7. Subsequent Events:
On April 27, 2011, the Company entered into a Share Exchange Agreement (the Agreement) with Rare Minerals Corporation (RMC), a privately held corporation, to acquire all of the outstanding shares of RMC. This agreement became effective on May 11, 2011, which is the date the Company took control of RMC.
RMC was formed as a Nevada corporation on December 9, 2010. RMC’s wholly-owned subsidiary is OOO Koklanovskoe (Koklanovskoe), a Russian limited liability company. Koklanovskoe holds a license (KUG00939TE) for the Koklanovskoe Molybdenum-Tungsten deposit in the Kurgan Region of the Russian Federation. Through the acquisition of this license, the Company plans to enter the market for the exploration and production of rare and semi-rare earth metals and precious minerals.
Pursuant to the Agreement, the Company acquired all of the outstanding shares of RMC by issuing 65,200,000 shares of restricted common stock (representing 99% of the Company’s then outstanding common stock) to the RMC shareholders. As a result of the Agreement, control of the Company changed to the former RMC Shareholders, subject to certain voting restrictions in relation to the appointment of the Company’s Board of Directors during the first year subsequent to the effective date of the Agreement.
The fair value of the common stock issued to RMC shareholders on May 11, 2011, the acquisition date, was $.37 per share which equates to $24,124,000 of common stock being issued.
The consolidated balance sheet and consolidated statement of operations of RMC as of and for the period ended May 11, 2011 is as follows:
Balance Sheet
Assets:
Cash
$ 2,000
Prepaid expenses
87,000
Intangible assets
405,000
$ 494,000
Liabilities:
Loans payable
$ 508,000
Other liabilities
3,000
511,000
Accumulated deficit
(17,000 )
$ 494,000
Statement of Operations
Revenue
$ -
Interest expense
14,000
Other expense, net
3,000
Net loss
$ 17,000
The consolidated balance sheet as of March 31, 2011 and December 31, 2010 and statement of operations for the three months ended March 31, 2011, as if the Company had acquired RMC as of these dates and through the period ended, is as follows:
Balance Sheet
2011
2010
Assets:
Cash
$ 3,000 $ 1,000
Prepaid expenses
87,000 9,000
Intangible assets
24,529,000 24,124,000
$ 24,619,000 $ 24,134,000
Liabilities:
Loans payable
$ 508,000 $ -
Other liabilities
523,000 367,000
1,031,000 367,000
Equity:
Common stock and additional
paid-in capital
39,882,000 39,882,000
Accumulated deficit
(16,280,000 ) (16,101,000 )
Accumulated other comprehensive
loss
(14,000 ) (14,000 )
23,588,000 23,767,000
$ 24,619,000 $ 24,134,000
F-10
Three months
ended
March 31,
Statement of Operations
2011
Revenue
$ -
Interest expense
14,000
Other expense, net
164,000
Net loss
$ 178,000
Basic and diluted loss per
common share
$ 0.00
RMC was not formed until December 9, 2010, therefore the Agreement would have had no effect on the three months ended March 31, 2010.
On April 22, 2011, the Company entered into employment contracts with two senior management employees that set annual compensation at a combined $255,000 per annum. These agreements expire at various times during 2011.
Effective May 5, 2011, David Zaikin resigned as the Chief Executive Officer of the Company and Michael Hellenbrand was appointed as the Chief Executive Officer to fill the vacancy left by Mr. Zaikin’s resignation. Mr. Zaikin continues to serve as the Chairman of the Board of Directors of the Company.
On June 15, 2011, the Company purchased certain geological data from two shareholders for 1,500,000 shares of restricted common stock. The fair value of the common stock issued to these two shareholders on this date was $.23 per share which equates to $345,000 of common stock being issued.
The Company has evaluated subsequent events for recognition or disclosure through the date these financial statements were available to be issued, June 21, 2011.
