American Rare Earths & Materials, Corp.

Dmitriy Sindalovsky has been contracted as an engineering consultant to the Company, specifically in support of the Company’s scandium applications. Under the terms of his contract, during the nine months ended March 31, 2012 the Company issued 2,150,000 (2011 – 710,000) shares valued at $237,750 (2011 - $171,225). During the three months ended March 31, 2012 the Company issued 350,000 (2011 – 250,000) shares valued at $14,000 (2011 – $72,500).  The value of these services are included in selling, general and administrative expenses in the condensed consolidated statement of operations for all periods presented.

As disclosed in Note 12, in a legal claim commenced by Paritet Holdings Ltd. et al, on April 10, 2012, against two subsidiaries of the Company and other defendants, it has been alleged, among other things, that Dmitriy Sindalovsky controls ZT Holdings Limited and as a result has a controlling interest in Zeroloft Corp. AREM entered into a Trademark License and Product Distribution Agreement and Management Agreement (“Agreements”) with Zeroloft Corp. on January 14, 2010.

On May 19, 2010, the Company issued and Zeroloft Corp. agreed to accept 306,122 shares of common stock to pay $150,000 on the amount due to Zeroloft Corp. On September 1, 2010, the balance due to Zeroloft Corp. was decreased by $442,912 by offsetting accrued receivable due to the Company by Zeroloft Corp. During the six months ended December 31, 2010, the Company and Zeroloft Corp. agreed to apply $129,207 of stock-based compensation paid on behalf of Zeroloft Corp. against the amount due to Zeroloft Corp. At March 31, 2012, $277,881 (June 30, 2011 - $277, 881, June 30 - 2010 - $850,000) is due to Zeroloft Corp.

NOTE 6 ROYALTY PAYABLE

On April 10 2012, a claim was commenced by Paritet Holding Ltd. and Contour Finance Limited (“Plaintiffs”) against Nataliya Hearn, the CEO of the Company, and two wholly subsidiaries of the Company, Element 21 Golf Canada Inc. and Element 21 Sports Inc. (“AREM Defendants”) and against ZT Holding Limited, DIY Group Ltd. Dmitriy Sindalovsky and Ilya Oprenko (“Other Defendants”). The claim is brought in the Ontario Superior Court of Justice Court File No CV-12-450806, Province of Ontario, Canada. The Plaintiffs allege that two of the Other Defendants, Sindalovsky and Oprenko, induced them through misrepresentations to invest approximately $4 million in an aerogel clothing insulation business known as "Zeroloft". They further alleged that money that was supposed to go to increasing Zeroloft's production capacity in South Korea but the funds were misappropriated and sent to other corporations controlled by Sindalovsky or to one of the AREM Defendants (see Note 5). There are no allegations of misrepresentation against the AREM Defendants. While monetary relief is claimed against the Other Defendants, the Plaintiffs are seeking from the AREM Defendants the following:

On April 10 2012, a claim was commenced by Paritet Holding Ltd. and Contour Finance Limited (“Plaintiffs”) against Nataliya Hearn, the CEO of the Company, and two wholly subsidiaries of the Company, Element 21 Golf Canada Inc. and Element 21 Sports Inc. (“AREM Defendants”) and against ZT Holding Limited, DIY Group Ltd. Dmitriy Sindalovsky and Ilya Oprenko (“Other Defendants”). The claim is brought in the Ontario Superior Court of Justice Court File No CV-12-450806, Province of Ontario, Canada. The Plaintiffs allege that two of the Other Defendants, Sindalovsky and Oprenko, induced them through misrepresentations to invest approximately $4 million in an aerogel clothing insulation business known as "Zeroloft". They further alleged that money that was supposed to go to increasing Zeroloft's production capacity in South Korea but the funds were misappropriated and sent to other corporations controlled by Sindalovsky or to one of the AREM Defendants. There are no allegations of misrepresentation against the AREM Defendants. While monetary relief is claimed against the Other Defendants, the Plaintiffs are seeking from the AREM Defendants the following: