who are both directors of the Company.

A copy of the Agreement was attached to the filing of a Form 8K in November, 2009.

The Agreement was supplemented in 2011 to include the right of the Company to mine various rare earth minerals on the mining claims.

ITEM 6.      EXHIBITS

Exhibit No.
 
Description
     
31.1
 
Certification of Chief Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2
 
Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1
 
Certification of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2
 
Certification of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 
 
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SIGNATURES

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

U.S. RARE EARTH MINERALS, INC
(Formerly known as U.S. Natural Nutrients  & Minerals, Inc)
 
Dated:           May 15, 2012      
 
By:
/s/ Paul Hait  
    Paul Hait  
    Chief Executive Officer and Director  
       

Dated:           May 15, 2012      
 
By:
/s/ Dennis Cullison  
    Dennis Cullison  
    Principle Financial Officer, President and Director  
       
 
 
 
 
 
 
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