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 June 30, 2015

 

Commission File Number: 333-154912

 

U.S. Rare Earth 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)

 

(800) 920-7507

(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 ☒ 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 ☒ 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	☒

 

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

 

There were 12,316,438 shares of common stock outstanding as of August 14, 2015.

 

 

 

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	8
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	11
ITEM 4A (T).	CONTROLS AND PROCEDURES	12
	PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	12
ITEM 1A.	RISK FACTORS	12
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	12
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	12
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	12
ITEM 5.	OTHER INFORMATION	12
ITEM 6.	EXHIBITS	14
SIGNATURES		15

 

 

PART I – FINANCIAL INFORMATION

ITEM 1. INTERIM FINANCIAL STATEMENTS

 

U.S. RARE EARTH MINERALS, INC.

BALANCE SHEETS

(UNAUDITED)

 

		June 30,				December 31,
		2015				2014
ASSETS
CURRENT ASSETS:
Cash		$	776			$	6,168
Accounts receivable			40,342				-
Total current assets			41,118				6,168
Property and Equipment, Net of Accumulated Depreciation of $213,053 and $183,958, respectively			78,020				107,115
Total assets		$	119,138			$	113,283
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses		$	262,933			$	201,559
Loans payable			110,000				110,000
Loans payable – related party			5,675				-
Accrued interest			27,044				23,176
Total current liabilities			405,652				334,735
Total liabilities			405,652				334,735
STOCKHOLDERS' DEFICIT:
Common stock: $0.001 par value; 300,000,000 authorized,
12,316,438 and 5,816,438 shares issued and outstanding
as of June 30, 2015 and December 31, 2014			12,316				5,816
Preferred stock: $0.001 par value; 500,000 authorized,
440,500 shares issued and outstanding
as of June 30, 2015 and December 31, 2014			441				441
Additional paid in capital			12,741,706				10,858,206
Accumulated deficit			(13,040,977	)			(11,085,915	)
Total stockholders' deficit			(286,514	)			(221,452	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	119,138			$	113,283

  

See accompanying notes to the unaudited financial statements.

 

 

U.S. RARE EARTH MINERALS, INC.

 STATEMENTS OF OPERATIONS

(UNAUDITED)

 

		For the Three Months Ended								For the Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2015				2014				2015				2014
REVENUES		$	59,400			$	37,844			$	121,890			$	246,200
Cost of goods sold			14,724				12,001				29,272				66,199
Gross Profit			44,676				25,843				92,618				180,001
General, selling and administrative expenses			1,958,736				82,002				2,043,887				170,403
Total operating expenses			1,958,736				82,002				2,043,887				170,403
Operating Income (Loss)			(1,914,060	)			(56,159	)			(1,951,269	)			9,598
Other income (expense):
Other income			-				-				75				348
Interest expense			(1,945	)			(1,995	)			(3,868	)			(5,316	)
Total other expense			(1,945	)			(1,995	)			(3,793	)			(4,968	)
Net Income (Loss) before provision for income taxes			(1,916,005	)			(58,154	)			(1,955,062	)			4,630
Provision for income taxes			-				-				-				-
Net Income (Loss)		$	(1,916,005	)		$	(58,154	)		$	(1,955,062	)		$	4,630
Net loss per common share - basic and diluted		$	(0.20	)		$	(0.00	)		$	(0.25	)		$	0.00
Weighted average of common shares outstanding			9,783,471				190,356,131				7,810,913				190,800,883

  

See accompanying notes to the unaudited financial statements.

 

 

U.S. RARE EARTH MINERALS, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		For the Six Months Ended
		June 30,				June 30,
		2015				2014
Cash Flows From Operating Activities:
Net Income (Loss)		$	(1,955,062	)		$	4,630
Adjustments to reconcile net income (loss) to net cash provided  by operations:
Depreciation			29,095				29,095
Stock for services			1,890,000				(90,685	)
Changes in assets and liabilities:
Increase accounts receivable			(40,342	)			(32,770	)
Increase accounts payable and accrued expenses			61,374				90,812
Increase in accrued interest			3,868				3,900
Decrease customer deposits			-				(12,501	)
Net cash provided by (used in) operating activities			(11,067	)			(7,519	)
Cash Flows From Financing Activities:
Proceeds from issuance of loans payable			7,175				-
Repayment of loans payable – related party			(1,500	)			-
Repayment of loans payable			-				(6,000	)
Net cash provided by (used in) financing activities			5,675				(6,000	)
Net increase (decrease) in cash			(5,392	)			(13,519	)
Cash, beginning of period			6,168				20,689
Cash, end of period		$	776			$	7,170
Cash paid for:
Interest		$	-			$	-

 

See accompanying notes to the unaudited financial statements 

 

 

U.S. RARE EARTH MINERALS, INC.

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, 2013. 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, 2015 and the three and six months ended June 30, 2015 and 2014 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, 2014.

     

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, 2015.

 

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 $364,534 as of June 30, 2015. 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.

 

 

Note 2. Capital Stock

 

The Company is authorized to issue 500,000 shares of its $0.001 par value preferred stock and 300,000,000 shares of its $0.001 par value common shares.

 

On May 5, 2015, the Company granted 6,000,000 shares to four board members 1,500,000 shares each for services. These shares are granted as fully paid, but are restricted from sale or transfer for three years. $1,740,000 was recognized non-cash stock based compensation during the three months ended June 30, 2015.

 

On May 5, 2015, the board of directors agreed to issue 3,000,000 shares of common stock to two related parties in exchange for services – 1,500,000 shares each. These shares will be issued in tranches on dates determined by these parties at their request. On May 11, 2015, the Company issued 500,000 shares pursuant to the board resolution referred to above. $150,000 was recognized as non-cash stock based compensation during the three months ended June 30, 2015.

 

There were 12,316,438 shares of common stock outstanding as of June 30, 2015.

 

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. Loans Payable

 

The Company has four short-term loans totaling $115,675 at June 30, 2015. These loans were due in 2012 and 2013 and as of June 30, 2015, are in default. One of the loans is accruing interest at a rate of 6% per annum and three of the loans are accruing interest at a rate of 10% per annum. The Company and loan holders are in discussions with respect to the payoff of the loans.

 

During the three months ended June 30, 2015, the Company received proceeds from the issuance of a new loan payable in the amount of $7,175 to a related party, of which $1,500 was repaid as of June 30, 2015. This loan bears no interest and is due upon demand.

 

At June 30, 2015, the Company has recorded accrued interest of $27,044 related to these loans.

 

 

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.

 

Overview

 

U.S. Rare Earth 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 that it cannot derive from profits from sales, the Company plans to sell additional shares of unregistered preferred 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 Excelerite® 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. The Company’s directors have been marketing the product to agricultural customers in Oregon, throughout the United States and internationally as well.

 

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.

 

RESULTS OF OPERATIONS

 

The following table shows the financial data of the statements of operations of the Company for the three-and six months ended June 30, 2015 and 2014.

 

THREE MONTHS ENDED JUNE 30, 2015 COMPARED TO THREE-MONTHS ENDED JUNE 30, 2014.

 

		Three Months Ended
		June 30,				June 30,
		2015				2014				$ Change				% Change
Revenues		$	59,400			$	37,844			$	21,556				57	%
Cost of sales			14,724				12,001				2,723				23	%
Gross profit			44,676				25,843				18,833				73	%
General and administrative expenses			1,958,736				82,002				1,876,734				2289	%
Operating Loss		$	(1,914,060	)		$	(56,159	)		$	(1,857,901	)			3308	%

 

The variance in the operating loss was primarily due to an increase in sales of $21,500 offset by a decrease in cost of good sold of $2,700, a decrease in bad debt expense of $34,000, an increase in compensation of outside services of $1,974,000, a decrease in professional fees of $33,500, a decrease in land lease expense of $3,000 and a decrease in repairs and maintenance of $8,500 when comparing the three month period ended June 30, 2015 to the same period last year.

 

SIX MONTHS ENDED JUNE 30, 2015 COMPARED TO SIX-MONTHS ENDED JUNE 30, 2014.

 

		Six Months Ended
		June 30,				June 30,
		2015				2014				$ Change				% Change
Revenues		$	121,890			$	246,200			$	(124,310	)			-50	%
Cost of sales			29,272				66,199				(36,927	)			-56	%
Gross profit			92,618				180,001				(87,383	)			-49	%
General and administrative expenses			(2,043,887	)			(170,403	)			(1,873,484	)			1099	%
Operating Income (Loss)		$	(1,951,269	)		$	9,598			$	(1,960,867	)			-20430	%

 

The variance in the operating loss was primarily due to an decrease in sales of $124,000 offset by a decrease in cost of goods sold of $37,000, a decrease in bad debt expense of $34,000, a decrease in auto expenses of $5,100, an increase in compensation of outside services of $1,980,000, a decrease in computer and software expenses of $3,000, a decrease in insurance of $2,000, an increase in legal expense of $4,000, an increase in mining expenses of $9,000, a decrease in professional fees of $23,500 and a decrease in land lease of $7,000 when comparing the six month period ended June 30, 2015 to the same period last year.

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

		As of
		June 30,				December 31,
		2015				2014				$  Change				% Change
Cash		$	776			$	6,168			$	(5,392	)			-87	%
Accounts payable and accrued expenses			262,933				201,559				61,374				30	%
Total current liabilities			405,652				334,735				70,917				21	%

 

The variance in accounts payable and accrued expenses is mainly for the land lease expense accrual and accounting fees accrual at June 30, 2015.

 

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 experienced recurring net operating losses of $13,040,977 as of June 30, 2015 and a working capital deficiency of $364,534 as of June 30, 2015. 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.

 

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 that are beneficial to the Company.

 

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 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. 

 

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.  CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the specified time period. Management, with the participation of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of June 30, 2015. Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2015.

 

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

 

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

 

ITEM 5. OTHER INFORMATION

 

On October 26, 2009, U.S. Rare Earth Minerals, Inc. (USMN), 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.

 

 

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 (“Product”) 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 initial term of the M Strata Agreement was for five (5) years and there was a provision for automatic extensions of the term for consecutive additional one (1) year terms thereafter.  The M Strata Agreement provided 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 were 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. There were monthly minimum purchases of Product that were required to be made during the term of the M Strata Agreement dated October 26, 2009. M Strata has agreed in the past to accept unregistered shares of common stock of USMN in consideration for the obligations of the Company pursuant to the terms of the M Strata Agreement.

 

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.

 

On December 9, 2013, the Company and M Strata renegotiated the M Strata Agreement dated October 26, 2009. The Company and M Strata entered into the First Amended and Restated Mining Agreement effective as of November 1, 2013 (Amended M Strata Agreement). The Amended M Strata Agreement relieved the Company of its contractual obligation to purchase a minimum annual amount of 40,000 tons of Product . The Amended M Strata Agreement, amends and substantially modifies the terms of the October 26, 2009 Agreement. At the time of the execution of the Amended M Strata Agreement, the Company owed M Strata $606.000 for Product. As part of the agreements between the Company and M Strata, M Strata agreed to accept 400,000 shares of $1, 6% Cumulative Preferred Stock in satisfaction of $400,000 of the Company’s obligation to it and to cancel the remaining $206,000 of the amount owed.

 

 

Management believes the Amended Agreement is of significant and substantial benefit and value to the Company because it eliminates the requirement that the Company purchase a minimum of 40,000 tons of Product per year (whether or not it was able to sell such amount in each year or not) at the current price calculated pursuant to the October 26, 2009 Agreement of a total of $1,080,000. Under the terms of the Amended M Strata Agreement, that minimum purchase requirement has been eliminated. Under the Amended M Strata Agreement, the Company is only required to pay for Product according to the greater of either (i) a minimum of one hundred tons a week at a price of $27 per ton (a minimum amount of $2,700 per week) or (ii) the actual amount of tons sold multiplied by $27 per ton. Accordingly, the Amended Agreement no longer obligates the Company to purchase a minimum of thousands of tons per year. The Amended Agreement contains additional modifications and provisions, which include, but are not limited to the following:

 

a. The $27 per ton price will be subject to adjustment based on an annual price adjustment equal to the increase in the cost of living;

b. Payment of the greater of the minimum or the actual amounts must be made weekly;

c. All mining costs and fees payable to all government agencies shall continue to be paid by the Company;

d. All insurance requirements remain the same; and,

e. The term of the Amended M Strata Agreement has been extended for an initial term of 5 years and the Company has the option to extend the term for an additional 5 years so long as it is not in default under any of its obligations at the time of the exercise of the extension.

 

Twenty-five percent (25%) of the beneficial ownership of M Strata is owned by Dennis Cullison, formerly, the Chairman of the Board and President of the Company and twenty-five percent (25%) beneficial ownership of M Strata is also owned by Paul Hait, a former member of the Board of Directors of the Company. Mr. Hait is a retired Chairman of the Board of the Company. Neither Mr. Cullison nor Mr. Hait participated in the negotiation of the Amended Agreement. A copy of the Agreement was attached to the filing of a Form 8K on December 9, 2013.

 

As a result of expanding mining operations over the past several years, the Bureau of Land Management (BLM) has advised the Company that it is required to file a new Plan of Operations (Plan) for the purpose of describing the additional mining operations to be conducted on the current mine site and the additional remediation and reclamation measures to be undertaken by the Company at the time that the Company discontinues mining at this site.  The Plan will include an Environmental Analysis of certain matters pertaining to the mine site.  It is contemplated that the Reclamation Bond posted with the BLM for reclamation costs will be increased by approximately $20,000 to $25,000. Mining operations have been suspended pending the approval of the new Plan of Operations.  As a result, the Company hired an experienced consultant to prepare the Plan and to interface with the BLM.  It is contemplated that the new Plan will be approved sometime in December or January.  After approval and payment of certain costs and expenses of the BLM and the posting of the increase in the bond, the Company will have all new permits to continue its mining operations.

 

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.

 

 

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.
Dated: August 19, 2015	By	/s/ Michael Herod
		Michael Herod
		Chief Operating Officer, President and Director
Dated: August 19, 2015	By	/s/ Larry Bonafide
		Larry Bonafide
		Principle Financial Officer, Secretary and Director

 

 

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