ITEM 1. BUSINESS.
Overview
U.S. Rare Earth Minerals (formerly U.S. Natural Nutrients and Minerals, Inc.) (the “Company”), was organized on June 9, 2008. The Company changed its name in April, 2011. The Company’s 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 are currently carried out through a distributor-based sales program directed at agricultural and human uses of the product. The Company commenced its mining activities in 2009, the Company entered into an agreement with M Strata LLC, a related party, whereby M Strata granted the Company permission and consent to mine certain mining claims owned or controlled by M Strata located on land located in the southwestern part of southern Nevada not far from the town of Panaca A copy of the First Amended and Restated Mining Agreement (the “M Strata Agreement”) effective as of November 1, 2013 was filed with the Securities and Exchange Commission in late 2013 on Form 8-K.
The Company has commenced a sales and marketing program and has been selling the product extracted in the mining process under the name “Excelerite®”. The Company believes that Excelerite® may have 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.
The Company markets Excelerite® through various channels including but not limited to direct distribution, sales through third-party distributors and sales on the Company’s website. The Company has also undertaken to develop a network of distributors, both in the United States and internationally.
Employees
As of December 31, 2016, the Company has no employees and the Board of Directors runs the Company for no compensation other than stock awards.
Item 1A.
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 this information.
Item 1B.
Item 1B. Unresolved Staff Comments.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Item 2.
Item 2. Description of Property.
The Company rents office space at 23 South 6th, Panaca, NV 89042.
Item 3.
Item 3. Legal Proceedings.
None.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
ITEM 5.
ITEM 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.
Common Stock
Our Articles of Incorporation authorizes the issuance of up to 300,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”). The Common Stock trades over the counter. As of December 31, 2016 and 2015, there were 28,166,350 and 12,316,438 respectively of shares outstanding.
Preferred Stock	
The Articles of Incorporation authorizes the issuance of up to 50,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”). The Preferred Stock is not publicly traded. As of December 31, 2016 and 2015, there were 440,500 and 440,500, respectively of preferred shares outstanding.
Dividend Policy
The Company has not declared or paid any cash dividends on its common stock and does not intend to declare or pay any cash dividend in the foreseeable future. The payment of dividends, if any, is within the discretion of the Board of Directors and will depend on the Company’s earnings, if any, its capital requirements and financial condition and such other factors as the Board of Directors may consider.
Securities Authorized for Issuance under Equity Compensation Plans
On January 19, 2010, the Company established a 2010 Employee, Director and Consultant Stock Plan (the “2010 Plan”). The 2010 Plan was approved by the Company’s board of directors and by the consent of the shareholders owning a majority of the outstanding shares. The material features of the 2010 Plan are described below.
Administration
A designated Administrator, or in the absence of such, our Board of Directors’ Compensation Committee or both, in the sole discretion of our Board, administers the 2010 Plan, which was approved by the Company’s Board of Directors on January 19, 2010. The Board, subject to the provisions of the 2010 Plan, has the authority to determine and designate officers, employees, directors and consultants to whom awards shall be made and the terms, conditions and restrictions applicable to each award (including, but not limited to, the option price, any restriction or limitation, any vesting schedule or acceleration thereof, and any forfeiture restrictions). The Board may, in its sole discretion, accelerate the vesting of awards. The Board of Directors must approve all grants of Options and Stock Awards issued to our officers or directors.
Types of Awards
The 2010 Plan is designed to enable us to offer certain officers, employees, directors and consultants of us and our subsidiaries equity interests in us and other incentive awards in order to attract, retain and reward such individuals and to strengthen the mutuality of interests between such individuals and our stockholders. In furtherance of this purpose, the 2010 Plan contains provisions for granting incentive and non-statutory stock options, stock wards and stock appreciation rights.
Stock Options. A "stock option" is a contractual right to purchase a number of shares of Common Stock at a price determined on the date the option is granted. The option price per share of Common Stock purchasable upon exercise of a stock option and the time or times at which such options shall be exercisable shall be determined by the Board at the time of grant. Such option price shall not be less than 100% of the fair market value of the Common Stock on the date of grant. The option price must be paid in cash, money order, check or Common Stock of the Company. The Options may also contain at the time of grant, at the discretion of the Board, certain other cashless exercise provisions.
Options shall be exercisable at the times and subject to the conditions determined by the Board at the date of grant, but no option may be exercisable more than ten years after the date it is granted. If the Optionee ceases to be an employee of our company for any reason other than death, any option granted as an Incentive Stock Option exercisable on the date of the termination of employment may be exercised for a period of thirty days or until the expiration of the stated term of the option, whichever period is shorter. In the event of the Optionee’s death, any granted Incentive Stock Option exercisable at the date of death may be exercised by the legal heirs of the Optionee from the date of death until the expiration of the stated term of the option or six months from the date of death, whichever event first occurs. In the event of disability of the Optionee, any granted Incentive Stock Options shall expire on the stated date that the Option would otherwise have expired or 12 months from the date of disability, whichever event first occurs. The termination and other provisions of a non-statutory stock option shall be fixed by the Board of Directors at the date of grant of each respective option.
Common Stock Award. “Common Stock Award” is shares of Common Stock that will be issued to a recipient at the end of a restriction period, if any, specified by the Board if he or she continues to be an employee, director or consultant of us. If the recipient remains an employee, director or consultant at the end of the restriction period, the applicable restrictions will lapse and we will issue a stock certificate representing such shares of Common Stock to the participant. If the recipient ceases to be an employee, director or consultant of us for any reason (including death, disability or retirement) before the end of the restriction period unless otherwise determined by the Board, the restricted stock award will be terminated.
Eligibility
The Company’s officers, employees, directors and consultants of U.S. Rare Earth Minerals, Inc. are eligible to be granted stock options, and Common Stock Awards. Eligibility shall be determined by the Board; however, all Options and Stock Awards granted to officers and directors must be approved by the Board.
Termination or Amendment of the 2010 Plan
The Board may at any time amend, discontinue, or terminate all or any part of the 2010 Plan, provided, however, that unless otherwise required by law, the rights of a participant may not be impaired without his or her consent, and provided that we will seek the approval of our stockholders for any amendment if such approval is necessary to comply with any applicable federal or state securities laws or rules or regulations.
Awards
For the calendar years ending December 31, 2016 and 2015, no awards had been made under the 2010 Plan to pay for services rendered to the Company in lieu of cash. These awards are made when the Company does not have sufficient cash to pay for the services provided to the Company.
Shares Subject to the 2010 Plan
Subject to adjustment, the aggregate number of shares of Stock which may be delivered under the 2010 Plan shall not exceed a number equal to 15% of the total number of shares of Stock outstanding immediately following the Effective Time, assuming for this purpose the conversion into Stock of all outstanding securities that are convertible by their terms (directly or indirectly) into Stock; provided, however, that, as of January 1 of each calendar year, commencing with the year 2011, the maximum number of shares of Stock which may be delivered under the 2010 Plan shall automatically increase by a number sufficient to cause the number of shares of Stock covered by the 2010 Plan to equal 15% of the total number of shares of Stock then outstanding, assuming for this purpose the conversion into Stock of all outstanding securities that are convertible by their terms (directly or indirectly) into Stock.
The Company filed a registration statement on August 29, 2016 with the Securities and Exchange Commission to register 6,200,000 additional shares to be available to be issued from the 2010 Plan. We now have 6,249,600 shares in the plan.
Federal Tax Consequences
The Federal income tax discussion set forth below is intended for general information only. State and local income tax consequences are not discussed, and may vary from locality to locality.
Incentive Stock Options. Incentive stock options granted under the 2010 Plan are designed to qualify for the special tax treatment for incentive stock options provided for in the Internal Revenue Code (the “Code”). Under the provisions of the Code, an optionee who at all times from the date of grant until three months before the date of exercise is an employee of the Company, and who holds the shares of Common Stock obtained upon exercise of his incentive stock option for two years after the date of grant and one year after exercise, will recognize no taxable income on either the grant or exercise of such option and will recognize capital gain or loss on the sale of the shares. If such shares are held by the optionee for the required holding period, the Company will not be entitled to any tax deduction with respect to the grant or exercise of the option. If such shares are sold by the optionee prior to the expiration of the holding periods described above, the optionee will recognize ordinary income upon such disposition. Upon the exercise of an incentive stock option, the optionee will incur an item of tax preference equal to the excess of the fair market value of the shares at the time of exercise over the exercise price, which may subject the optionee to the alternative minimum tax.
Non-Qualified Options. Under present Treasury regulations, an optionee who is granted a non-qualified option will not realize taxable income at the time the option is granted. In general, an optionee will be subject to tax for the year of exercise on an amount of ordinary income equal to the excess of the fair market value of the shares on the date of exercise over the option price, and the Company will receive a corresponding deduction. Income tax withholding requirements apply upon exercise. The optionee's basis in the shares so acquired will be equal to the option price plus the amount of ordinary income upon which he is taxed. Upon subsequent disposition of the shares, the optionee will realize capital gain or loss, long-term or short-term, depending upon the length of time the shares are held after the option is exercised.
Common Stock Awards. Recipients of shares of restricted Common Stock that are not "transferable" and are subject to "substantial risk of forfeiture" at the time of grant will not be subject to Federal income taxes until lapse or release of the restrictions on the shares. The recipient's income and the Company's deduction will be equal to the fair market value of the shares on the date of lapse or release of such restrictions. It has been the Company’s policy to value the cost of the issuance of said unregistered shares at the then bid price of the stock when issued.
The issuance of any of our common or preferred stock is within the discretion of our Board of Directors, which has the power to issue any or all of our authorized but unissued shares without stockholder approval.
Recent Sales of Unregistered Securities
During 2016, 18,850,000 unregistered restricted shares were issued for cash consideration, payment for goods and services and compensation to the Board of Directors. On November 29, 2016 3,000,000 of these shares were cancelled and on February 15, 2017, those shares were returned to the Treasury.
Issuer Purchases of Equity Securities
None.
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 and related party (“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 designated which claims may be mined and USMN had 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.
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 8-K 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.
A copy of the Agreement was attached to the filing of a Form 8K on December 9, 2013.
On September 1, 2016 the Company moved it’s executive office from 4631 Bradford Court, Reno, Nevada 89519 to 23 South 6th, Panaca, NV 89042.
ITEM 6.
ITEM 6. Selected Financial Data.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
ITEM 7.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
The following discussion should be read in conjunction with our audited financial statements and the notes thereto.
Forward-Looking Statements
This annual 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.
RESULTS OF OPERATIONS
The following table shows the financial data of the consolidated statements of operations of the Company for the year ended December 31, 2016 and December 31, 2015. The data should be read in conjunction with the audited consolidated financial statements of the Company and related notes thereto.
YEAR ENDED DECEMBER 31, 2016 COMPARED TO YEAR ENDED DECEMBER 31, 2015
During the year ended December 31, 2016, we improved expenses by $1,390,996, a decrease of -63% from the year ended December 31, 2015. The decrease is attributable to less stock payment for current and future services.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2016, cash totaled $11,092 and from the year ended December 31, 2015, cash increased by $7,611. This cash position was the result of net cash used in operating activities.
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 our financial position, facilitate growth and provide us with additional flexibility to take advantage of business opportunities. The Company is in the process of an offering of shares of common and preferred stock to be designated by the Company. There is no guarantee that this offering will be completed, and if completed, the specific terms and conditions. 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.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
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 business operates 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.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes”. Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We have no material uncertain tax positions for any of the reporting periods presented.
Revenue Recognition
The Company purchases Calcium Montmorillonite Clay pursuant to an agreement with a related party, who owns the land and mine containing such clay, and resells the product for agricultural uses. 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.
Stock based compensation for employees is account for using the Stock Based Compensation Topic of the FASB ASC. We use the fair value method for equity instruments granted to 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.
Going Concern
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have significant cash or other material assets, nor does it have operations or a source of revenues sufficient to cover its operational costs and allow it to continue as a 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. As of December 31, 2016, the Company’s current liabilities exceeded its current assets by $315,302 and it has an accumulated deficit of $13,882,800. 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 from management and significant shareholders sufficient to meet its minimal operating expenses and 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 its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
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.
Contractual Obligations
The Company has a contractual obligation pursuant to the M Strata Agreement. See Item 5 above.
ITEM 7A.
ITEM 7A. 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 this information.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data.
Audited financial statements begin on the following page of this report.
U.S. RARE EARTH MINERALS, INC.
(formerly known as U.S. NATURAL NUTRIENTS AND MINERALS, INC.)
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
INDEX TO THE FINANCIAL STATEMENTS
Heaton & Company, PLLC
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Stockholders of U.S. Rare Earth Minerals, Inc.
We have audited the accompanying balance sheets of U.S. Rare Earth Minerals, Inc. (the Company) as of December 31, 2016, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of U.S. Rare Earth Minerals, Inc. as of December 31, 2016, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has negative working capital and has generated minimal revenues. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/Heaton & Company, PLLC Farmington, Utah March 31, 2017
240 N. East Promontory Suite 200 Farmington, Utah 84025 (T) 801.218.3523
heatoncpas.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors of
U.S. Rare Earth Minerals, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheet of U.S. Rare Earth Minerals, Inc. as of December 31, 2015 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of U.S. Rare Earth Minerals, Inc. as of December 31, 2015, and the results of its operations and its cash flow for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that U.S. Rare Earth Minerals, Inc. will continue as a going concern. As discussed in Note 3 to the financial statements, the Company’s income has come from two major clients and there can be no assurance that there will be a continuance in their business, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MaloneBailey, LLP
Houston, Texas
July 22, 2016
U.S. RARE EARTH MINERALS, INC.
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
U.S. RARE EARTH MINERALS, INC.
STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these financial statements.
U.S. RARE EARTH MINERALS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended December 31, 2016 and 2015
The accompanying notes are an integral part of these financial statements.
U.S. RARE EARTH MINERALS, INC.
STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements.
U.S. RARE EARTH MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. FORMATION AND BUSINESS OF THE COMPANY
Basis of Presentation and Organization
U.S. Rare Earth Minerals, Inc. was incorporated in the state of Nevada on June 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.
U.S. Rare Earth Minerals, Inc., formerly known as U.S. Natural Nutrients and Minerals, Inc. is in the business of mining a certain high quality Calcium Montmorillonite clay which is high in minerals and other nutrients that is used for agricultural purposes to restore minerals to mineral depleted soil and for mineral supplements for animals and humans.
The Company approved a 50 to 1 reverse stock split of the common stock to be effective March 9, 2015. The effect of this split was retroactively applied to all periods reported in this filing.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company maintains cash balances at one financial institution. Accounts at that institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Cash balances may at times exceed the FDIC insured limits. The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents.
Uncollectible Receivables
The Company requires payment before release of product to preclude uncollectible receivables. If terms are granted to an established customer and their receivables are open one year past the due date, these open invoices will be reviewed to determine if they should be charged off at the year end. As of December 31, 2016 and 2015 no balances were charged off.
Inventories
Inventories are stated at the lower of cost or market using the first-in, first out (FIFO) method. As of December 31, 2016, all inventory consisted of finished goods.
Fixed Assets
The Company records fixed assets at cost and calculates depreciation using the straight-line method over the estimated useful life of the assets, which is estimated to be between five and seven years. Maintenance, repairs and minor renewals are charged to expense when incurred. Replacements and major renewals are capitalized.
At December 31, 2016 and December 31, 2015, the value of mining equipment was $280,834, with accumulated depreciation of $256,950 and $231,102 respectively for a net value of $23,884 and $49,733 respectively. The value of office equipment was $10,239 with accumulated depreciation of $9,416 and $7,636 respectively for a net value of $823 and $2,603 respectively. At December 31, 2016 and December 31, 2015, the depreciation expense for mining equipment was $25,998 and $52,756 respectively and for office equipment was $1,630 and $2,024 respectively.
Shipping and Handling Costs
The Company charges the customer for shipping and handling and those costs are recorded as cost of sales.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes”. Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We have no material uncertain tax positions for any of the reporting periods presented.
Revenue Recognition
The Company purchases Calcium Montmorillonite Clay pursuant to an agreement with a party, who owns the land and mine containing such clay, and resells the product for agricultural uses. 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.
Stock based compensation for employees is account for using the Stock Based Compensation Topic of the FASB ASC. We use the fair value method for equity instruments granted to 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.
Fair Value Measurements
We adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 - quoted prices in active markets for identical assets or liabilities
Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 - inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
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 3. 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 an accumulated deficit of $13,882,800 and a working capital deficiency of $315,302 as of December 31, 2016. 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 4. CAPITAL STOCK
On February 27, 2015, the Company filed a Certificate of Change with the Nevada Secretary of State changing the number of authorized common shares from 6,000,000 to 300,000,000. The Company is currently 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.
During 2015, at various times, an aggregate of 6,500,000 shares of common stock were issued in exchange for services. 6,000,000 shares, valued at $0.29 per share were issued to Board members and 500,000 shares were issued with a value of $0.30 per share to a consultant.
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.
The Company formally filed a Certificate of Designation authorizing 500,000 of the 50,000,000 authorized preferred shares to be designated as $0.001 par value, Class “A” 6% Cumulative, Convertible Voting Preferred Stock with the Nevada Secretary of State on December 31, 2013.
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 December 31, 2016 and 2015, a total of $86,610 and $56,774 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 December 31, 2016 and 2015, there were 440,500 and 440,500 shares of Class “A” 6% Cumulative, Convertible Voting Preferred Stock issued and outstanding, respectively.
As of December 31, 2016 and 2015, there were 28,166,350 and 12,316,438 shares of common stock issued and outstanding, respectively.
NOTE 5. NOTES AND DEBENTURES PAYABLE
In 2009, the Company received multiple set of funds and the terms of each note payable are set forth: $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 both are in default.
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.
At December 31, 2015, the Company has recorded accrued interest of $10,398 related to the notes and debentures payable which is included in the $25,976 accrued interest balance on the balance sheet. A $5,000 payment of accrued interest was made in 2015.
NOTE 6. LOAN PAYABLE
We have two short-term loans totaling $25,000 at December 31, 2016 and 2015. These loans were due in 2012 and as of December 31, 2016 and 2015, are in default. These notes are accruing interest at a rate of 10% per annum. At December 31, 2016 and 2015, the Company has recorded accrued interest of $18,078 and $15,578, respectively related to the loans payable which is included in the $26,776 and $25,976, respectively of accrued interest balance on the balance sheet.
NOTE 7. INCOME TAXES
The components of the Company’s deferred tax asset are as follows as of December 31, 2016:
Deferred tax asset consists of accumulated net operating losses of approximately $13,875,000 and $13,186,000 as of December 31, 2016 and 2015, respectively, which expire between 2033 and 2036.
The reconciliation of income tax expense at the U.S. statutory rate of 35% for the years ended December 31, 2016 and 2015 is as follows:
The Company had no gross unrecognized tax benefits that, if recognized, would affect the effective income tax rate in future periods. At December 31, 2016, the amount of gross unrecognized tax benefits before valuation allowances and the amount that would favorably affect the effective income tax rate in future periods after valuation allowances were $0. The Company has not accrued any additional interest or penalties.
The Company files income tax returns in the United States. The Company will file its U.S. federal return for the year ended December 31, 2016 in 2017. Once filed, the 2016 U.S. federal return and those for 2015 and 2014 will be considered as open tax years. No tax returns are currently under examination by any tax authorities. The Company has not accrued any additional interest or penalties or the delinquency of our outstanding tax returns as we have incurred net losses in those periods still outstanding.
NOTE 8. RELATED PARTY TRANSACTIONS
The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts.
During 2015, in consideration of past stock issued to M. Strata, M. Strata forgave $236,362 of the balance owed by the Company relating to 2015, 2014, and December, 2013 tonnage fees. The Company made payments of $31,941 to M. Strata during 2016. As of December 31, 2016, the Company owed M. Strata $164,522 related to tonnage fees.
In 2015, four directors each received 1,500,000 shares of the company’s common stock for past and future services. At the time of issuance, each Director held a minimum of 10% of the outstanding common stock. Refer to Item 12 herein for actual percentages each Director holds. 18,850,000 shares of common stock were issued during 2016. 800,000 shares were issued to a Director 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; 2,500,000 shares were sold to investors; 9,000,000 shares were issued to Directors; 3,550,000 shares were issued to consultants.
As of December 31, 2016, the Company had an outstanding payable of $3,803 to a company owned by the CEO for packaging services provided during the year. As of December 31, 2015, the Company had an outstanding payable to Dave Quincy Farber $24,003.
During 2015, the Company rented office space at 4613 Bradford Court, Reno, Nevada 89519 from Michael Herod at no cost.
NOTE 9. CONCENTRATION
The Company has concentrated sales as follows:
The Company has concentrated purchases as follows:
NOTE 10. 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. 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 December 31, 2016 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 11. SUBSEQUENT EVENTS
In preparing the financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were available to be issued.
Of the 18,850,000 shares of common stock issued in 2016, 4,349,999 shares were cancelled by Treasury Order on January 23, 2017 and 3,000,000 shares were cancelled on February 15, 2017.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Management’s Report on 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.
As of December 31, 2016, 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 (2013) 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 were not effective.
Management’s Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this annual report, being December 31, 2016, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company’s management, including our company’s Principal Executive Officer and Principal Financial Officer. Based upon that evaluation, our company’s Principal Executive Officer and Principal Financial Officer concluded that our company’s disclosure controls and procedures are not effective due to the material weaknesses described below. There have been no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our Principal Executive Officer, to allow timely decisions regarding required disclosure.
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.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
On January 6, 2017, MaloneBailey informed U. S. Rare Earth Minerals, Inc. ("the Company”) that they declined to stand for re-election as our independent registered public accounting firm for the audit of the year ended December 31, 2016. MaloneBailey offered their cooperation for a smooth transition to the new auditor and wished us well in the future. Then, on January 25, 2017, U. S. Rare Earth Minerals, Inc., (“the Company”) engaged Heaton & Company, PLLC, 240 North East Promontory, Suite 200, Farmington, Utah 84075.
Larry Bonafide resigned as Secretary and Treasurer effective as of February 29, 2016. Mr. Bonafide remains Chairman. The Board of Directors appointed Donita R. Kendig, a current director of the Company, as Secretary/Treasurer and Chief Financial Officer effective as of February 29, 2016.
On February 29, 2016, the Board of Directors of the Company elected Daniel Potente a Director of the Company. Refer to March 3, 2016 Form 8-K.
On May 16, 2016, the Board of Directors of the Company elected D. Quincy Farber a Director of the Company. Refer to May 17, 2016 Form 8-K.
Michael Herod resigned as President and Director effective as of July 23, 2016. The Board of Directors appointed D. Quincy Farber, a current director of the Company, as Chief Executive Officer and President effective as of July 23, 2016.
On September 1, 2016 the Company moved its executive office from 4631 Bradford Court, Reno, Nevada 89519 to 23 South 6th, Panaca, NV 89042.
The Company’s Attorney continues an on going dialogue with the Bureau of Land Management and hopes to reach an agreement over an alleged water diversion on U.S. Rare Earth Minerals, Inc. Panaca, NV BLM mine site. It is hoped that the Army Corps of Engineer’s will soon visit the site and render a decision.
PART III.
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Set forth below are the names of our directors and executive officers, their ages, all positions and offices that they held with us, the period during which they have served as such, and their business experience during at least the last five years.
Larry Bonafide (70). On February 10, 2014, the Board of Directors of the Company elected Larry Bonafide a Director of the Company. Mr. Bonafide attended the Pennsylvania State University followed by a successful and rewarding professional career that spanned 45+ years. He had an excellent record of accomplishments as an executive with ChevronTexaco, Marriott, U S Foodservice and Stouffer Restaurants and Inns. He has also been active as an independent Marketing and Business Development consultant.
Mr. Bonafide has vast experience and expertise in the following areas: Strategic, financial, and organization planning; Organization management; Contract negotiations, compliance and oversight; Marketing and sales management; Operating systems design and implementation; Purchasing/procurement; Human resource recruiting, training and development; and, Performance measured incentive Compensation programs.
Donita R Kendig (79) attended the University of Nebraska & the University of Arizona and started her career as an accountant. She managed the multiple office Los Angeles firm of Kendig, Stockwell & Gleason (a Professional Law Corporation) for 11 years. Later, she then applied her management skills to turn around the busy Sunset Plaza, Los Angeles restaurant, “Le Petit Four” from a money loser to a multi-million dollar success. Since 1992 she has enjoyed tremendous success as a Professional Artist producing sought after works throughout the world. For 8 years her works were represented by Richard danskin Gallery, El Paseo, Palm Desert, California. Her management and merchandising skills are evidenced by giclee print sales, websites and licensed images. She operates the following websites: www.donikendig.com and www.jewelsnart.com
Dave Quincy Farber (38), is owner of Quincy Bag Company, Inc. in Dubuque, IA (www.quincybag.com). Quincy Bag Company Inc. supplies new & reconditioned FIBCs (bulk bags), woven polypropylene, multi-wall paper, BOPP, burlap, and sandbags to companies in various industries from agriculture and manufacturing to home and garden. He attended University of Dubuque majoring in Aviation. After a short stint in the family business, his entrepreneurial spirit surged to the forefront, as he founded Quincy Bag Company and built it from the ground up. The business is thriving and growing each year. It now has several satellite warehouses and 15 employees. His true passion is to invest in people and businesses that started out like he did. He values the small farms that he supplies bags to as much as the large corporations he does business with.
David Lee (68) is a graduate of El Camino College, Torrance, California, with a degree in Business Administration. Mr. Lee, also, has extensive sales and marketing experience in various industries including Alternative Energy (Photovoltaic and Solar Heating of fluids for domestic and commercial applications). He was General Manager, Solar Division for Reliable Steel Corp., Los Angeles. His other sales experience was for various Wholesale Distributors in the Heating, Ventilating and Air Conditioning (HVAC) including one of the largest Manufacture Direct to Wholesale, Williams Furnace Company, Colton, California.
He has been a professional pilot for thirty-five years. During his flying career, he flew Boeing 727-200 for Kitty Hawk Air Cargo, various passenger aircraft for AMR Eagle Airlines and was Director of Operations and Chief Pilot for Empire Airways in New York. He continues to pilot charted, twin engine jets throughout North America as a contract pilot. He has more than 10,000 hours of flight time.
Daniel Potente (60) founded Artline Wholesalers, Inc. (http://www.artlinegroup.com/) in 1978 now Artlinegroup. (http://www.artlinewholesalers.com/) is one of the top companies in the field of Art and Hospitality (winning the BDNY Design Award for 2014 and 2015) and GSA Contracts. They have contracts from the General Services Administration for interiors/furnishings of VA facilities, hospitals and rehab facilities ranging from refurbishing to total interiors in new structures. Over the last 20 years, Artline has expanded its scope to Shopping Malls, Hotels, Restaurants and Trade Shows. Clients include Hilton (HLT) and Best Western Hotels.
Mr. Potente is an entrepreneur of the first order residing in Long Island, New York. He has always been a conservationist and interested in the environment. He is an enthusiastic believer in Excelerite's® applications in agricultural, animal and human supplements and cosmetic/spa use.
Mr. Potente is a graduate of Farmingdale State College, Long Island, NY. He conducts lectures and classes in Sales and Marketing to his staff as well as marketing major students at a NY University. Mr. Potente is also an avid sportsman, environmentalist, health enthusiast and self improvement devotee. He competes in triathlons and other athletic events, breeds & raises peafowl, maintains a Bird Sanctuary and is the current President of the United Peafowl Association.
He has traveled extensively in Africa, encouraging and financing local small businesses and has visited every continent but Antarctica, which is planned for 2016.
Larry Bonafide was appointed to the Board of Directors on February 10, 2014.
David Lee was appointed to the Board of Directors on March 24, 2014.
Donita R. Kendig was appointed to the Board of Directors on May 5, 2015.
Daniel Potente was appointed to the Board of Directors on February 29, 2016
Dave Quincy Farber was appointed to the Board of Directors on May 12, 2016.
Audit Committee and Audit Committee Financial Expert
We do not currently have an audit committee financial expert, nor do we have an audit committee. Our entire board of directors handles the functions that would otherwise be handled by an audit committee. We do not currently have the capital resources to pay director fees to a qualified independent expert who would be willing to serve on our board and who would be willing to act as an audit committee financial expert. As our business expands and as we appoint others to our board of directors we expect that we will seek a qualified independent expert to become a member of our board of directors. Before retaining any such expert our board would make a determination as to whether such person is independent.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Securities Act of 1934 requires the Company's officers and directors, and greater than 10% stockholders, to file reports of ownership and changes in ownership of its securities with the Securities and Exchange Commission. Copies of the reports are required by SEC regulation to be furnished to the Company. Based on management's review of these reports during the fiscal year ended December 31, 2014, all reports required to be filed were filed on a timely basis.
Code of Ethics
Our board of directors has adopted a code of ethics that our officers, directors and any person who may perform similar functions are subject to. The Code of Ethics does not indicate the consequences of a breach of the code. If there is a breach, the board of directors would review the facts and circumstances surrounding the breach and take action that it deems appropriate, which action may include dismissal of the employee who breached the code. The board of directors is responsible for reviewing their own conduct under the Code of Ethics and determining what action to take in the event of a breach of the Code of Ethics by any director(s).
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
No past officer or director of the Company has received any salary and none is due or payable. We currently have no formal written salary arrangement with any of our officers or directors. Notwithstanding, any or all of our officers and /or directors may receive a salary or other compensation for services that they provide to the Company in the future. No retirement, pension, profit sharing or insurance programs or other similar programs have been adopted by the Company for the benefit of the Company’s employees. The Company did adopt its 2010 Employee, Director and Consultant Stock Plan in January 2010. (see Item 5, above).
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding beneficial stock ownership as of December 31, 2016 of (i) all persons known to us to be beneficial owners of more than 5% of our outstanding common stock; (ii) each director of our company and our executive officers, and (iii) all of our officers and directors as a group. Each of the persons in the table below has sole voting power and sole dispositive power as to all of the shares shown as beneficially owned by them, except as otherwise indicated.
The following table sets forth information regarding beneficial ownership of our common stock as of December 31, 2016 (i) by each person who is known by us to beneficially own more than five percent of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group:
(1) Beneficial Ownership is determined in accordance with Rule 13d-3 of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of our common stock. For each Beneficial Owner above, any options exercisable within 60 days have been included in the denominator.
(2) Based on 28,166,350 shares of our Common Stock outstanding as of December 31, 2016.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts.
The Company has commenced its mining activities. The Company entered into an agreement in 2009 with M Strata, LLC whereby M Strata granted the Company permission and consent to mine certain mining claims owned or controlled by M Strata located in Panaca, Nevada.
On April 21, 2016 the Company issued 800,000 shares of common stock to Dave Quincy Farber for a payable owed him in the amount of $24,003.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
The aggregate fees billed by our auditors, Heaton & Company, PLLC and MaloneBailey LLP, for professional services rendered for the audit of our annual financial statements for fiscal year ended December 31, 2016 and review of our interim financial statements for the first, second and third quarters of 2016 is approximately $24,000. The aggregate fees billed by our auditors, MaloneBailey LLP, for professional services rendered for the audit of our annual financial statements for fiscal year ended December 31, 2015 and review of our interim financial statements for the first, second and third quarters of 2015 was approximately $39,500.
AUDIT-RELATED FEES
During the last two fiscal years, no fees were billed or incurred for assurance or related services by our auditors that were reasonably related to the audit or review of financial statements reported above.
TAX FEES
Tax preparation fees billed for the fiscal years ended December 31, 2016 and 2015 were approximately $800 and $750, respectively.
ALL OTHER FEES
During the last two fiscal years, no other fees were billed or incurred for services by our auditors other than the fees noted above. Our board, acting as an audit committee, deemed the fees charged to be compatible with maintenance of the independence of our auditors.
THE BOARD OF DIRECTORS PRE-APPROVAL POLICIES
We do not have a separate audit committee. Our full board of directors performs the functions of an audit committee. Before an independent auditor is engaged by us to render audit or non-audit services, our board of directors pre-approves the engagement. Board of directors pre-approval of audit and non-audit services will not be required if the engagement for the services is entered into pursuant to pre-approval policies and procedures established by our board of directors regarding our engagement of the independent auditor, provided the policies and procedures are detailed as to the particular service, our board of directors is informed of each service provided, and such policies and procedures do not include delegation of our board of directors' responsibilities under the Exchange Act to our management. Our board of directors may delegate to one or more designated members of our board of directors the authority to grant pre-approvals, provided such approvals are presented to the board of directors at a subsequent meeting. If our board of directors elects to establish pre-approval policies and procedures regarding non-audit services, the board of directors must be informed of each non-audit service provided by the independent auditor. Board of directors pre-approval of non-audit services, other than review and attest services, also will not be required if such services fall within available exceptions established by the SEC. For the fiscal year ended December 31, 2014, 100% of audit-related services, tax services and other services performed by our independent auditors were pre-approved by our board of directors.
Our board has considered whether the services described above under the caption "All Other Fees", which are currently none, is compatible with maintaining the auditor's independence.
The board approved all fees described above.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this 10-K:
1. FINANCIAL STATEMENTS
The following documents are filed in Part II, Item 8 of this annual report on Form 10-K:
2. FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted as they are not required, not applicable, or the required information is otherwise included.
3. EXHIBITS
The exhibits listed below are filed as part of or incorporated by reference in this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.