UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 21, 2018
U.S. RARE EARTH MINERALS, INC.
(Exact Name of Registrant as Specified in Charter)
| Nevada | 333-154912 | 26-2797630 | ||
| (State or Other Jurisdiction | (Commission | (IRS Employer | ||
| of Incorporation) | File Number) | Identification Number) |
C/O BIOXYTRAN, INC.
233 Needham Street,
Suite 300
Newton MA, 02464
(Address of principal executive offices, including zip code)
(617) 494-1199
(Registrant’s telephone number including area code)
23 South Sixth, Panaca, Nevada 89042
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Explanatory Note:
As previously disclosed in a filing on Form 8-K with the Securities and Exchange Commission (“SEC”) made by U.S. Rare Earth Minerals, Inc. (the “Company”) on September 21, 2018 consummated a series of transactions including the merger of Bioxytran, Inc., a Delaware corporation, into BiOxy Acquisition Corp., a Wyoming corporation and wholly owned subsidiary of the Company. The purpose of this report is to amend the Current Report on Form 8-K filed on September 24, 2018 by the Company in order to provide the financial information described below.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| 1 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
U.S. Rare Earth Minerals Inc. | |
| Date: October 26, 2018 | |
| /s/ David Platt | |
| By: David Platt | |
| Title: President and Chief Executive Officer |
| 2 |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in U.S Rare Earth Minerals, Inc.’s on Form 8-K/A (No. 333-154912) to be filed on October 26, 2018, of our Report of Independent Registered Public Accounting Firm, dated March 30, 2018 (except for the effects of the reverse acquisition as to which the date is September 21, 2018) relating to the financial statements of U.S. Rare Earth Minerals, Inc. as of December 31, 2017 and for the year then ended included in this Current Report on Form 8-K/A.
We also consent to the references to us under the headings “Experts”.
Pinnacle Accountancy Group of Utah
Farmington, Utah
October
26, 2018
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in amendment to the 8-K of U.S Rare Earth Minerals, Inc. to be filed on October 26, 2018, of our Report of Independent Registered Public Accounting Firm for Bioxytran, Inc., dated October 26, 2018 relating to the balance sheet of Bioxytran, Inc., as of December 31, 2017 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the period from October 5, 2017 (inception) to December 31, 2017, which appear in such 8-K/A..
We also consent to the references to us under the headings “Experts”.
Pinnacle Accountancy Group of Utah
Farmington, Utah
October 26, 2018
Exhibit 99.1
BIOXYTRAN, INC.
FINANCIAL STATEMENTS
FOR THE PERIOD OF OCTOBER 5, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017
(audited)
TABLE OF CONTENTS
| Page | ||
| Report of Independent Registered Public Accounting Firm | A-1 | |
| Financial Statements | ||
| Balance Sheets | A-2 | |
| Statement of Operations | A-3 | |
| Statement of Changes in Stockholders’ Deficit | A-3 | |
| Statement of Cash Flows | A-4 | |
| Notes to Financial Statements | A-5 | |
Except as otherwise required by the context, all references in this report to “we,” “us,” “our,” “BIOX” or “Company” refer to the consolidated operations of Bioxytran, Inc.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Bioxytran, Inc.
233 Needham Street, Suite 300
Newton, MA 02464
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Bioxytran, Inc., (the “Company”) as of December 31, 2017 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the period of inception on October 5, 2017 to December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, 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.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Emphasis of Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses and has no operations which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Pinnacle Accountancy Group of Utah, PLLC
Pinnacle Accountancy Group of Utah, PLLC
Farmington, Utah
October 26, 2018
We
have served as the Company’s auditors since 2018.
| A-1 |
BIOXYTRAN, INC.
BALANCE SHEET
DECEMBER 31, 2017
| ASSETS | ||||
| Current assets: | ||||
| Cash | $ | 110 | ||
| Total current assets | 110 | |||
| Total assets | $ | 110 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||
| Current liabilities: | ||||
| Accounts payable - related party | $ | 1,419 | ||
| Total current liabilities | 1,419 | |||
| Stockholders’ equity (deficit): | ||||
| Preferred stock, $0.0001 par value; 5,000,000 shares authorized, none issued and outstanding | - | |||
| Common stock, $0.0001 par value; 95,000,000 shares authorized; 15,000,000 issued and outstanding | 1,500 | |||
| Accumulated deficit | (2,809 | ) | ||
| Total stockholders’ equity (deficit) | (1,309 | ) | ||
| Total liabilities and stockholders’ equity (deficit) | $ | 110 | ||
The Company was incorporated on October 5, 2017. Therefore, there is no comparative information presented related to the year ended December 31, 2016.
See the accompanying notes to these audited financial statements.
| A-2 |
BIOXYTRAN, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD OF OCTOBER 5, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017
| Operating expenses: | ||||
| General and administrative | $ | 2,809 | ||
| Total operating expenses | 2,809 | |||
| Loss from operations | (2,809 | ) | ||
| Other income (expenses) | - | |||
| Net loss before provision for income taxes | (2,809 | ) | ||
| Provision for income taxes | - | |||
| NET LOSS | $ | (2,809 | ) | |
| Loss per common share, basic and diluted | $ | (0.00 | ) | |
| Weighted average number of common shares outstanding, basic and diluted | 15,000,000 | |||
The Company was incorporated on October 5, 2017. Therefore, there is no comparative information presented related to the year ended December 31, 2016.
See the accompanying notes to these audited financial statements.
| A-3 |
BIOXYTRAN, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD OF OCTOBER 5, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017
| Common Stock | Additional Paid in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance, October 5, 2017 (date of inception) | - | - | - | - | - | |||||||||||||||
| Issuance of founder shares | 15,000,000 | $ | 1,500 | $ | - | $ | - | $ | 1,500 | |||||||||||
| Net loss | - | - | - | (2,809 | ) | (2,809 | ) | |||||||||||||
| Balance, December 31, 2017 | 15,000,000 | $ | 1,500 | $ | - | $ | (2,809 | ) | $ | (1,309 | ) | |||||||||
The Company was incorporated on October 5, 2017. Therefore, there is no comparative information presented related to the year ended December 31, 2016.
See the accompanying notes to these audited financial statements.
| A-4 |
BIOXYTRAN, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD OF OCTOBER 5, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
| Net loss | (2,809 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Stock-based compensation | 1,500 | |||
| Changes in operating assets and liabilities: | ||||
| Increase in accounts payable - related party | 1,419 | |||
| Net cash provided by operating activities | 110 | |||
| CASH FLOWS FROM INVESTING ACTIVITIES: | - | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | - | |||
| Net increase (decrease) in cash | 110 | |||
| Cash, beginning of period | - | |||
| Cash, end of period | 110 | |||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||
| Interest paid | - | |||
| Income taxes paid | - | |||
The Company was incorporated on October 5, 2017. Therefore, there is no comparative information presented related to the year ended December 31, 2016.
See the accompanying notes to these audited financial statements.
| A-5 |
BIOXYTRAN, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD OF OCTOBER 5, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017
(AUDITED)
NOTE 1 – BACKGROUND AND ORGANIZATION
Business Operations
Bioxytran, Inc. (the “Company”) is an early-stage pharmaceutical company focused on the development, manufacture and commercialization of therapeutic drugs designed to address hypoxia in humans, which is a lack of oxygen to tissues, in a safe and efficient manner. If it is not addressed, lack of oxygen to tissues, or hypoxia, results in necrosis, which is the death of cells comprising body tissue. Necrosis cannot be reversed. Our lead drug candidate, code named BXT-25, is an oxygen-carrying small molecule consisting of bovine hemoglobin stabilized with a co-polymer with intended applications to include treatment of hypoxic conditions in the brain resulting from stroke, and hypoxic conditions in wounds to prevent necrosis and to promote healing. The Company’s initial focus is the treatment of hypoxic conditions in the brain resulting from stroke, and hypoxic conditions in wounds to prevent necrosis and to promote healing. We believe that ours is a novel approach that will result in the creation of safe drug alternatives to existing therapies for effectively addressing hypoxic conditions in humans. Our drug development efforts are guided by specialists in co-polymer chemistry and other disciplines, and we intend to supplement our efforts with input from a scientific and medical advisory board whose members are leading physicians.
Organization, Reincorporation, and Merger with U.S. Rare Earth Minerals, Inc.
The Company was organized on October 5, 2017, as a Delaware corporation with a taxing structure for U.S. federal and state income tax as a C-Corporation with 95,000,000 authorized common shares with a par value of $0.0001, and 5,000,000 preferred shares with a par value of $0.0001. As of December 31, 2017, 15,000,000 common shares are issued and outstanding.
On September 17, 2018, the Company announced an Agreement and Plan of Merger and Reorganization among Bioxytran, Inc., U.S. Rare Earth Minerals, Inc. (“USMN”) and Bioxy Acquisition Corp. (the “Merger”). The Merger closed on September 21, 2018. After the consummation of the Merger, the Company is a wholly-owned subsidiary of USMN, and USMN (to be renamed Bioxytran, Inc.) is the continuing registrant and reporting company. Each outstanding share of the Company’s common stock was converted into 5.10580 shares of USMN common stock. Immediately after the Merger, the Company’s former shareholders own a majority of the voting common stock of the combined company and control the combined company’s board of directors, and the Company’s officers are now the officers of the combined company. The Merger has been accounted for as a reverse acquisition, with the Company as the accounting acquirer. The Company’s accompanying historical financial statements will replace USMN’s historical financial statements in future filings with the U.S. Securities and Exchange Commission (“SEC”).
NOTE 2. FORMATION AND BUSINESS OF THE COMPANY
Basis of Presentation and Organization
Bioxytran, Inc. was incorporated in the state of Delaware on October 5, 2017. As used in these Notes to the Financial Statements, the terms the “Company,” “we,” “us,” “our” and similar terms refer to Bioxytran, Inc.
Bioxytran, Inc. (the “Company”) is an early-stage pharmaceutical company focused on the development, manufacture and commercialization of therapeutic drugs designed to address hypoxia in humans. The Company’s efforts are principally devoted to developing products as alterative solutions to red blood cell transfusions, as well as for use in the treatment of other critical-care conditions. The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying financial statements. The Company has not earned any revenue from operations since inception. The Company chose December 31st as its fiscal year end.
| A-6 |
BIOXYTRAN, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD OF OCTOBER 5, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017
(AUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
Cash
For purposes of the Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. Significant estimates include the fair value of the Company’s stock, stock-based compensation and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.
Net Loss per Common Share, basic and diluted
The Company computes earnings (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.
There are no potential dilutive items outstanding as of December 31, 2017
Stock Based Compensation
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the statements of operations, as if such amounts were paid in cash. As of December 31, 2017, there were no outstanding stock options.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or be settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion of the gross deferred tax asset will not be realized. The Company records interest and penalties related to income taxes as a component of provision for income taxes. The Company did not recognize any interest and penalty expense for the period ended December 31, 2017.
On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was signed into law by the President of the United States. TCJA is a tax reform act that among other things, reduced corporate tax rates to 21 percent effective January 1, 2018. FASB ASC 740, Income Taxes, requires deferred tax assets and liabilities to be adjusted for the effect of a change in tax laws or rates in the year of enactment, which is the year in which the change was signed into law. Accordingly, the Company adjusted its deferred tax assets and liabilities at December 31, 2017, using the new corporate tax rate of 21 percent. See Note 7.
| A-7 |
BIOXYTRAN, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD OF OCTOBER 5, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017
(AUDITED)
Research and Development
The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. From October 5, 2017 (date of inception) through December 31, 2017, the Company did not incur significant research and development expenses.
Fair Value
Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.
The Company follows Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”), which permits entities to choose to measure many financial instruments and certain other items at fair value.
Recent Accounting Pronouncements
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.
NOTE 4 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
As of December 31, 2017, the Company had cash of $110 and a negative working capital of $1,309. From October 5, 2017 (date of inception) through December 31, 2017, the Company has not yet generated any revenues, and has incurred net losses of $2,809. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
From October 5, 2017 (date of inception) through December 31, 2017, the Company did not raise any funds from third-party investors, and has been fully funded from related party loans. The Company is aware that its current cash on hand will no longer be able to fund its projected operating requirements and is pursuing alternative opportunities to funding.
The Company’s primary source of operating funds since inception has been advances by related parties. The Company intends to raise additional capital through private placements of debt and equity securities, but there can be no assurance that these funds will be available on terms acceptable to the Company or will be sufficient to enable the Company to fully complete its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
| A-8 |
BIOXYTRAN, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD OF OCTOBER 5, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017
(AUDITED)
NOTE 5 – RELATED PARTY TRANSACTIONS
The Company has Accounts Payables from related parties in the aggregate amount of $1,419 for working capital purposes.
NOTE 6 – STOCKHOLDERS’ EQUITY
Preferred stock
The Company is authorized to issue 5,000,000 shares of $0.0001 par value preferred stock. As of December 31, 2017, no shares have been designated or issued.
Common stock
The Company is authorized to issue 95,000,000 shares of $0.001 par value common stock. As of December 31, 2017, the Company has 15,000,000 shares issued and outstanding.
Upon inception in October 2017, the Company issued 15,000,000 founder shares of its common stock at par value to its officers and directors in the form of stock compensation with a fair value of $1,500.
NOTE 7 – INCOME TAXES
Provision for Income Taxes
During the year ended December 31, 2017, no provision for income taxes was recorded, as the Company generated net operating losses. The Company is a Delaware C-Corporation, but since it does not do business in Delaware, the Company is not subject to state and local corporate income taxes pursuant to Delaware tax law.
The tax effects of temporary differences that give rise to deferred tax assets are presented below:
| 2017 | ||||
| Deferred Tax Assets: | ||||
| Net operating loss carryforward (at 21%) | $ | 590 | ||
| Total deferred tax assets | 590 | |||
| Valuation allowance | (590 | ) | ||
| Deferred tax asset, net of valuation allowance | $ | - | ||
The income tax benefit consists of the following:
| 2017 | ||||
| Federal (at 21%): | ||||
| Current | $ | - | ||
| Deferred | 590 | |||
| Change in valuation allowance | (590 | ) | ||
| Income tax provision (benefit) | $ | - | ||
| A-9 |
BIOXYTRAN, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD OF OCTOBER 5, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017
(AUDITED)
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
| Tax benefit at federal statutory rate | (21.0 | )% |
The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not likely, a valuation allowance is established. Based upon the Company’s history of losses since inception, management believes that it is more likely than not that future benefits of deferred tax assets will not be realized.
At December 31, 2017, the Company had approximately $2,809 of federal net operating losses that may be available to offset future taxable income. The net operating loss carry forwards, if not utilized, will begin to expire in 2037 for federal purposes.
Pursuant to the Internal Revenue Code Section 382 (“Section 382”), certain ownership changes may subject the net operating loss carryforwards (“carryforwards”) and research and development tax credit carryforwards to annual limitations which could reduce or defer the carryforwards. Section 382 imposes limitations on a corporation’s ability to utilize carryforwards if it experiences an ownership change. An ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. In the event of an ownership change, utilization of the carryforwards would be subject to an annual limitation under Section 382 determined by multiplying the value of its stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may be carried over to later years. The imposition of this limitation on its ability to use the carryforwards to offset future taxable income could cause the Company to pay U.S. federal income taxes earlier than if such limitation were not in effect and could cause such carryforwards to expire unused, reducing or eliminating the benefit of such carryforwards. The Company has not completed a Section 382 study to determine if there have been one or more ownership changes due to the costs associated with such a study. Until a study is completed and the extent of the limitations, if any, is able to be determined, no additional amounts have been written off or are being presented as an uncertain tax position.
The Company provided a full valuation allowance for deferred tax assets generated since, based on the weight of available evidence; it is more likely than not that these benefits will not be realized. During the period ended December 31, 2017, the Company did not apply any valuation allowance. Management reevaluates the positive and negative evidence at each reporting period.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act establishes new tax laws that affect 2018 and future years, including a reduction in the U.S. federal corporate income tax rate to 21%, effective January 1, 2018.
The Company applies the provisions of ASC 740-10, Income Taxes. The Company has not recognized any liability for unrecognized tax benefits and does not believe there is any uncertainty with respect to its tax position. The Company’s policy with respect to unrecognized tax benefits is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending income tax examinations. The Company’s tax years are still open under statute from 2017 to the present. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Employment contracts
The Company’s executive officers have entered into employment contracts and confidentiality, non-disclosure and assignment of invention agreements. The employment agreements do not provide for the payment of any compensation to our executive officers.
Litigation
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Legal fees for such matters are expensed as incurred and we accrue for adverse outcomes as they become probable and estimable. During the period of October 5, 2017 (inception) to December 31, 2017 and through the issuance of these financial statements, the Company was not involved in any legal proceedings.
| A-10 |
BIOXYTRAN, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD OF OCTOBER 5, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017
(AUDITED)
NOTE 9 – 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.
On September 17, 2018, the Company announced an Agreement and Plan of Merger and Reorganization among Bioxytran, Inc., U.S. Rare Earth Minerals, Inc. (“USMN”) and Bioxy Acquisition Corp. (the “Merger”). The Merger closed on September 21, 2018. See also Note 1.
| A-11 |
Exhibit 99.2
BIOXYTRAN, INC.
CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018
(unaudited)
INDEX TO THE FINANCIAL STATEMENTS
| Page | ||
| Financial Statements (Unaudited) | ||
| Condensed Balance Sheets | B-1 | |
| Condensed Statements of Operations | B-2 | |
| Condensed Statement of Cash Flows | B-3 | |
| Notes to Condensed Financial Statements | B-4 | |
BIOXYTRAN, INC.
CONDENSED BALANCE SHEETS
JUNE 30, 2018 AND DECEMBER 31, 2017
(Unaudited)
| June 30, 2018 | December 31, 2017 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 35 | $ | 110 | ||||
| Total current assets | 35 | 110 | ||||||
| Total assets | $ | 35 | $ | 110 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable - related party | $ | 2,289 | $ | 1,419 | ||||
| Total current liabilities | 2,289 | 1,419 | ||||||
| Stockholders’ equity (deficit): | ||||||||
| Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued and outstanding | - | - | ||||||
| Common stock, $0.001 par value; 95,000,000 shares authorized; 15,000,000 issued and outstanding | 1,500 | 1,500 | ||||||
| Accumulated deficit | (3,754 | ) | (2,809 | ) | ||||
| Total stockholders’ equity (deficit) | (2,254 | ) | (1,309 | ) | ||||
| Total liabilities and stockholders’ equity (deficit) | $ | 35 | $ | 110 | ||||
The Company was incorporated on October 5, 2017. Therefore, there is no comparative information presented related to the related to the six months ended June 30, 2017.
See the accompanying notes to these condensed unaudited financial statements.
| B-1 |
BIOXYTRAN, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018
(unaudited)
| Three months ended | Six months ended | |||||||
| June 30, 2018 | June 30, 2018 | |||||||
| Operating expenses: | ||||||||
| General and administrative | $ | 275 | $ | 945 | ||||
| Total operating expenses | 275 | 945 | ||||||
| Loss from operations | (275 | ) | (945 | ) | ||||
| Other income (expenses): | - | - | ||||||
| Net loss before provision for income taxes | (275 | ) | (945 | ) | ||||
| Provision for income taxes | - | - | ||||||
| NET LOSS | $ | (275 | ) | $ | (945 | ) | ||
| Loss per common share, basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted average number of common shares outstanding, basic and diluted | 15,000,000 | 15,000,000 | ||||||
The Company was incorporated on October 5, 2017. Therefore, there is no comparative information presented related to the related to the six months ended June 30, 2017.
See the accompanying notes to these condensed unaudited financial statements.
| B-2 |
BIOXYTRAN, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
(unaudited)
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
| Net loss | $ | (945 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities | - | |||
| Changes in operating assets and liabilities: | ||||
| Accounts payable - related party | 870 | |||
| Net cash used in operating activities | (75 | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | - | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | - | |||
| Net increase (decrease) in cash | (75 | ) | ||
| Cash, beginning of period | 110 | |||
| Cash, end of period | $ | 35 | ||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||
| Interest paid | $ | - | ||
| Income taxes paid | $ | - | ||
The Company was incorporated on October 5, 2017. Therefore, there is no comparative information presented related to the related to the six months ended June 30, 2017.
See the accompanying notes to these condensed unaudited financial statements.
| B-3 |
BIOXYTRAN, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
AS AT JUNE 30, 2018
(UNAUDITED)
NOTE 1 – BACKGROUND AND ORGANIZATION
Business Operations
Bioxytran, Inc. (the “Company”) is an early-stage pharmaceutical company focused on the development, manufacture and commercialization of therapeutic drugs designed to address hypoxia in humans, which is a lack of oxygen to tissues, in a safe and efficient manner. If it is not addressed, lack of oxygen to tissues, or hypoxia, results in necrosis, which is the death of cells comprising body tissue. Necrosis cannot be reversed. Our lead drug candidate, code named BXT-25, is an oxygen-carrying small molecule consisting of bovine hemoglobin stabilized with a co-polymer with intended applications to include treatment of hypoxic conditions in the brain resulting from stroke, and hypoxic conditions in wounds to prevent necrosis and to promote healing. The Company’s initial focus is the treatment of hypoxic conditions in the brain resulting from stroke, and hypoxic conditions in wounds to prevent necrosis and to promote healing. We believe that ours is a novel approach that will result in the creation of safe drug alternatives to existing therapies for effectively addressing hypoxic conditions in humans. Our drug development efforts are guided by specialists in co-polymer chemistry and other disciplines, and we intend to supplement our efforts with input from a scientific and medical advisory board whose members are leading physicians.
Organization, Reincorporation, and Merger with U.S. Rare Earth Minerals, Inc.
The Company was organized on October 5, 2017, as a Delaware corporation with a taxing structure for U.S. federal and state income tax as a C-Corporation with 95,000,000 authorized common shares with a par value of $0.0001, and 5,000,000 preferred shares with a par value of $0.0001. 15,000,000 common shares are issued and outstanding.
On September 17, 2018, the Company announced an Agreement and Plan of Merger and Reorganization among Bioxytran, Inc., U.S. Rare Earth Minerals, Inc. (“USMN”) and Bioxy Acquisition Corp. (the “Merger”). The Merger closed on September 21, 2018. After the consummation of the Merger, the Company is a wholly-owned subsidiary of USMN, and USMN (to be renamed Bioxytran, Inc.) is the continuing registrant and reporting company. Each outstanding share of the Company’s common stock was converted into 5.10580 shares of USMN common stock. Immediately after the Merger, the Company’s former shareholders own a majority of the voting common stock of the combined company and control the combined company’s board of directors, and the Company’s officers are now the officers of the combined company. The Merger was accounted for as a reverse acquisition, with the Company as the accounting acquirer. The Company’s accompanying historical financial statements will replace USMN’s historical financial statements in future filings with the U.S. Securities and Exchange Commission (“SEC”).
NOTE 2. FORMATION AND BUSINESS OF THE COMPANY
Basis of Presentation and Organization
Bioxytran, Inc. was incorporated in the state of Delaware on October 5, 2017. As used in these Notes to the Financial Statements, the terms the “Company,” “we,” “us,” “our” and similar terms refer to Bioxytran, Inc.
Bioxytran, Inc. (the “Company”) is an early-stage pharmaceutical company focused on the development, manufacture and commercialization of therapeutic drugs designed to address hypoxia in humans. The Company’s efforts are principally devoted to developing products as alterative solutions to red blood cell transfusions, as well as for use in the treatment of other critical care conditions. The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying financial statements. The Company has not earned any revenue from operations since inception. The Company chose December 31st as its fiscal year end.
| B-4 |
BIOXYTRAN, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
AS AT JUNE 30, 2018
(UNAUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the accompanying unaudited condensed financial statements follows.
The accompanying unaudited condensed financial statements have been prepared by Bioxytran, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim financial statements be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2017. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018.
NOTE 4 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
As of June 30, 2018, the Company had cash of $35 and a negative working capital of $2,254. From October 5, 2017 (date of inception) through June 30, 2018, the Company has not yet generated any revenues, and has incurred net losses of $3,754. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
From October 5, 2017 (date of inception) through June 30, 2018, the Company has not raised any cash proceeds from the issuance of common stock. The Company is aware that its current cash on hand will not be sufficient to fund its projected operating requirements and is pursuing alternative opportunities to funding.
The Company’s primary source of operating funds are cash proceeds advanced by related parties. The Company intends to raise additional capital through private placements of debt and equity securities, but there can be no assurance that these funds will be available on terms acceptable to the Company, or will be sufficient to enable the Company to fully complete its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.
Accordingly, the accompanying condensed interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
NOTE 5 – STOCKHOLDERS’ EQUITY
Preferred stock
The Company is authorized to issue 5,000,000 shares of $0.0001 par value preferred stock. As of June 30, 2018 and December 31, 2017, no shares have been designated or issued.
Common stock
The Company is authorized to issue 95,000,000 shares of $0.0001 par value common stock. As of June 30, 2018 and December 31, 2017, the Company has 15,000,000 shares issued and outstanding.
During the three and six months ended June 30, 2018, the Company has not issued any shares of its common stock.
| B-5 |
BIOXYTRAN, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
AS AT JUNE 30, 2018
(UNAUDITED)
NOTE 6 – COMMITMENTS AND CONTINGENCIES
Employment contracts
The Company’s executive officers have entered into employment contracts and confidentiality, non-disclosure and assignment of invention agreements. The employment agreements do not provide for the payment of any compensation to our executive officers.
Litigation
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Legal fees for such matters are expensed as incurred and we accrue for adverse outcomes as they become probable and estimable. During the period of October 5, 2017 (inception) to June 30, 2018, and through the issuance of these financial statements, the Company was not involved in any legal proceedings.
NOTE 7 – 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.
On September 17, 2018, the Company announced an Agreement and Plan of Merger and Reorganization among Bioxytran, Inc., U.S. Rare Earth Minerals, Inc. (“USMN”) and Bioxy Acquisition Corp. (the “Merger”). The Merger closed on September 21, 2018. See also Note 1.
| B-6 |
Exhibit 99.3
U.S. RARE EARTH MINERALS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
INDEX TO THE FINANCIAL STATEMENTS
| Page | ||
| Report of Independent Registered Public Accounting Firm | C-1 | |
| Financial Statements | ||
| Balance Sheets | C-2 | |
| Statement of Operations | C-3 | |
| Statement of Changes in Stockholders’ Deficit | C-4 | |
| Statement of Cash Flows | C-5 | |
| Notes to Financial Statements | C-6 | |
To The Board of Directors and Stockholders of
U.S. Rare Earth Minerals, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of U.S. Rare Earth Minerals, Inc. (the “Company”) as of December 31, 2017 and 2016, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2017 and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017 and 2016, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
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 not generated revenues to cover operating expenses. These factors, among others, raise substantial doubt about the Company’s 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/ Pinnacle Accountancy Group of Utah
We have served as the Company’s auditor since 2017
Farmington, Utah
March 30, 2018
| C-1 |
U.S. RARE EARTH MINERALS, INC.
BALANCE SHEETS
| December 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 15,274 | $ | 11,092 | ||||
| Accounts receivable | 22,959 | 9,600 | ||||||
| Inventory | 5,264 | 6,272 | ||||||
| Total current assets | 43,497 | 26,964 | ||||||
| Property and Equipment, Net of Accumulated Depreciation of $283,902 and $266,366 respectively | 682,171 | 24,707 | ||||||
| Total assets | $ | 725,668 | $ | 51,671 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | 11,304 | $ | 37,165 | |||||
| Accounts payable- related party | 9,898 | 168,325 | ||||||
| Shareholder Advance | 22,700 | - | ||||||
| Deferred revenue | 4,800 | - | ||||||
| Accrued interest | 24,576 | 26,776 | ||||||
| 10% Series A Senior (non-subordinated) debentures | 5,000 | 5,000 | ||||||
| Loan payable | 25,000 | 25,000 | ||||||
| Notes Payable | 80,000 | 80,000 | ||||||
| Total current liabilities and total liabilities | 183,278 | 342,266 | ||||||
| STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
| Class A Preferred stock: $0.001 par value; 50,000,000 authorized, 440,500 shares issued and outstanding as of December 31, 2017 and 2016, respectively | 441 | 441 | ||||||
| Common stock: $0.001 par value; 300,000,000 authorized, 105,416,350 and 28,166,350 shares issued and outstanding as of December 31, 2017 and 2016, respectively | 105,416 | 28,166 | ||||||
| Additional paid in capital | 14,637,720 | 13,563,598 | ||||||
| Accumulated deficit | (14,201,187 | ) | (13,882,800 | ) | ||||
| Total stockholders’ equity (deficit) | 542,390 | (290,595 | ) | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 725,668 | $ | 51,671 | ||||
The accompanying notes are an integral part of these financial statements.
| C-2 |
U.S. RARE EARTH MINERALS, INC.
STATEMENTS OF OPERATIONS
| For the Year Ended | ||||||||
| December 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| REVENUES | $ | 191,077 | $ | 246,495 | ||||
| Cost of goods sold | 103,979 | 96,304 | ||||||
| Gross Profit | 87,098 | 150,191 | ||||||
| General, selling and administrative expenses | 397,685 | 821,470 | ||||||
| Total operating expenses | 397,685 | 821,470 | ||||||
| Operating Loss | (310,587 | ) | (671,279 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | (7,800 | ) | (7,800 | ) | ||||
| Loss on settlement of debt | - | (17,677 | ) | |||||
| Total other income (expense) | (7,800 | ) | (25,477 | ) | ||||
| Loss before provision for income taxes | (318,387 | ) | (696,756 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net Loss | $ | (318,387 | ) | $ | (696,756 | ) | ||
| Net loss per common share - basic and diluted | $ | (0.01 | ) | $ | (0.03 | ) | ||
| Weighted average of common shares outstanding | 39,493,199 | 26,505,350 | ||||||
The accompanying notes are an integral part of these financial statements.
| C-3 |
U.S. RARE EARTH MINERALS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
For the years ended December 31, 2017 and 2016
| Additional | ||||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid in Capital | Accumulated | |||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Common | Preferred | Deficit | Total | |||||||||||||||||||||||||
| Balance January 1, 2016 | 12,316,350 | $ | 12,316 | 440,500 | $ | 441 | $ | 12,538,009 | $ | 440,059 | $ | (13,186,044 | ) | $ | (195,219 | ) | ||||||||||||||||
| Issuance of stock for cash | 2,500,000 | 2,500 | - | - | 47,500 | - | - | 50,000 | ||||||||||||||||||||||||
| Issuance of stock for services | 12,550,000 | 12,550 | - | - | 497,150 | - | - | 509,700 | ||||||||||||||||||||||||
| Issuance of stock in exchange for payables | 800,000 | 800 | - | - | 40,880 | - | - | 41,680 | ||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | (696,756 | ) | (696,757 | ) | ||||||||||||||||||||||
| Balance December 31, 2016 | 28,166,350 | $ | 28,166 | 440,500 | $ | 441 | $ | 13,123,539 | $ | 440,059 | $ | (13,882,800 | ) | $ | (290,595 | ) | ||||||||||||||||
| Issuance of stock for services | 6,750,000 | 6,750 | - | - | 215,250 | - | - | 222,000 | ||||||||||||||||||||||||
| Issuance of stock for mining claims | 67,500,000 | 67,500 | - | - | 607,500 | - | - | 675,000 | ||||||||||||||||||||||||
| Issuance of stock in exchange for payables | 3,000,000 | 3,000 | 27,000 | 30,000 | ||||||||||||||||||||||||||||
| Settlement of accounts payable- related party | 224,372 | 224,372 | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | (318,387 | ) | (318,387 | ) | ||||||||||||||||||||||
| Balance December 31, 2017 | 105,416,350 | $ | 105,416 | 440,500 | $ | 441 | $ | 14,197,661 | $ | 440,059 | $ | (14,201,187 | ) | $ | 542,390 | |||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| C-4 |
U.S. RARE EARTH MINERALS, INC.
STATEMENTS OF CASH FLOWS
| For the Year Ended | ||||||||
| December 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net Loss | $ | (318,387 | ) | $ | (696,756 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operations: | ||||||||
| Depreciation | 17,536 | 27,628 | ||||||
| Stock for services | 222,000 | 509,700 | ||||||
| Loss on settlement of debt | - | 17,677 | ||||||
| Changes in assets and liabilities: | ||||||||
| Decrease (Increase) accounts receivable | (13,359 | ) | (9,600 | ) | ||||
| Decrease (Increase) inventory | 1,008 | (6,272 | ) | |||||
| Increase (Decrease) accounts payable and accrued expenses | (16,663 | ) | 46,285 | |||||
| Increase (Decrease) accounts payable – related party | 86,747 | 168,325 | ||||||
| Increase (Decrease) accrued interest | (2,200 | ) | 800 | |||||
| Increase in deferred revenue | 4,800 | - | ||||||
| Net cash provided by (used in) operating activities | (18,518 | ) | (42,389 | ) | ||||
| Cash Flows From Investing Activities: | - | - | ||||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from Shares issued for cash | - | 50,000 | ||||||
| Proceeds from shareholder advances | 22,700 | - | ||||||
| Net cash provided by financing activities | 22,700 | 50,000 | ||||||
| Net increase (decrease) in cash | 4,182 | 7,611 | ||||||
| Cash, beginning of period | 11,092 | 3,481 | ||||||
| Cash, end of period | $ | 15,274 | $ | 11,092 | ||||
| Cash paid for: | ||||||||
| Income Taxes | - | - | ||||||
| Interest | $ | 10,000 | $ | 7,000 | ||||
| Supplemental schedule of non-cash activities: | ||||||||
| Shares issued for Accounts payable – related party | $ | 30,000 | $ | 41,680 | ||||
| Forgiveness of Accounts payable – related party | $ | 224,372 | $ | - | ||||
| Shares issued for mining claims – related party | $ | 675,000 | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
| C-5 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
(audited)
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.
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, 2017, and 2016 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, 2017, and 2016, all inventory consisted of finished goods of capsules.
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, 2017 and December 31, 2016, the value of mining equipment was $280,834, with accumulated depreciation of $273,877 and $256,950 respectively for a net value of $6,957 and $23,884 respectively. The value of office equipment was $10,239 with accumulated depreciation of $10,024 and $9,416 respectively for a net value of $215 and $823 respectively. At December 31, 2017 and December 31, 2016, the depreciation expense for mining equipment was $16,927 and $25,998 respectively and for office equipment was $608 and $1,630 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.
| C-6 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
(audited)
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 accounted 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)
| C-7 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
(audited)
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 $14,201,187 and a working capital deficiency of $139,781 as of December 31, 2017. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. We will need to raise funds or implement our business plan to continue operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital sufficient to meet its minimal operating expenses by seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon, among other things, its ability to successfully accomplish the plans described in the preceding paragraph and eventually begin operations in accordance with its business plan. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
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.
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, 2017, and 2016, a total of $118,237 and $86,610 has not been declared by the Company, respectively.
Each share is convertible at any time from date of issue into five (5) shares of Company common stock. Each share shall be entitled to five (5) votes that may be cast by the holder at any shareholder meeting or event requiring a shareholder vote. All interest accrued to date of conversion will be paid by Company to holder within sixty (60) days of date of conversion by holder. These shares are callable by the Company at any time after three (3) years from date of issue at $1.00 plus accrued but unpaid interest unless previously converted.
As of December 31, 2017, and 2016, there were 440,500 and 440,500 shares of Class “A” 6% Cumulative, Convertible Voting Preferred Stock issued and outstanding, respectively.
| C-8 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
(audited)
During 2016, at various times, an aggregate of 18,850,000 shares of common stock were issued in exchange for services and consideration. 2,500,000 shares were sold to investors at $0.02 per share; 800,000 shares valued at $0.05 per share were issued for settlement of accounts payable – related party of $24,003 and a loss on settlement of debt in the amount $17,677 was recorded related to this issuance; 6,000,000 shares, valued at $0.04 per share, 1,500,000 shares valued at $0.02 per share and 1,500,000 shares valued at $0.05 per share were issued to Board members; 3,000,000 shares valued at $0.04 per share and 550,000 valued at $0.05 per share were issued to consultants; 3,000,000 shares were issued in error on November 29, 2016, cancelled on November 29, 2016 and returned to the treasury.
On January 13, 2017, 4,350,000 shares were cancelled.
On April 25, 2017, the Company issued 8,100,000 shares of common stock to 3 directors and various consultants for past services rendered. The fair value of these shares is $0.02 per share based on the stock price; thus $162,000 was recognized as stock-based compensation. Also, on that date, the Company issued 3,000,000 shares of S-8 shares to two consultants. The fair market value of these shares is $0.02 per share based on the stock price; thus $60,000 was recognized as stock-based compensation.
On November 18, 2017, the Company issued 67,500,000 shares of its unregistered Common Stock to a related party as consideration for acquisition of nine (9) Unpatented Placer Mining Claims valued at $675,000 by the Company and 3,000,000 shares of unregistered Common Stock as payment for outstanding accounts payable- related party valued at $30,000 and the remaining balance of $224,372 of the debt was forgiven and recorded to additional paid-in capital.
As of December 31, 2017, and 2016, there were 105,416,350 and 28,166,350 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, 2017, the Company has recorded accrued interest of $3,997 related to the notes and debentures payable which is included in the $24,576 accrued interest balance on the balance sheet. A $10,000 payment of accrued interest was made in 2017.
At December 31, 2016, the Company has recorded accrued interest of $8,697 related to the notes and debentures payable which is included in the $26,776 accrued interest balance on the balance sheet. A $7,000 payment of accrued interest was made in 2016.
NOTE 6. LOAN PAYABLE
We have two short-term loans totaling $25,000 at December 31, 2017 and 2016. These loans were due in 2012 and as of December 31, 2017 and 2016, are in default. These notes are accruing interest at a rate of 10% per annum. At December 31, 2017 and 2016, the Company has recorded accrued interest of $20,578 and $18,078, respectively related to the loans payable which is included in the $24,576 and $26,776, 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, 2017 and 2016:
| December 31, 2017 | December 31, 2016 | |||||||
| Net operating loss carry forward at 21% (2017) and 35% (2016) | $ | 2,318,157 | $ | 3,832,590 | ||||
| Valuation allowance | (2,318,157 | ) | (3,832,590 | ) | ||||
| Net deferred tax allowance | $ | - | $ | - | ||||
For the fiscal year ended December 31, 2016 the Company measured our U.S. deferred tax assets at a statutory income tax rate of 35%. The valuation allowance for 2017 decreased by approximately $1,533,000 due to the change in enacted tax rates from 35% in 2016 to 21% in 2017.
| C-9 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
(audited)
On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the Tax Act) was enacted into law including a one-time mandatory transition tax on accumulated foreign earnings and a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others. We are required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, remeasuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities. The Company does not have any foreign earnings and therefore, we do not anticipate the impact of a transition tax. We have remeasured our U.S. deferred tax assets at a statutory income tax rate of 21%. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of any transition tax, deferred tax re-measurements, and other items to be incomplete due to the forthcoming guidance and our ongoing analysis of final year-end data and tax positions. We expect to complete our analysis within the measurement period in accordance with SAB 118, and no later than fiscal year end December 31, 2018.
Deferred tax asset consists of accumulated net operating losses of approximately $11,038,000 and $10,950,000 as of December 31, 2017 and 2016, respectively, which expire between 2033 and 2036.
The reconciliation of income tax expense at the U.S. statutory rate of 21% and 35% for the years ended December 31, 2017 and 2016, respectively, is as follows:
| 2017 | 2016 | |||||||
| US Statutory rate | 21 | % | 35 | % | ||||
| Valuation allowance | -21 | % | -35 | % | ||||
| Income tax provision | - | - | ||||||
The Company had no gross unrecognized tax benefits that, if recognized, would affect the effective income tax rate in future periods. At December 31, 2017, 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 recognizes interest expense and penalties related to unrecognized tax benefits in operating expenses. The Company had no accruals for interest or penalties as December 31, 2017 or December 31, 2016.
The Company files income tax returns in the United States. The Company has not filed its tax returns since 2014. The Company will file its U.S. federal return for the years ended December 31, 2017, 2016 and 2015 in 2018. Once filed, the 2017 U.S. federal return and those for 2016 and 2015 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.
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, 2017, the balance due is $9,198.
On July 11, 2017 Nathan Marks was appointed as Director and his company is also a customer. The Company had sales of $160,866 and $212,905 during the years ended December 31, 2017 and 2016, respectively, to this company.
The Company made payments of $26,157 and $31,941 to M. Strata, LLC during the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, and 2016, the Company owed M. Strata, LLC $700 and $164,522 related to tonnage fees, respectively.
On November 18, 2017, finalized an Agreement with M Strata, LLC and the Company issued 67,500,000 shares of its unregistered Common Stock to AFCC, LLC (a Wyoming LLC) as consideration for acquisition of nine (9) Unpatented Placer Mining Claims valued at $675,000 by the Company and 3,000,000 shares of unregistered Common Stock as payment for outstanding payables valued at $254,372. The 3,000,000 shares issued for the $254,372 of payables were valued at $30,000 and the remaining balance of $224,372 was forgiven and recorded in additional paid-in capital.
| C-10 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
(audited)
Shareholder Advance
During the year ended December 31, 2017, various shareholders advanced $22,700 to the Company to help pay for operating expenses. The advances don’t have re-payment terms.
NOTE 9. CONCENTRATION
The Company has concentrated sales as follows:
| % of Sales | ||||||||
| 2017 | 2016 | |||||||
| Customer #1- related party | 86 | % | 87 | % | ||||
The Company has concentrated purchases as follows:
| % of Purchases | ||||||||
| 2017 | 2016 | |||||||
| Vendor #1- related party | 25 | % | 64 | % | ||||
| Vendor #2 | 31 | % | - | |||||
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. Management estimates that the cost to be minimal and possibly zero. 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, 2017, no determination has been made by the Army Corps of Engineers. No communication has been received from the Army Corps of Engineers since May 2014.
The Company’s Attorney continues an ongoing 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 Engineers will soon visit the site and render a decision.
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 and none were noted.
| C-11 |
Exhibit 99.4
U.S. RARE EARTH MINERALS, INC.
FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018
(UNaudited)
INDEX TO THE FINANCIAL STATEMENTS
| Page | ||
| Financial Statements | ||
| Balance Sheets | D-1 | |
| Statement of Operations | D-2 | |
| Statement of Cash Flows | D-3 | |
| Notes to Financial Statements | D-4 | |
U.S. RARE EARTH MINERALS, INC.
BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 1,368 | $ | 15,274 | ||||
| Accounts receivable | 4,800 | 22,959 | ||||||
| Inventory | 6,594 | 5,264 | ||||||
| Total current assets | 12,762 | 43,497 | ||||||
| Property and Equipment, Net of Accumulated Depreciation of $288,265 and $283,902 respectively | 673,445 | 682,171 | ||||||
| Total assets | $ | 686,207 | $ | 725,668 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | 2,435 | $ | 11,304 | |||||
| Accounts payable- related party | 9,198 | 9,898 | ||||||
| Shareholder Advance | - | 22,700 | ||||||
| Deferred revenue | - | 4,800 | ||||||
| Accrued interest | 28,476 | 24,576 | ||||||
| 10% Series A Senior (non-subordinated) debentures | 5,000 | 5,000 | ||||||
| Loan payable | 25,000 | 25,000 | ||||||
| Notes Payable | 80,000 | 80,000 | ||||||
| Total current liabilities and total liabilities | 150,109 | 183,278 | ||||||
| STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
| Class A Preferred stock: $0.001 par value; 50,000,000 authorized, 440,500 shares issued and outstanding as of June 30, 2018 and December 31, 2017 | 441 | 441 | ||||||
| Common stock: $0.001 par value; 300,000,000 authorized, 110,436,350 and 105,416,350 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively | 110,436 | 105,416 | ||||||
| Additional paid in capital | 14,771,741 | 14,637,720 | ||||||
| Accumulated deficit | (14,346,520 | ) | (14,201,187 | ) | ||||
| Total stockholders’ equity (deficit) | 536,098 | 542,390 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 686,207 | $ | 725,668 | ||||
The accompanying notes are an integral part of these unaudited financial statements.
| D-1 |
U.S. RARE EARTH MINERALS, INC.
STATEMENTS OF OPERATIONS
(UNaudited)
| For the 3 Months Ended | For the 6 Months Ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| REVENUES | $ | 20,310 | $ | 39,472 | $ | 33,626 | $ | 46,909 | ||||||||
| Cost of goods sold | 8,115 | 19,396 | 23,364 | 33,305 | ||||||||||||
| Gross Profit | 12,195 | 20,076 | 10,262 | 13,604 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| General, selling and administrative expenses | 124,865 | 278,543 | 150,595 | 334,942 | ||||||||||||
| Total operating expenses | 124,865 | 278,543 | 150,595 | 334,942 | ||||||||||||
| Operating Income (Loss) | (112,670 | ) | (258,467 | ) | (140,333 | ) | (321,338 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (3,050 | ) | (1,950 | ) | (5,000 | ) | (3,900 | ) | ||||||||
| Total other expense | (3,050 | ) | (1,950 | ) | (5,000 | ) | (3,900 | ) | ||||||||
| Net Income (Loss) | $ | (115,720 | ) | $ | (260,417 | ) | $ | (145,333 | ) | $ | (325,238 | ) | ||||
| Net Income (Loss) per common share - basic and diluted | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | ||||
| Weighted average of common shares outstanding | 108,653,493 | 31,866,899 | 107,043,864 | 27,863,864 | ||||||||||||
See accompanying notes to the unaudited financial statements.
| D-2 |
U.S. RARE EARTH MINERALS, INC.
STATEMENTS OF CASH FLOWS
(UNaudited)
| For the Six Months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2018 | 2017 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net Loss | $ | (145,333 | ) | $ | (325,238 | ) | ||
| Adjustments to reconcile net loss to net cash provided By (used in) operations: | ||||||||
| Depreciation | 8,726 | 8,795 | ||||||
| Stock for services | 111,141 | 222,000 | ||||||
| Stock for interest on debt settlement | 1,100 | - | ||||||
| Changes in assets and liabilities: | ||||||||
| Decrease (Increase) accounts receivable | 18,159 | 9,600 | ||||||
| Decrease (Increase) inventory | (1,330 | ) | 620 | |||||
| Increase (Decrease) accounts payable and accrued expenses | (4,369 | ) | 7,343 | |||||
| Increase (Decrease) accounts payable – related party | (700 | ) | 61,540 | |||||
| Increase (Decrease) accrued interest | 3,900 | 3,900 | ||||||
| Increase in deferred revenue | (4,800 | ) | - | |||||
| Net cash provided by (used in) operating activities | (13,506 | ) | (11,440 | ) | ||||
| Cash Flows From Investing Activities: | - | - | ||||||
| Cash Flows From Financing Activities: | ||||||||
| Bank overdraft | - | 348 | ||||||
| Repayment of shareholder advances | (400 | ) | - | |||||
| Net cash provided by financing activities | (400 | ) | 348 | |||||
| Net increase (decrease) in cash | (13,906 | ) | (11,092 | ) | ||||
| Cash, beginning of period | 15,274 | 11,092 | ||||||
| Cash, end of period | $ | 1,368 | $ | - | ||||
| Cash paid for: | ||||||||
| Income Taxes | $ | - | $ | - | ||||
| Interest | $ | - | $ | - | ||||
| Supplemental schedule of non-cash activities: | ||||||||
| Shares issued for Accounts payable – related party | $ | 4,500 | $ | - | ||||
| Forgiveness of Accounts payable – related party | $ | 9,618 | $ | - | ||||
| Shares issued for mining claims – related party | $ | 12,682 | $ | - | ||||
The accompanying notes are an integral part of these unaudited financial statements.
| D-3 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 2018
(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, 2017. 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 the six months ended June 30, 2018, are unaudited and should be read in conjunction with the audited financial statements and the notes there to include in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
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, 2018.
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 $137,347 as of June 30, 2018. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty. We will need to raise funds or implement our business plan to continue operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital sufficient to meet its minimal operating expenses by seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon among other things; its ability to successfully accomplish the plans described in the preceding paragraph and eventually begin operations in accordance with its business plan. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Recent Accounting Pronouncements
From time to time new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.
| D-4 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 2018
(UNAUDITED)
Note 2. 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.
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 June 30, 2018, and 2017, a total of $126,618 and $94,517 has not been declared by the Company, respectively.
Each share is convertible at any time from date of issue into five (5) shares of Company common stock. Each share shall be entitled to five (5) votes that may be cast by the holder at any shareholder meeting or event requiring a shareholder vote. All interest accrued to date of conversion will be paid by Company to holder within sixty (60) days of date of conversion by holder. These shares are callable by the Company at any time after three (3) years from date of issue at $1.00 plus accrued but unpaid interest unless previously converted.
As of June 30, 2018, and December 31, 2017, there were 440,500 shares of Class “A” 6% Cumulative, Convertible Voting Preferred Stock issued and outstanding, respectively.
Share issuances during the fiscal year ended December 31, 2017
On January 13, 2017, 4,350,000 common shares were cancelled.
On April 25, 2017, the Company issued 8,100,000 shares of common stock to 3 directors and various consultants for past services rendered. The fair value of these shares is $0.02 per share based on the stock price; thus $162,000 was recognized as stock-based compensation. Also, on that date, the Company issued 3,000,000 shares of common stock to two consultants. The fair market value of these shares is $0.02 per share based on the stock price; thus $60,000 was recognized as stock-based compensation.
On November 18, 2017, the Company issued 67,500,000 shares of its unregistered Common Stock to a related party as consideration for acquisition of nine (9) Unpatented Placer Mining Claims valued at $675,000 by the Company and 3,000,000 shares of unregistered Common Stock as payment for outstanding accounts payable- related party valued at $30,000 and the remaining balance of $224,372 of the debt was forgiven and recorded to additional paid-in capital.
Share issuances during the six months ended June 30, 2018
On April 12, 2018, the Company issued 845,454 shares of the Company’s common stock to a director and a former director and officer, in respect of $27,900 in outstanding advances and accrued interest thereon, as well as outstanding accounts payable. Included in the amount settled was $22,300 in advances payable, $4,500 in accounts payable and $1,100 in accrued interest. The fair market value of the shares on issue date was $0.018 per share, or $15,218, and therefore the Company has recorded forgiveness of debt in respect to the transaction of $12,682, which amount has been allocated to Additional Paid in Capital.
On April 12, 2018, the Company issued a total of 1,174,546 shares of the Company’s common stock to a director and a former director for services rendered. The fair market value of the shares on the date of issue was $0.018 per share based on the Company’s quoted market price on OTCMarkets; therefore, the Company recorded $21,142 as stock-based compensation in respect of the issued shares.
| D-5 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 2018
(UNAUDITED)
Note 2. Capital Stock (continued)
On May 16, 2018, the Company issued 3,000,000 shares of common stock to our Chairman, CFO and Secretary/Treasurer in respect of services rendered. The fair market value of the shares was $0.03 per share on the date of issue based on the Company’s quoted market price on OTCMarkets; therefore, $90,000 was recognized as stock-based compensation in respect of this share issuance.
As of June 30, 2018, and December 31, 2017, there were 110,436,350 and 105,416,350 shares of common stock issued and outstanding, respectively.
Note 3. Notes and Debentures Payable, Loan 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.
We have two short-term loans totaling $25,000 at June 30, 2018 and December 31, 2017. These loans came due in 2012 and as of June 30, 2018 and December 31, 2017, are in default. These notes accrue interest at a rate of 10% per annum.
During the six months ended June 30, 2018 and 2017, the Company has recorded accrued interest of $3,900 and $3,900 respectively, in relation to the aforementioned loans, which amounts are included in the $28,476 and $24,576 as “Accrued interest” on the Company’s balance sheets.
Note 4. Related Party Transactions
The officers and directors of 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.
As of June 30, 2018, and December 31, 2017, the Company had an outstanding payable of $9,198 to a company owned by the CEO for packaging services provided in year 2017.
On July 11, 2017 Nathan Marks was appointed as Director and his company is also a customer. The Company had no sales during the six month periods ended June 30, 2018 and 2017 to this company.
The Company made payments of $700 to M. Strata, LLC during the six months ended June 30, 2018. As of June 30, 2018, and December 31, 2017, the Company owed M. Strata, LLC $nil and $700 related to tonnage fees, respectively.
On April 12, 2018, the Company accepted the resignation of CFO, Secretary/Treasurer and Director Donita R. Kendig. Concurrently, the Board of Directors authorized the issuance of a severance bonus for Ms. Kendig by way of 556,364 shares. (ref: Note 2). Concurrently, the Board of Directors appointed our Chairman and Director of the Company, Larry Bonafide to fill the position of Chief Financial Officer, and Secretary/Treasurer. Mr. Bonafide will also continue as Chairman.
On April 12, 2018, the Board of Directors authorized the issuance of 618,182 shares of the Company’s common stock to D. Quincy Farber, Officer and Director, for past services rendered. (ref: Note 2)
On May 16, 2018 the Company issued 3,000,000 shares of common stock to Mr. Larry Bonafide, our Chairman, CFO and Secretary/Treasurer in respect of services rendered. (re: Note 2)
| D-6 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
AS AT JUNE 30, 2018
(UNAUDITED)
Shareholder Advances
During the year ended December 31, 2017, two shareholders, officers and directors, advanced $22,700 to the Company to help pay for operating expenses. The advances have no specific terms of repayment.
During the six months ended June 30, 2018, the Company made payments of $400 to reduce the balance payable.
On April 12, 2018, the Company issued 845,454 shares of the Company’s common stock to two shareholders, officers and directors in respect of a cumulative amount of $27,900 in outstanding advances and accrued interest thereon. Included in the total amount settled was $22,300 in advances payable, $1,100 in accrued interest and $4,500 from accounts payable – related party. (ref: Note 2)
Note 5. 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. Management estimates that the cost to be minimal and possibly zero. The Company and the BLM are waiting also for the Army Corps of Engineers to determine if a drainage ditch adjacent to the mine site is a stream, which is regulated by them. As of June 30, 2018, 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.
The Company’s Attorney continues an ongoing 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 Engineers will soon visit the site and render a decision.
Note 6. Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined that there are no additional subsequent events to disclose.
| D-7 |
Exhibit 99.5
U.S. RARE EARTH MINERALS, INC.
UNAUDITED CONSOLIDATED PRO-FORMA FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND YEAR ENDED DECEMBER 31, 2017
(UNaudited)
Introductory Paragraph:
The following unaudited pro forma condensed combined financial statements are based on our historical consolidated financial statements and Bioxytran’s historical consolidated financial statements as adjusted to give effect to the September 21, 2018 acquisition of Bioxytran. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2018 and the year ended December 31, 2017 give effect to the acquisition of Bioxytran as if it had occurred on January 1, 2017. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2017 include the operations of Bioxytran from its inception on October 5, 2017 through December 31, 2017. The unaudited pro forma condensed combined balance sheet as of June 30, 2018 gives effect to the acquisition of Bioxytran, Inc. as if it had occurred on June 30, 2018.
The pro forma combined financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
There are a combination of four (4) elements affecting the pro forma statements.
On August 13, 2018 U.S. Rare Earth Minerals, Inc. executed on a reverse stock split;
| (a) | all issued and outstanding common and preferred stock were reduced by a fraction of 30:1, reducing outstanding common shares to 3,711,204 and Series A Preferred outstanding shares to 14,680. |
For more detail on the Reverse Stock Split, please consult the 8-K filed with SEC on August 13, 2018.
On September 21, 2018, due to a default of a 6% promissory note;
| (b) | a merger with Bioxytran, Inc took place, |
| (c) | the Company’s assets were acquired, and |
| (d) | all remaining Series A Preferred shares were converted to Common shares. |
For more detailed information about the Merger and the Asset Sale, please consult the 8-K filed with SEC on September 24, 2018.
INDEX TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND YEAR ENDED DECEMBER 31, 2017
(UNAUDITED)
| Page | ||
| Financial Statements (Unaudited) | ||
| Pro Forma Condensed Combined Balance Sheets | F-1 | |
| Pro Forma Condensed Combined Statements of Operations for the Six Months Ended June 30, 2018 | F-2 | |
| Pro Forma Condensed Combined Statements of Operations for the Year Ended December 31, 2017 | F-3 | |
| Notes to Pro Forma Condensed Combined Financial Statements | F-4 | |
U.S. RARE EARTH MINERALS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
JUNE 30, 2018
| Registrant | Bioxytran Acquiree | Pro Forma | Pro Forma | |||||||||||||||
| Historical | Historical | Adjustments | Notes | Combined | ||||||||||||||
| ASSETS | ||||||||||||||||||
| CURRENT ASSETS: | ||||||||||||||||||
| Cash | $ | 1,368 | $ | 35 | $ | (1,368 | ) | $ | 35 | |||||||||
| Accounts receivable | 4,800 | - | (4,800 | ) | - | |||||||||||||
| Inventory | 6,594 | - | (6,594 | ) | - | |||||||||||||
| Total current assets | 12,762 | 35 | (12,762 | ) | 35 | |||||||||||||
| Property and Equipment, Net of Accumulated Depreciation | 673,445 | - | (673,445 | ) | - | |||||||||||||
| Total assets | $ | 686,207 | $ | 35 | $ | (686,207 | ) | (1) | $ | 35 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||||
| CURRENT LIABILITIES: | ||||||||||||||||||
| Accounts payable and accrued expenses | 2,435 | $ | - | $ | (2,435 | ) | $ | - | ||||||||||
| Accounts payable- related party | 9,198 | 2,289 | (9,198 | ) | 2,289 | |||||||||||||
| Accrued interest | 28,476 | - | (28,476 | ) | (2) | - | ||||||||||||
| 10% Series A Senior (non-subordinated) debentures | 5,000 | - | (5,000 | ) | - | |||||||||||||
| Loan payable | 25,000 | - | (25,000 | ) | - | |||||||||||||
| Notes Payable | 80,000 | - | (80,000 | ) | - | |||||||||||||
| Total current liabilities and total liabilities | 150,109 | 2,289 | (150,109 | ) | (1) | 2,289 | ||||||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||||||||||||
| Class A Preferred stock | 441 | - | (441 | ) | (2) | - | ||||||||||||
| Common stock | 110,436 | 1,500 | (26,832 | ) | (3) | 85,104 | ||||||||||||
| Additional paid in capital | 14,771,741 | - | (14,771,741 | ) | (f) | - | ||||||||||||
| Accumulated deficit | (14,346,520 | ) | (3,754 | ) | 14,262,916 | (g) | (87,358 | ) | ||||||||||
| Total stockholders’ equity (deficit) | 536,098 | (2,254 | ) | (536,098 | ) | (2,254 | ) | |||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 686,207 | $ | 35 | $ | (686,207 | ) | $ | 35 | |||||||||
See the accompanying notes to these unaudited pro forma condensed combined financial statements.
| F-1 |
U.S. RARE EARTH MINERALS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
| Registrant | Bioxytran Acquiree | Pro Forma | Pro Forma | |||||||||||||||
| Historical | Historical | Adjustments | Notes | Combined | ||||||||||||||
| REVENUES | $ | 33,626 | $ | - | $ | (33,626 | ) | $ | - | |||||||||
| Cost of goods sold | 23,364 | - | (23,364 | ) | - | |||||||||||||
| Gross Profit | 10,262 | - | (10,262 | ) | - | |||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||
| General, selling and administrative expenses | 150,595 | 945 | (150,595 | ) | 945 | |||||||||||||
| Total operating expenses | 150,595 | 945 | (150,595 | ) | 945 | |||||||||||||
| Operating Income (Loss) | (140,333 | ) | (945 | ) | (140,333 | ) | (945 | ) | ||||||||||
| Other income (expense): | ||||||||||||||||||
| Interest expense | (5,000 | ) | - | 5,000 | - | |||||||||||||
| Total other expense | (5,000 | ) | (945 | ) | 5,000 | (945 | ) | |||||||||||
| Net loss before provision for income taxes | (5,000 | ) | (945 | ) | 5,000 | (945 | ) | |||||||||||
| Provission for Income Taxes | - | - | - | - | ||||||||||||||
| Net Income (Loss) | $ | (145,333 | ) | $ | (945 | ) | $ | (145,333 | ) | (4) | $ | (945 | ) | |||||
| Net Income (Loss) per common share - basic and diluted | $ | (0.04 | ) | $ | (0.00 | ) | (0.03 | ) | $ | (0.00 | ) | |||||||
| Weighted average of common shares outstanding | 3,711,204 | 76,586,937 | 4,948,607 | (5) | 85,103,673 | |||||||||||||
See the accompanying notes to these unaudited pro forma condensed combined financial statements
| F-2 |
U.S. RARE EARTH MINERALS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2017
| Registrant | Bioxytran Acquiree | Pro Forma | Pro Forma | |||||||||||||||
| Historical | Historical | Adjustments | Notes | Combined | ||||||||||||||
| REVENUES | $ | 191,077 | $ | - | $ | (191,077 | ) | $ | - | |||||||||
| Cost of goods sold | 103,979 | - | (103,979 | ) | - | |||||||||||||
| Gross Profit | 87,098 | - | (87,098 | ) | - | |||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||
| General, selling and administrative expenses | 397,685 | 2,809 | (397,685 | ) | 2,809 | |||||||||||||
| Total operating expenses | 397,685 | 2,809 | (397,685 | ) | 2,809 | |||||||||||||
| Operating Income (Loss) | (310,578 | ) | (2,809 | ) | (310,578 | ) | (2,809 | ) | ||||||||||
| Other income (expense): | ||||||||||||||||||
| Interest expense | (7,800 | ) | - | 7,800 | - | |||||||||||||
| Total other expense | (7,800 | ) | (2,809 | ) | 7,800 | (2,809 | ) | |||||||||||
| Net loss before provision for income taxes | (7,800 | ) | (2,809 | ) | 7,800 | (2,809 | ) | |||||||||||
| Provission for Income Taxes | - | - | - | - | ||||||||||||||
| Net Income (Loss) | $ | (318,387 | ) | $ | (2,809 | ) | $ | (318,387 | ) | (4) | $ | (2,809 | ) | |||||
| Net Income (Loss) per common share - basic and diluted | $ | (0.09 | ) | $ | (0.00 | ) | (0.06 | ) | $ | (0.00 | ) | |||||||
| Weighted average of common shares outstanding | 3,513,878 | 76,586,937 | 4,948,607 | (5) | 85,049,422 | |||||||||||||
See the accompanying notes to these unaudited pro forma condensed combined financial statements
| F-3 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND YEAR ENDED DECEMBER 31, 2017
NOTE 1 – BASIS OF PRESENTATION
The unaudited pro forma condensed combined financial statements are based on Registrant’s and Bioxytran’s historical consolidated financial statements as adjusted to give effect to the acquisition of Bioxytran, with the related stock issuance and asset purchase. The unaudited pro forma combined statements of operations for the six months ended June 30, 2018 and year ended December 31, 2017 give effect to the Bioxytran acquisition as if it had occurred on January 1, 2017. The unaudited combined pro forma combined balance sheets as of June 30, 2018 give effect to the Bioxytran acquisition as if it had occurred on June 30, 2018.
NOTE 2 – REVERSE SPLIT OF OUSTANDING SHARES PRIOR TO MERGER
At a Board of Director’s Meeting on July 30, 2018, the Company authorized a reverse split that resulted in a reduction of the number of outstanding and issued shares of both common and preferred stock so that after the split became effective, the shares of both common and preferred stock were reduced to 1 share for each 30 shares currently issued and outstanding. The effect on the Balance Sheet is a transfer of value from stock value at par to Additional Paid-in Capital (APIC). As a result of the one (1) for thirty (30) reverse stock split, the Company will continue to be authorized to issue 300,000,000 shares of Common Stock.
As of August 1, 2018 andprior to the reverse stock split, there were 111,336,350 shares of Common Stock outstanding. As a result of the reverse stock split that was effective on August 13, 2018, there were approximately 3,711,211 shares of Common Stock outstanding.
As of August 1, 2018 and prior to the reverse stock split, there were 440,500 outstanding shares of the Company’s Preferred Stock. After the reverse stock split that was effective on August 13, 2018, the Company’s outstanding shares of preferred stock was 14,683 and the authorized preferred stock of 50,000,000 shares remained unchanged.
| (a) | Reverse Stock split |
| Common Shares at par | $ | (106,755 | ) | |||
| Preferred Shares at par | (426 | ) | ||||
| (a) | Additional Paid in Capital | 107,181 |
NOTE 3 – STOCK CONSIDERATION IN MERGER
On September 21, 2018, the Company completed a series of transactions as set forth in the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), dated September 17, 2018, by and among the Company, Bioxy Acquisition Corp., a Wyoming corporation wholly-owned by the Company (“Acquisition-Sub”), and BioxyTran, Inc., a Delaware corporation (“BioxyTran”) whereby Acquisition-Sub was merged into BioxyTran with BioxyTran being the surviving company (the “Merger”). As consideration for the Merger, the stockholders of BioxyTran were issued 76,586,937 shares of common stock of the Company and 10,000 shares of Preferred Stock were returned to treasury. The Merger was structured as a tax-free reorganization. An additional 30,000 shares have earlier been released as a settlement of accounts payable- related party.
The Company’s lead product candidate, BXT-25, will be tested as a potent resuscitative agent to treat strokes during the first hour of a stroke and for other brain trauma. The product is based on a new molecule reversing hypoxia, or oxygen deficiency. The molecule is expected to be injected intravenously and bind to oxygen in the lungs. The molecule then carries the oxygen and delivers it to the area in the brain blocked by the clot. During the next 18 months, the Company plans to submit an Investigational New Drug Application (IND) to the Food and Drug Administration (FDA) and, immediately thereafter, begin clinical trials on brain stroke patients. In addition, the Company will be working on additional applications to treat ischemia, an inadequate blood supply to an organ or part of the body, with a focus on the heart. The compound is also expected to be effective in healing wound.
| (b) | Merger |
| Common Stock | $ | 76,617 | ||||
| (b) | Additional Paid in Capital | (76,617 | ) |
| F-4 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND THE YEAR ENDED DECEMBER 31, 2017
NOTE 4 – MANDATORY CONVERSION OF PREFERRED STOCK
The change of control of ownership resulted in the mandatory conversion of all of the outstanding shares of the Company’s Class A 6% Cumulative Convertible Voting Preferred Stock, par value $.001 per share (“Preferred Stock”), with 5 shares of common stock, par value $.001 per share (the “Common Stock”) of the Company, being issued for each outstanding share of Preferred Stock, including accrued interest.
After completion of the transactions, the Company had approximately 85,103,673 shares of Common Stock issued and outstanding, no shares of Preferred Stock after converting the Preferred Stock to approximately 23,405 shares of Common Stock. An additional 7,095 shares was issued for accumulated interest.
| (c) | Conversion of Preferred Stock |
| Common Shares | 24 | |||||
| Preferred Shares | (5 | ) | ||||
| (c) | Additional Paid in Capital | (19 | ) | |||
| Common Shares | 7 | |||||
| (c) | Additional Paid in Capital | 1,412 | ||||
| Accrued Interest | (1,419 | ) |
NOTE 5 – ASSET PURCHASE AGREEMENT
On September 21, 2018, the Company completed a series of transactions with a secured creditor reaching an accord and satisfaction of a 6% secured promissory note (the “Note”) in the principal amount of $110,000, including all interest due thereon, which had been in default since August 23, 2013 (the “Settlement”). The Note was secured by substantially all of the assets of the Company. As consideration for the satisfaction of the obligation and as a condition to the Settlement, the Company agreed to divest substantially all of its assets and remaining liabilities to an affiliate of the creditor and former majority stockholder of the Company after the completion of the acquisition by the Company of BioxTran, Inc., a Delaware company. The creditor agreed to release all liens upon the completion of the asset sale. In connection with the Settlement, AFCC, LLC, the former majority stockholder of the Company received 4,455,856 shares of common stock, par value $.001 per share (the “Common Stock”), of the Company and the directors and officers received 850,732 shares of Common Stock. Further, 10,000 shares of Preferred Stock were returned to treasury.
| (d) | Asset Purchase Agreement |
| Total Asset | (686,207 | ) | ||||
| Total Liabilities | 150,109 | |||||
| - accrued interest in Pref. Shares | (1,419 | ) | ||||
| Preferred Shares | 10 | |||||
| (d) | Additional Paid in Capital | 299,990 | ||||
| Issued Common Shares | (4,775 | ) | ||||
| (e) | Loss on APA | $ | (242,292 | ) |
NOTE 6 – PRO FORMA ADJUSTMENTS
The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:
The Company’s prior assets have been separated though an asset Purchase Agreement, see note 5 above, and it will have no further operating revenues from the former assets and will rely solely on external funding until commercialization of its drug candidates.
| F-5 |
U.S. RARE EARTH MINERALS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
SIX MONTHS ENDED JUNE 30, 2018 AND YEAR ENDED DECEMBER 31, 2017
Adjustments to the pro forma condensed combined balance sheet
The Company’s Net Operation Losses (NOL’s) are eliminated by the change of control of ownership due to the continuation of Bioxytran subsequent to the Merger. As such, the Company’s prior accumulated losses are eliminated against Additional Paid-in Capital (APIC).
| (e) | Elimination of Accumulated Deficit |
| (f) | Accumulated Deficit; see Balance Sheet | (14,201,187 | ) | |||
| (e) | Loss on APA; see (d) above | (242,292 | ) | |||
| (a) | APIC Reverse Split; see (a) above | 107,181 | ||||
| (c) | APIC Conversion; see (c) above | 1,393 | ||||
| (d) | APIC in APA; see (d) above | (299,990 | ) | |||
| (b) | APIC Merger; see (b) above | (76,587 | ) | |||
| (g) | APIC Pre-Merger, see Balance Sheet | 14,771,741 | ||||
| Remaining Accumulated Loss | $ | (85,104 | ) |
Additional adjustments to the pro forma condensed combined balance sheet
| (1) | Reflects the asset purchase agreement all assets and liabilities have been disposed of in satisfaction of a defaulted promissory note, see also Note 5 above |
| (2) | Reflects the mandatory conversion of all outstanding preferred shares including accrued interest, see also Note 4 above |
| (3) | Reflects the; |
| a. | shares issued in consideration of the merger with Bioxytran, see also Note 3 above, and |
| b. | issuance of common shares in connection with the Asset Purchase Agreement, see Note 5 above. |
Adjustments to the pro forma condensed statements of operations
| (4) | Reflects the elimination of the Registrant’s historical business through the asset purchase agreement, see note 5 above. |
| (5) | Reflects the; |
| a. | 30:1 reverse stock split, see also Note 2 above |
| b. | mandatory conversion of all outstanding preferred shares including accrued interest, see also Note 4 above |
| c. | shares issued in consideration of the merger with Bioxytran, see also Note 3 above, and |
| d. | issuance of common shares in connection with the Asset Purchase Agreement, see Note 5 above |
| F-6 |