(Name, Telephone, E-mail and/or Facsimile number
and Address, of Company Contact Person)
Securities registered or to be registered pursuant
to Section 12(b) of the Act: None
Securities registered or to be registered pursuant
to Section 12(g) of the Act: None
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act.
Indicate the number of outstanding
shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.
Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [X] No
If this report is an annual
or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934. [ ] Yes [X] No
Note - Checking the box
above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 from their obligations under those Sections.
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports
)
, and (2) has
been subject to such filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,
if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files).
[X] Yes
[ ] No
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
If an emerging growth company that prepares its financial
statements in accordance with U.S. GAAP, 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.
Indicate by check which
basis of accounting the registrant has used to prepare the financial statements included in this filing:
US GAAP [ X ] International
Financial Reporting Standards as issued by the International Accounting Standards Board [ ] Other [
]
If "Other" has been checked in response
to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report,
indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes
[X] No
This Annual Report on Form 20-F contains or
incorporates by reference forward-looking statements. All statements, other than statements of historical facts, that address
activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking
statements. Such statements are characterized by terminology such as "anticipates," "believes," "expects,"
"future," "intends," "assuming," "projects," "plans," "will," "should"
and similar expressions or the negative of those terms or other comparable terminology. These forward-looking statements,
which include statements about the mineral industry; market size, share and demand; performance; our expectations, objectives,
anticipations, intentions and strategies regarding the future, expected operating results, revenues and earnings and potential
litigation are not guarantees of future performance and are subject to risks and uncertainties, including those risks described
under the heading "Risk Factors" set forth herein, or in the documents incorporated by reference herein, that could cause
actual results to differ materially from the results contemplated by the forward-looking statements.
Investors are cautioned that our forward-looking
statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations
expressed in the forward-looking statements.
As for the forward-looking statements that
relate to future financial results and other projections, actual results will be different due to the inherent uncertainty of estimates,
forecasts and projections may be better or worse than projected. Given these uncertainties, you should not place any reliance on
these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the
date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates
and assumptions associated with them, after the date of this filing to reflect events or changes in circumstances or changes in
expectations or the occurrence of anticipated events.
We undertake no obligation to publicly update
any forward-looking statement, whether as a result of new information, future events or otherwise. You are advised, however, to
consult any additional disclosures we make in our reports on Form 20-F and Form 6-K, or their successors. We also note that we
have provided a cautionary discussion of risks and uncertainties under the caption "Risk Factors" in this Annual Report.
These are factors that we think could cause our actual results to differ materially from expected results. Other factors
besides those listed here could also adversely affect us.
Information regarding market and industry statistics
contained in this Annual Report is included based on information available to us which we believe is accurate. We have not reviewed
or included data from all sources, and cannot assure stockholders of the accuracy or completeness of the data included in this
Annual Report. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications
and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and
services.
PART I
Item 1. Identity of Directors,
Senior Management and Advisers.
Not applicable.
Item 2. Offer Statistics and Expected Timetable.
Not applicable.
Item 3. Key Information.
Item 3.A. Selected Financial Data.
The following selected consolidated financial
data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations"
and our consolidated financial statements and related notes included elsewhere in these statements. The selected consolidated financial
data presented below are derived from our audited consolidated financial statements as of December 31, 2018, and for the year from
January 1, 2018 to December 31, 2018, which are prepared in accordance with accounting principles generally accepted in the United
States of America ("US GAAP").
Except as may be otherwise indicated, all dollar
amounts are stated in U.S. dollars, the Registrant's reporting currency. The following table sets out the exchange rates,
based on the data from the website of Brazil’s “Banco Central” (an equivalent to the U.S. Federal Reserve), for
the conversion of the Brazilian real (R$) currency into the United States dollar (US$), for the period from January 1, 2018 to
December 31, 2018. The average exchange rates are based on the average of the daily closing exchange rates during such periods:
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Average
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High
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Low
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Close
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Fiscal Year Ended 12/31/2018
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$
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3.6558
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$
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4.1879
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$
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3.1391
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$
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3.8748
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The exchange rate on May 1, 2019 was $3.9447
Brazilian reais per one U.S. dollar.
Item 3.B. Capitalization and Indebtedness.
As of May 1, 2019, we had issued 4,644,599
shares of our Common Stock and 1 share of a Series A Preferred Stock.
As of December 31, 2018, we had current liabilities
of $10,454 all of which was unsecured and attributable to non-related parties. We had no long-term liabilities.
Item 3.C. Reasons for the Offer and Use
of Proceeds.
Not applicable.
Item 3.D. Risk Factors.
You should carefully consider the following
risk factors and all other information contained in this Report before purchasing our shares. We have assembled these risk factors
based upon publicly available information, our own analysis and our own beliefs relative to our understanding of our business.
If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely
affected, in which case, the value of our shares could decline, and you may lose some or all of your investment.
General Risks Relating to Our Business
Risks Related to Operations
Our results
are likely to fluctuate significantly in future periods.
Our operating and
financial results are difficult to predict and may fluctuate significantly from period to period. Results of operations may fluctuate
as a result of a variety of factors that are outside of our control including, but not limited to, lack of sufficient working capital,
equipment malfunction and breakdowns, and regulatory or licensing delays.
We may be unable
to access funding on acceptable terms or at all.
We may seek additional
debt or equity financing to finance our business model and for growth. Such financing may not be available on acceptable
terms or at all and any failure to obtain additional financing when needed could severely impact our business. Additional equity
financing may be dilutive to shareholders, and debt financing may involve significant covenants and future repayment obligations.
Risks Related to Doing Business in
Brazil
We are subject
to extensive mining and environmental regulation in Brazil.
We are subject to
various Brazilian federal mining laws and regulations and federal, state and local environmental laws and regulations. For any
of the operations that we intend to pursue directly, we will be required to obtain a certain number of permits from regulators.
After operations begin, we will have capital expenditures on an ongoing basis to continue to ensure compliance with the permits
obtained as well as other mining and environmental laws and regulations. In addition, due to the possibility of changes to
mining and environmental laws and regulations, the amount and timing of future regulatory expenditures may vary substantially
from those currently anticipated. We could be subject to civil or criminal penalties for non-compliance with mining and environmental
laws and regulations under Brazilian law.
Significant
volatility in the value of the Brazilian real in relation to the U.S. dollar could harm our results.
The local costs in
Brazil are in the currency of Brazil, the Brazilian real. There have been significant fluctuations in the exchange rate between
the Brazilian real and the U.S. dollar and this may at times be detrimental to us.
Brazilian economic
and political conditions may have an impact on our businesses.
The Brazilian economy
has been characterized by frequent, and occasionally drastic, intervention by the Brazilian government, which has often changed
monetary, credit and other policies to influence the economy. Actions taken by the Brazilian government concerning the economy
may have important effects on us. Our financial condition and results of operations may be adversely affected by the following
factors, among others, and by any of the Brazilian government's actions in response to them: economic and social instability, energy
and/or fuel shortages, exchange rate controls and restrictions on remittances abroad, and tax policy.
Brazilian contract
and corporate laws may negatively affect us.
The judicial enforcement
of contracts in Brazil is a lengthy process, requiring skill and tenacity, and the application of corporate laws through the Brazilian
legal system can be uneven, haphazard and unreliable.
Brazilian tax
laws are complex and may be detrimental to us.
Brazilian taxation
tends to be one of the more complex tax regimes in the world. We make every effort, in conjunction with Brazilian advisors,
to limit the taxes to which we are subject; however, there is no assurance that the tax laws in Brazil will not be changed nor
interpreted by Brazilian authorities in a manner that could be detrimental to us.
Risks Related to Our Common Stock
There is currently a very limited trading
market for our Common Stock.
The shares of our Common Stock began trading
on OTC Pink, a platform of OTC Markets, on November 5, 2018 and since then have been only sporadically traded. A possible reason
for the current lack of liquidity includes the fact that only a small percentage of our Common Stock is available to be traded
and is held by a small number of holders. Another possible reason may be related to the fact that we are a new company and therefore
the demand for our shares is limited by the lack of knowledge about us. We believe that liquidity will be dependent, among other
things, on the perception of our business, alongside with steps that we may take to raise investor awareness, including press releases,
road shows, and conferences. There can be no assurance as to when an increase in liquidity will occur.
The price and
liquidity of our Common Stock may be affected by many reasons, some beyond our control.
The price and liquidity of our Common Stock
may be affected by a variety of factors and events outside of our control, some, but not all, of which are listed below:
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overall market conditions;
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changes in the market valuations of other similar or comparable companies;
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announcements by competitors of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
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the absence of consistent administrative supervision of "bid" and
"ask" quotations;
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adoption of new accounting standards;
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changes in estimates and recommendations by advisors and analysts; and
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changes in gold prices.
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The price and liquidity
of our Common Stock may also impair our ability to raise capital by selling shares of our stock, to acquire mineral properties
by using our stock as consideration, or to recruit and retain executives with equity-based stock incentive plans.
Our operating
results may be volatile and difficult to predict, and if it fails to meet expectations the market price of our Common Stock may
decline significantly.
Our operating results
may fluctuate significantly from period to period, due to a number of factors. These factors include, but are not limited to:
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the global price for gold;
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costs related to our operations;
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the Brazilian real – U.S. dollar exchange rate;
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extreme weather periods;
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delays in licensing of mines or mineral properties;
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departures of key personnel;
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research results related to any of their projects and mineral rights;
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new mining, environmental, and/or tax regulations in Brazil; and
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fluctuations in economic, political, and market conditions.
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Many of these factors
are entirely outside of our control, and for others we only have limited influence. As a result of the factors above, and others,
we may be unable to forecast our financial projections accurately and may be unable to adjust our spending in a timely manner to
compensate for any unexpected revenue and/or funding shortfalls. Additionally, a failure to meet revenue or expense projections
may have an immediate and negative impact on our operating results. If this were to happen, the market price of our Common Stock
could decline significantly.
Our Common Stock
may be considered a "penny stock" and may be difficult to sell.
The U.S. Securities
and Exchange Commission (the “SEC”) has adopted regulations which generally define a "penny stock" to be
an equity security that has a market price of less than US$5.00 per share or an exercise price of less than US$5.00 per share,
subject to specific exemptions. The SEC's penny stock rules require a broker-dealer, before a transaction in a penny stock not
otherwise exempt from the rules, to deliver to its customer a standardized risk disclosure document that provides information about
penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and the salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules generally
require that before a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock
is a suitable investment for the purchaser and receive the purchaser's agreement to the transaction. These rules may adversely
impact the liquidity of our Common Stock and may affect the ability of investors to sell their shares.
We do not anticipate
paying dividends on our Common Stock for the foreseeable future.
We anticipate that,
for the foreseeable future, if and when we generate profits, that our Board of Directors may choose to reinvest such profits or
save them as reserves and not pay dividends.
Risks Specific to Jupiter Gold
Our results
of operations, financial position and business outlook may become highly dependent on the price of gold, which is subject
to significant volatility and uncertainty
.
Our results may become
substantially related to gold prices. As a result of the volatility of gold prices, such results may fluctuate substantially.
We currently do not have mineral reserves
as such term is defined by the SEC.
Although both of our Paracatu and
Pindaíba
Projects have what we believe are positive drilling studies, none of these studies were carried out in a manner as to allow the
measurement of “reserves” under the SEC’s definition of such term. Lack of “reserves” may lead to
lesser desirability from investors and potential partners.
We are highly
dependent on certain members of our management.
We depend on the efforts
of a small number of officers and directors. In particular, we are heavily dependent upon the expertise of Marc Fogassa, our Chairman
and Chief Executive Officer, who is also formally our Chief Financial Officer and Principal Accounting Officer. Mr. Fogassa speaks
Portuguese and English fluently, has extensive networks in both Brazil and the United States of America, and relevant experience
in management and finance. If it occurs, any loss of the services of Mr. Fogassa could have a material adverse effect upon
our results of operations and financial position.
Marc Fogassa
is both our Chairman and Chief Executive Officer as well as Chairman and Chief Executive Officer of Brazil Minerals, Inc. and may
be subject to potential conflicts of interest in matters involving both companies.
Mr. Fogassa, our Chairman
and Chief Executive Officer, is also Chairman and Chief Executive Officer of Brazil Minerals, Inc. (“Brazil Minerals”).
As of May 3, 2019, Brazil Minerals and a subsidiary own an aggregate 2,277,559 shares (approximately 49.14%) of our outstanding
Common Stock. Potential conflicts of interest may occur between Jupiter Gold and Brazil Minerals as related to allocation of opportunities
and of Mr. Fogassa's working time, among others. As a practical manner to diminish or eliminate such potential conflicts of interests
between these two companies, the Board of Directors of each company has a different composition. In board votes that involve a
potential conflict of interest, Mr. Fogassa recuses himself, and let the disinterested directors decide.
Our Series A
Preferred Stock has the effect of concentrating voting control in Marc Fogassa, our Chairman and Chief Executive Officer.
One share of our Series
A Preferred Stock is issued, outstanding and held by Marc Fogassa, Chairman and Chief Executive Officer, since 2016. Mr. Fogassa
holds the only outstanding share of such Series A Preferred Stock. The Certificate of Designations, Preferences and Rights of the
Series A Convertible Preferred provides that for so long as Series A Preferred Stock is issued and outstanding, the holders of
Series A Preferred Stock shall vote together as a single class with the holders of our Common Stock, with the holders of Series
A Preferred Stock being entitled to 51% of the total votes on all matters regardless of the actual number of shares of Series A
Preferred Stock then outstanding, and the holders of our Common Stock being entitled to their proportional share of the remaining
49% of the total votes based on their respective voting power. Therefore, so long as he holds the only outstanding shares of Series
A Preferred Stock, Mr. Fogassa will have effective voting control on all matters requiring a stockholder vote.
Under our Bylaws,
stockholders that initiate certain proceedings may be obligated to reimburse us and our officers and directors for all fees, costs
and expenses incurred in connection with such proceedings if the claim proves unsuccessful.
Our Bylaws include
a fee-shifting provision in Article VI, Section 7 for stockholder claims (the "Fee Shifting Provision"), which reads
as follows: "In the event that (a) any current or prior shareholder of the Company or anyone on their
behalf ("Claiming Party") initiates or asserts any claim or counterclaim ("Claim") or joins, offers
assistance to, or has a direct interest in any Claim against the Corporation and/or any
of its shareholders, officers, or directors (together, the Corporation and/or any of its shareholders, officers, or directors
are henceforth called "Receiving Parties"), including any Claim purportedly filed on behalf of the Corporation or any
shareholder, whether direct or derivative, in any jurisdiction, and (b) the Claiming Party (or the third party that received assistance
from the Claiming Party or in whose Claim the Claiming Party had a direct interest) does not obtain
a favorable judgment on all of the merits of its Claim, with such determination made by the Corporation, then each Claiming Party
shall be obligated jointly and severally to reimburse the Receiving Parties for all fees, costs and expenses of every kind and
description (including, but not limited to, all attorneys' fees) that the Receiving Parties may incur in connection
with such Claim."
The Fee Shifting Provision
was adopted to eliminate or decrease nuisance and frivolous litigation. We intend to apply the Fee Shifting Provision broadly to
all actions, including U.S. federal securities law claims. The level of recovery for the plaintiff to avoid any payment, quoting
verbatim the language of the Fee Shifting Provision, would necessitate such plaintiff obtaining a "favorable judgment on all
of the merits of its Claim." The Fee Shifting Provision is intended to apply to "any current or prior shareholder of
the Company or anyone on their behalf" and the Company will make such determination based on the facts of any case it may
encounter. The parties entitled to recover, quoting verbatim, are "the Corporation and/or any of its shareholders,
officers, or directors."
We are incorporated
in the Marshall Islands, which may have fewer rights and protections for shareholders.
We are incorporated
in the Republic of the Marshall Islands (“Marshall Islands”). Our corporate affairs are governed by our Articles of
Incorporation and Bylaws and by the Marshall Islands Business Corporations Act (the "BCA"). The provisions of the BCA
resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases
in the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Marshall
Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent
in existence in certain U.S. jurisdictions. Shareholder rights may differ as well. While the BCA does specifically incorporate
the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions,
our public shareholders may have more difficulty in protecting their interests in the face of actions by management, directors
or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction. Further, the Marshall
Islands does not have a well-developed body of bankruptcy law. As such, in the case of our bankruptcy, there may be a delay of
bankruptcy proceedings and the ability of shareholders and creditors to receive recovery after a bankruptcy proceeding. Additionally,
our incorporation in the Marshall Islands may make service of process more difficult.
Substantially
all of our assets are in Brazil.
Substantially all
of our assets (mineral properties, equipment) are located in Brazil. We therefore depend on complying with laws and regulations
in Brazil to keep such assets free of any liens or judgments. On the other hand, it may be difficult to enforce judgments from
other countries’ courts against such assets.
Item 4. Information on the Company.
Item 4.A. History and Development of the Company.
Date of Incorporation, Legal Form, Domicile,
& Business Summary
Jupiter Gold Corporation was incorporated under
the laws of the Republic of the Marshall Islands on July 27, 2016, and we have been in continuous, active operations since that
date. On December 16, 2016, our Registration Statement on Form F-1 was declared effective by the Securities and Exchange Commission
(“SEC”). During 2017, we conducted a self-directed initial public offering of our common stock in which $254,000 was
raised at $1.00/share. Our stock symbol is JUPGF and our first trade in OTC Pink (a unit of OTC Markets) occurred on November 5,
2018.
We are a company pursuing exploration and development
of gold and precious metals mining opportunities in Brazil. As of May 3, 2019, we hold title to eleven mineral rights for gold
totaling 101,133 acres and one active mineral right for manganese with 233 acres, all located in Brazil. All of our mineral rights
have been carefully selected, and most of them are in well-known mining districts. We operate our business directly and also through
wholly-owned subsidiaries, in particular
Mineração
Jupiter Ltda in
Brazil.
We have no issued debt, except for operational
payables. We have been primarily funded to date by sales of our common stock. We are prohibited from issuing variable-rate convertible
debt by our Bylaws.
Business Strategy & Goal
Our business strategy is to acquire and advance
exploration properties. We plan to mine properties that lend themselves to year-round, lower cost open-sky operations such to enable
high profitability on gold retrieval and sales. In other situations, such as the
Pindaíba
Project, we will collect royalties.
Our main goal is to become a profitable company
as soon as possible. Our secondary goal is to uplist our common stock to a stock exchange such as Nasdaq or NYSE American.
Sector Outlook
We believe that significant growth and profit
opportunities exist in the mining industry over the long term. These opportunities derive from long-term trends, including globalization
of the world economy, growth in investable funds and accelerating technology innovation.
In particular, we believe that gold will continue
to grow in its usage as a medium of value storage, in addition to uses in jewelry and manufacturing. We also believe that Brazil,
a country that is larger than the continental United States, with varied geology, will continue to yield promising areas for gold
exploration. Brazil also has a detailed mining code and a long history of welcoming exploration of its resources by foreign groups.
We believe the trends favoring gold mining in stable jurisdictions such as Brazil will continue for the next several decades.
Emerging Growth Company Status
We may be deemed to be an "emerging growth
company" as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. As long as we remain an emerging growth
company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements, and exemptions from the requirements of holding an annual nonbinding advisory vote
on executive compensation and seeking nonbinding stockholder approval of any golden parachute payments not previously approved.
We may take advantage of these reporting exemptions until we are no longer an "emerging growth company."
Under the JOBS Act, emerging growth companies
can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have
irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject
to the same new or revised accounting standards as other public companies that are not emerging growth companies.
We will remain an "emerging growth company"
for up to five years, although we would cease to be an "emerging growth company" prior to such time if we have more than
$1 billion in annual revenue, more than $700 million in market value of our common stock is held by non-affiliates, or we issue
more than $1 billion of non-convertible debt over a three-year period.
Item 4A. Unresolved Staff Comments.
Not applicable.
Item 5. Operating and Financial Review
and Prospects.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of
our financial condition and results of operations should be read in conjunction with the financial statements and the related notes
and other information included elsewhere in this registration statement. This discussion contains forward-looking statements that
are based on management's current expectations, estimates and projections about our business and operations. Our actual results
may differ materially from those currently anticipated and expressed in such forward-looking statements and as a result of the
factors we describe under "Risk Factors" and elsewhere in this filing. See "Special Note Regarding Forward-looking
Statements" and "Risk Factors." We undertake no obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other events occur in the future.
Overview
We are a company pursuing exploration and development
of gold and precious metals mining opportunities in Brazil. As of May 3, 2019, we hold title to eleven mineral rights for gold
totaling 101,133 acres and one active mineral right for manganese with 233 acres, all located in Brazil. All of our mineral rights
have been carefully selected, and most of them are in well-known mining provinces, including:
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Our Paracatu Project (one mineral right owned by us): located 4 miles from
the largest gold mine in Brazil which is owned by Kinross Gold Corporation (NYSE: KGC) within an ore body of 16,000,000 ounces
of gold and producing 490,000 ounces of gold per year;
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b)
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Our Crixás Project (one mineral right owned by us): located 11 miles
from 4 active gold mines owned and operated by AngloGold Ashanti (NYSE: AU) within an ore body of 9,000,000 ounces of gold and
annual production of producing 130,000 ounces of gold per year;
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c)
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Our Serrita Project (three mineral rights owned by us): located within an
area known to host narrow high-grade gold mineralized quartz veins. The Brazilian government-funded CPRM (Mineral Resources Research
Company) researched this province extensively and confirmed gold mineralization.
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Other of our gold projects are in newer jurisdictions
such as the state of Bahia and the state of Amazonas. In Bahia, one of our projects is an area with potential for gold, platinum,
and palladium. Additionally, we own an area with known manganese mineralization in the state of Minas Gerais.
We also own a recovery plant for gold that
utilizes centrifugation as the main separation technique and other mining capital equipment. This plant is scheduled to be operated
by Brazil Minerals, Inc. in its Pindaiba Project in the state of Minas Gerais. In return, Jupiter Gold will receive a 50% royalty
on any gold recovered from its plant.
None of our properties presently contain “reserves”
as such term is defined by the Securities and Exchange Commission (the “SEC”).
Corporate Structure
We were incorporated under the laws of the
Republic of the Marshall Islands on July 27, 2016, and has been in continuous, active operations since that date. On December 16,
2016, our Registration Statement on Form F-1 was declared effective by the SEC. During 2017, Jupiter Gold conducted a self-directed
initial public offering of our Common Stock. Our Common Stock symbol is JUPGF and we are listed in OTC Pink, a platform of OTC
Markets. We operate our business directly and also through wholly-owned subsidiaries, in particular
Mineração
Jupiter Ltda in Brazil.
Business Strategy & Goal
Our business strategy is currently focused
on gold properties in Brazil, a well-regarded jurisdiction that we know well and one that presents attractive opportunities. We
plan to mine properties that lend themselves to year-round, simple open-sky operations to enable steady profitability on gold retrieval.
In other situations, we will prefer to partner and collect royalties while another company operates the project. Our main goal
is to become a profitable company as soon as possible. Our secondary goal is to uplist a stock exchange such as Nasdaq or NYSE
American.
Monetization of Mineral Rights Areas
Our approach for its earlier stage projects
is to perform focused geological research for the occurrence of gold which would significantly enhance the value of such areas.
This could allow us either to raise additional capital for further development and exploration or to partner with larger companies.
There is known gold mineralization either within
or in the vicinity of most our mineral rights for gold. In general, for any of its earlier projects, our initial assessment will
be based on geophysics using an airborne geophysical survey with full radiometric and magnetic fields. After defining priority
areas, it will be necessary to detail each of them with ground geophysics. The geophysical work will provide the definition of
priority targets for exploration where geological mapping will be done, including soil geochemistry, digging trenches and pits
and drilling.
It is likely that even before the completion
of such exploration work, our technical team may have collected enough data to ascertain whether there are likely potential gold
deposits in the mineral rights studied. We believe that such data, even if preliminary, could allow for an estimation of whether
there are primary or secondary deposits, whether any gold is free or associated with some minerals (e.g., sulphide or quartz),
and whether such gold is widespread in large structures or concentrated in veins.
We believe that there is potential for the
existence of secondary gold deposits that can be leveraged to gold production with low investment and low operating costs in several
of our mineral rights for gold. In general, these deposits have free gold in altered rock or in alluvium and can be excavated via
opencast mines and processed in small portable plants, and the gold recovered by gravimetric methods (centrifuges and gutters)
without using chemical reagents.
Offices & Operations
Jupiter Gold’s principal place of operation
and office is in the municipality of
Olhos-d'Água
, state of Minas Gerais, in
Brazil.
100%-Owned Projects & Mineral Properties
Our 100%-owned projects
and mineral properties are listed in the following map and tables.
|
Project
Number
|
Project Name and Mineral Right Number (1)
|
Mineral Right Status (2)
|
Location in Brazil (municipality and state)
|
Area
(in acres)
|
Mineral
|
Deadline for Further
Reporting
(when applicable)
|
|
1)
|
Paracatu Project
831.883/2016
|
RP
|
Paracatu, state of Minas Gerais
|
773
|
Gold
|
04/12/2020 (3)
|
|
2)
|
Crixás Project
860.807/2016
|
RP
|
Crixás, state of Goiás
|
3,068
|
Gold and possibly Nickel
|
12/27/2019 (3)
|
|
3)
|
Serrita Project
840.118/2018
|
ARP
|
Serrita, state of Pernambuco
|
4,222
|
Gold and possibly Copper, Manganese, Nickel
|
n/a (4)
|
|
|
Serrita Project
840.119/2018
|
ARP
|
Serrita, state of Pernambuco
|
4,582
|
Gold and possibly Copper, Manganese, Nickel
|
n/a (4)
|
|
|
Serrita Project
840.120/2018
|
ARP
|
Serita, state of Pernambuco
|
4,927
|
Gold and possibly Copper, Manganese, Nickel
|
n/a (4)
|
|
4)
|
Apuí Project
880.133/2016
|
RP
|
Apuí, state of Amazonas
|
23,043
|
Gold
|
08/30/2021 (3)
|
|
|
Apuí Project
880.134/2016
|
ARP
|
Apuí, state of Amazonas
|
23,207
|
Gold
|
n/a (4)
|
|
|
Apuí Project
880.135/2016
|
ARP
|
Apuí, state of Amazonas
|
23,080
|
Gold
|
n/a (4)
|
|
5)
|
Itabira Project
831.942/2016
|
RP
|
Dionisio, state of Minas Gerais
|
4,653
|
Gold and possibly Iron
|
04/12/2020 (3)
|
|
6)
|
Brotas I Project
871.881/2018
|
ARP
|
Brotas de Macaúbas,
state of Bahia
|
4,757
|
Gold
|
n/a (4)
|
|
7)
|
Brotas II Project
870.400/2019
|
ARP
|
Brotas de Macaúbas,
state of Bahia
|
4,821
|
Gold, Palladium, Platinum
|
n/a (4)
|
|
8)
|
Diamantina Project
831.665/2016
|
RP
|
Augusto de Lima, state of Minas Gerais
|
233
|
Manganese
|
05/03/2020 (3)
|
Observations:
|
|
(1)
|
Each mineral right, or claim, has a specific number awarded by DNPM ("Departamento Nacional
de Produção Mineral", the Brazilian national mining department) or its replacement
ANM
(“
Agência
Nacional
de Mineração”), a
federal entity with offices in each state
|
|
|
(2)
|
The currently applicable statuses for these mineral rights are: "RP" for Research Permit
(active), and "ARP" for Application for Research Permit.
|
|
|
(3)
|
By this date we must submit a research report to ANM which, if approved, would permit application
for a mining concession. If by this date the research is not concluded, we can request an extension upon submission of preliminary
findings. ANM usually grants such extensions for one to three additional years although there are no guarantees.
|
|
|
(4)
|
A deadline for submission of a research report has not started as the application for research
permit is being reviewed.
|
Royalty Projects
Our first royalty
project is shown in the map above and listed in the table below.
|
Royalty Project Name and Mineral Right Number (1)
|
Mineral Right Status (2)
|
Location in Brazil (municipality and state)
|
Area
(in acres)
|
Mineral
|
Deadline for Further Reporting
|
|
Pindaíba
Project
802.267/1977 (3)
|
RC
|
Olhos-d'Água
, state of Minas Gerais
|
1,310
|
Gold and Diamonds
(diamonds not part of royalty agreement)
|
n/a
|
Observations:
|
|
(1)
|
Each mineral right, or claim, has a specific number awarded by DNPM ("Departamento Nacional
de Produção Mineral", the Brazilian national mining department) or its replacement ANM (“
Agência
Nacional de Mineração”), a federal entity with offices in each state
|
|
|
(2)
|
The currently applicable status for this mineral right is “RC” for Request for Mining
Concession
|
|
|
(3)
|
Mineral right owned by Brazil Minerals, Inc.
|
Project
Details
1 -
Paracatu Project
Mineral:
Gold
Ownership:
100%
Location:
Paracatu, state of Minas Gerais
Area:
773 acres
Highlights:
|
|
·
|
Extensive drilling conducted by Jupiter Gold and concluded in Q2 2018;
|
|
|
·
|
18 of 23 drill holes were visually positive for gold and confirmed by geochemical studies performed
at an SGS-Geosol laboratory;
|
|
|
·
|
Mining licensing underway as of Q4 2018;
|
|
|
·
|
Project is located only 4 miles from the largest gold mine in Brazil, Morro do Ouro (“Gold
Hill”), owned and operated by Kinross Gold (NYSE: KGC). Morro do Ouro is a massive open-sky mine within an ore body of 16,000,000
ounces of gold and recent annualized production of 490,000 ounces of gold, according to publicly-available information.
|
Other Information & Maps:
Figure
Above: Nearby mines and projects to Jupiter Gold’s Paracatu Project
Our geologists had
initially planned for an exploratory drilling campaign for the Paracatu Project with six drill holes spaced 100 meters apart. Upon
initial drilling, immediate visualization of fine gold in several holes resulted in the decision to expand from an exploratory
to a detailed drilling campaign. A total of 23 holes spaced 25-30 meters were drilled using a Banka 4-inch percussion rotary drill.
Gold was visualized in 18 out of the 23 drill holes executed. Fine gold was observed within gravel at depths varying from 0.5 meters
(app. 20 inches) to 7.8 meters (app. 26 feet). Samples were submitted to the SGS-Geosol laboratory unit in Belo Horizonte,
Brazil, where geochemical analysis was performed by Fire Assay Atomic Absorption protocols, and 18 of 23 drill holes were confirmed
positive for gold.
Figure Above:
Local geology of our Paracatu Project
Our senior geologist
on the Paracatu Project is Rodrigo Mello, who has extensive experience in Brazilian gold geology. Mr. Mello has worked in Brazil
for some of the largest gold companies in the world such as Goldcorp, AngloGold, and AngloAmerican, and has written 19 geological
reports, mostly on gold formations.
The municipality of
Paracatu has approximately 100,000 inhabitants and is located in the northwest part of the state of Minas Gerais, and 125 miles
from Brasilia, the capital of Brazil. The city has all of the infrastructure and labor needed for mining research and exploration.
2 - Crixás
Project
Mineral:
Gold
Ownership:
100%
Location:
Crixás, state of Goiás
Area:
3,068 acres
Highlights:
|
|
·
|
In situ geological research planned for Q2 2019;
|
|
|
·
|
Located 11 miles from 4 active open-sky gold mines owned and operated by AngloGold Ashanti (NYSE:
AU) within an ore body with 9,000,000 ounces of gold and annual production of 130,000 ounces;
|
|
|
·
|
Our area has a high probability to be in a continuation of the same geological trend;
|
|
|
·
|
Our area may also have nickel deposits.
|
Other Information & Maps:
Figure Above:
Map of our Crixás Project mineral right
Our Crixás
Project consists of a mineral right for gold in this well-known gold district. This area of Brazil was settled in the 18th century
by pioneers searching for gold. Today Crixás is home to the some of the largest gold operations in Brazil, with large gold
mines and projects from AngloGold Ashanti (NYSE: AU). AngloGold Ashanti’s operations in Crixás encompass three underground
and two open sky mines, with an ore body of approximately 9 million ounces of gold and annual production of over 130,000 ounces
of gold, according to publicly-available information.
Figure Above:
Local geology of our Crixás Project
Figures Above: Maps
of our Serrita Project mineral rights (3 areas)
Figure
Above: Local geology of our Serrita Project
4 – Apuí
Project
Mineral:
Gold
Ownership:
100%
Location:
Apuí, state of Amazonas
Area:
69,330 acres (3 contiguous mineral rights)
Highlights:
|
|
·
|
In situ geological research planned for 2019;
|
|
|
·
|
The Amazon is a new gold frontier; primary deposits in this region of
Brazil are usually greater than 1 million ounces;
|
|
|
·
|
Large gold areas in the Amazon with verified gold mineralization have
fetched prices varying between US$15,000,00 to $160,000,000 in disclosed transactions involving public companies.
|
Other Information & Maps:
Figures Above: Maps
of our Apuí Project mineral rights (3 areas)
Figure
Above: Nearby mines and projects to our
Apuí
Project
Figure
Above: Local geology of Jupiter Gold’s
Apuí
Project
5 – Itabira
Project
Mineral:
Gold
Ownership:
100%
Location:
Near Itabira, state of Minas Gerais
Area:
4,653 acres
Highlights:
|
|
·
|
In situ geological research planned for Q2 2019;
|
|
|
·
|
Located in the area known as “Iron Quadrangle” with several gold and iron mines.
|
Other Information & Maps:
Our Itabira Project
is located within the well-known area in the state of Minas Gerais in Brazil called the "Iron Quandrangle". This region,
known for both iron and gold mining, has excellent logistics and is also close to the state's capital, Belo Horizonte. The closest
larger city to this project is Itabira.
Figure
Above: Nearby projects to our
Itabira
Project
Geological formations in the Iron
Quadrangle are rich and highly complex; gold mines usually begin as open-sky alluvial operations and later advance underground
following primary gold deposits. Several companies have operated gold mines within the Iron Quandrangle, notably AngloGold Ashanti
(NYSE: AU) and Jaguar Mining.
Figure Above:
Local geology of our
Itabira
Project
6 – Brotas
I Project
Mineral:
Gold
Ownership:
100%
Location:
Brotas
de Macaúbas
, state of Bahia
Area:
4,757 acres
Highlights:
|
|
·
|
In situ geological research planned for 2019;
|
|
|
·
|
Area with known primary gold in quartz veins.
|
Other Information & Maps:
Figure Above: Map
of our Brotas I Project mineral right
Figure
Above: Nearby projects to our
Brotas
I Project
7 – Brotas
II Project
Mineral:
Gold, Palladium, and Platinum
Ownership:
100%
Location:
Brotas
de Macaúbas
, state of Bahia
Area:
4,821 acres
Highlights:
|
|
·
|
This region of Bahia is known for rock formations associated with auriferous
mineralization which percolates quartz veins and breccias.
|
|
|
·
|
This overall district had been previously studied by the CBPM, “Companhia
Baiana de Pesquisa Mineral”, the Mining Research Service of Bahia. Their researchers collected sample material and first
identified the gold-palladium-platinum occurrence.
|
|
|
·
|
In situ geological research planned for 2019;
|
Other Information & Maps:
Figure Above: Map of our
Brotas
II Project mineral right
Figure Above: Nearby projects to our
Brotas
II Project
Figure Above: Local
geology of our
Brotas
II Project
8 – Diamantina
Project
Mineral:
Manganese
Ownership:
100%
Location:
Near Diamantina, state of Minas Gerais
Area:
233 acres
Highlights:
|
|
·
|
Geological research completed in Q3 2018 confirmed manganese mineralization;
|
|
|
·
|
Located less than a mile from an area with a prior manganese mine; excellent logistics;
|
|
|
·
|
Brazilian manganese is highly sought after particularly by Asian buyers.
|
Other Information & Maps:
Figure Above: Map
of our Diamantina Project mineral right
Figure
Above: Nearby projects to our
Diamantina
Project
Our Diamantina Project
consists of a mineral right for manganese in the region in and surrounding Diamantina where other companies have explored for manganese.
Manganese has been positively identified by Jupiter Gold’s research team during the third quarter of 2018. We intend to further
study with respect to the potential to mine for manganese, or to partner or sell the project.
Figure
Above: Local geology of our
Diamantina
Project
Royalty Projects
Pindaíba Project
Minerals:
Gold (royalty) & Diamonds
(no royalty)
Ownership:
This mineral property
belongs to Brazil Minerals, Inc.
Royalty Terms:
50% of all gold extracted
and processed in our gold recovery plant
Location:
Olhos-d'Água
,
state of Minas Gerais
Area:
1,310 acres
Highlights:
|
|
·
|
Extensive drilling campaign conducted by Brazil Minerals concluded in
Q3 2018;
|
|
|
·
|
35/35 of drill holes were visually positive for gold;
|
|
|
·
|
57% of drill holes had high-probability diamond recovery; a “diamond-rich”
zone was identified in the area;
|
|
|
·
|
Results support open-sky mining;
|
|
|
·
|
The target area studied in this drilling campaign is an alluvial plain along the Jequitinhonha
River Valley, an area known for placer mining for gold and diamonds for over two hundred years. Pindaíba is a storied mineral
rights area that has had thousands of diamond prospectors in the past, which is a strong indication of mineralization; these prospectors
were all removed over 10 years ago; previous prospector presence does not alter the area’s mineralization potential, as they
prospected at the river margin with rudimentary tools and by law the area can only be mined at least 100 meters from the river
margin.
|
|
|
·
|
In September 2018, Brazil Minerals announced the conclusion of an extensive drilling campaign of
a portion of the mineral right of the Pindaíba Project. It was reported that Brazil Minerals drilled 35 holes spaced 30
to 50 meters utilizing a Banka 4-inch drill. All 35 holes were positive for fine gold as observed by the drilling team, and samples
were collected for quantitative geochemical analysis. The average depth for the auriferous gravel layer was 8 meters and with a
thickness between 1.5 to 9.3 meters.
|
Map:
Figure Above: Map of the
location
of our gold recovery plant for use in the Pindaíba Project
Gold Recovery Plant
We built an initial modular plant for recovery
of alluvial and have tested it successfully. The plant uses high speed centrifugation as the primary method of gold separation.
The use of centrifugal concentrators
for free gold recovery from alluvial ore has been a common practice in the mining industry for over two decades. This method uses
the difference in intrinsic densities between gold and the "waste" for separation – whereas the native gold density
is equal to 19.0 g/cm³, and the density of silica, the main component of the waste, is equal to 2.6 g/cm³.
This equipment was originally
developed by the Canadian mining industry and has several advantages over other processes, such as:
|
|
·
|
No use of chemicals (such as cyanide and mercury)
|
|
|
·
|
Low maintenance and low energy consumption
|
|
|
·
|
Recovery of gold in a wide particle size range
|
|
|
·
|
Simple installation and operation, with excellent mobility
|
Results of Operations
Fiscal Year Ended
December 31, 2018 Compared to Fiscal Year Ended December 31, 2017
In 2018, we recorded
revenue of $8,525, as compared to no revenue in 2017. These revenues were realized through the sale of a gold bar generated from
our exploratory mining efforts. We expect revenues to increase in future periods as we increase our mining operations; however,
can offer no assurances that we will be successful in efforts.
Our operating expenses
are comprised primarily of stock-based compensation, general administrative expenses, and to lesser extent professional fees and
other compensation related costs. In 2018, our operating expenses were $410,290, as compared to $436,141 in 2017. The decrease
in operating expenses of 5.9% is explained primarily by lower stock-based compensation costs related to stock options granted,
offset in part by an increase in general and administrative expenses related to due diligence costs and fees in preparation of
the Company’s financing efforts.
In 2018, we experienced
a net loss of $401,765, representing a decrease of $35,870, or 8.2%, when compared to a net loss of $437,635 in 2017.
Net cash used in operating
activities was $82,989 in 2018, as compared to net cash provided by operating activities of $166,230 in 2017. Net cash used in
investing activities was $803 in 2018, as compared to $6,552 in 2017. Net cash provided by financing activities was $5,000 in 2018,
as compared to $250,100 in 2017.
Fiscal Year Ended
December 31, 2017 Compared to Fiscal Year Ended December 31, 2016
Our operating expenses
in 2017 were $436,141, comprised primarily of stock-based compensation, and to lesser extent by general and administrative expenses,
professional fees, and other compensation and related costs. Our operating expenses for the period from July 27, 2016 (inception)
to December 31, 2016 were $340,714. The increase of 28.00% between 2017 and 2016 for the operating expenses is explained primarily
by the longer period of operations in 2017 as compared to operations for a shorter period in 2016, and secondarily by both higher
stock-based compensation and general and administrative expenses, which more than offset lower professional fees.
In 2017, we experienced
a net loss of $437,635, as compared to a net loss of $340,728 in 2016, an increase of $96,907 or 28.44%. This result is explained
by the higher operating expenses in 2017 in comparison to 2016, as detailed above.
Net cash used in operating
activities was $166,230 in 2017, as compared to net cash provided by operating activities of $12,225 in 2016. Net cash used in
investing activities was $6,552 in 2017, as compared to $9,153 in 2016. Net cash provided by financing activities was $250,100
in 2017, as compared to zero in 2016.
Liquidity and Capital Resources
As of December 31,
2018, we had total current assets of $177,034 and total current liabilities of $10,454 for a current ratio of 16.9 to 1 and working
capital of $166,580. By comparison, on December 31, 2017, we had total current assets of $204,242 and total current liabilities
of $15,366 for a current ratio of 13.3 to 1 and working capital of $188,876.
In 2018, our primary
source of liquidity was derived from the sale of our common stock. In 2017, our sources of liquidity were cash from the initial
public offering of our common stock and loans from Brazil Minerals.
For 2019 and beyond,
we expect that our sources of liquidity will continued to be generated from the sale of our common stock, and increased revenues
from royalties derived from the operation of our modular plant.
Item 5.C. R&D, Patents and Licenses
None, except mineral rights described above.
Item 5.E. Off-Balance Sheet Arrangements
None.
Item 5F. Tabular Disclosure of Contractual
Obligations.
The following table sets forth our contractual
obligations and commercial commitments as of December 31, 2018, due on demand:
|
Payable To
|
|
Description
|
|
Amount
|
|
|
Marc Fogassa
|
|
Honorarium
|
|
$
|
5,326
|
|
|
|
|
|
|
|
|
|
|
Various third-parties
|
|
Professional fees and other general obligations
|
|
$
|
5,128
|
|
Item 6. Directors, Senior Management and Employees.
Item 6.A. Directors and Senior Management.
Our officers and directors as of December 31, 2018 were as follows:
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
|
|
Marc Fogassa
|
|
52
|
|
Chairman of the Board of Directors, Chief Executive Officer, and Chief Financial Officer
|
|
General Antônio Florêncio da Silva
|
|
67
|
|
Director and Vice-President
|
|
Joel de Paiva Monteiro, Esq.
|
|
34
|
|
Director and Secretary
|
Executive officers are appointed by and serve
at the pleasure of our Board of Directors. A biography of each director and officer follows.
Marc Fogassa, age 52, a resident of the U.S.,
has been a director and our Chairman and Chief Executive Officer since July 2016. He has over 18 years of investment experience
in venture capital, and private and public equity investing, and has served on boards of directors of multiple private companies.
Mr. Fogassa has worked at Goldman Sachs & Co. (1997), Atlas Venture (1998-2000), and Axiom Ventures (2000-2005). He also worked
as investment manager with Hedgefort Capital Management LLC from May 2005 to June 2012, and as an investment banker from November
2011 to January 2014 with Hunter Wise Financial Group, LLC. He has been Chairman and CEO of Brazil Minerals, Inc. since December
2012 and Brazil Mining, Inc. since March 2012. Mr. Fogassa has been invited numerous times to speak about investment issues, particularly
as related to Brazil. Mr. Fogassa double majored at the Massachusetts Institute of Technology (M.I.T.), graduating with two Bachelor
of Science degrees in 1990. He later graduated from the Harvard Medical School with a Doctor of Medicine degree in 1995, and also
from the Harvard Business School with a Master in Business Administration degree in 1999. Mr. Fogassa was born in Brazil and is
fluent in Portuguese and English.
General Antônio
Florêncio da Silva, age 67, a resident of Brazil,
has been a director and vice-president since November 2018. General
Florêncio retired from the Brazilian Army as a two-star general. He has held many posts as commander in various units throughout
his career, culminating with being the Commander-in-Chief of the Second Military Zone in Brazil, headquartered in Campo Grande,
state of Mato Grosso. He graduated as an Army officer from the Academia Militar das Agulhas Negras em Resende, state of Rio de
Janeiro, in 1972. He pursued advanced Army Officer specialization in the branch of Communications in the School of Advancement
of the Brazilian Army in Rio de Janeiro, graduating in 1981. He further pursued advanced studies in Command and Joint Chiefs at
the Army School of Command. Already as a general, he studied politics and strategy at the doctorate level at the Superior War College
in Rio de Janeiro, the highest-level military and geopolitical training in Brazil. He was Chief of Staff of the Army in Brasilia,
Distrito Federal. General Florêncio was also the Director of Munitions and Supplies for the Brazilian Army and in that capacity
was in charge of all acquisitions including munitions, combat vehicles, military gear and battlefield equipment. He was a military
observer as part of the United Nations mission to El Salvador and later a Chief of Operations and Vice Commander in the Region
of San Vicente, El Salvador for the United Nations contingent. After his retirement from the Army, General Florêncio has
been a consultant for SAAB Bofors Dynamics in their missile program and for Brazilian construction companies. He received numerous
medals of valor in Brazil including: Ordem do Mérito Militar – grau Comendador; Ordem do Mérito Aeronáutico
– grau Comendador; Medalha Militar de Ouro; Medalha do Pacificador; Medalha Marechal Hermes Aplicação em Estudos
– prata uma coroa; Medalha da Vitória; Medalha Marechal Mascarenhas de Moraes; Medalha Tenente Max Wolf Filho; Medalha
Marechal Zenóbio da Costa; and Medalha Insígnia do Mérito Policial Militar do Estado do Mato Grosso do Sul.
His international medals include the United Nations Medal – ONUSAL, and the Order of Merit of Guiana.
Joel de Paiva Monteiro, Esq. is a partner of
the Brazilian law firm PRA Advogados - Pimenta da Rocha Andrade, with three offices and headquarters in Belo Horizonte, state of
Minas Gerais. Mr. Monteiro works with all aspects of Brazilian business law, has extensive experience in a wide range of areas,
from strategic business planning to litigation. His current clients include large corporations in a variety of economic sectors
in diverse states in Brazil. Mr. Monteiro has a law degree from the Milton Campos Faculty in Belo Horizonte, Brazil. Subsequently
he achieved a post-graduate degree in Business and Civil Law from the Pontifical Catholic University of Minas Gerais.
There are no family relationships between or among any of the persons
listed above.
Item 6.B. Compensation
.
Marc Fogassa is currently is not paid any cash
compensation for his service as chief executive officer and director. The other two directors receive monthly cash compensation
amounting to an aggregate of approximately $770 as of May 3, 2019.
We adopted an incentive plan (the "2016
Incentive Plan") to compensate employees, directors, and consultants, and allow it to acquire and retain human talent. The
2016 Incentive Plan has been filed herewith as Exhibit 10.7.
Marc Fogassa, our
Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer has entered into a six-month employment agreement
with us commencing September 1, 2016, which has been extended to date. Under the agreement, Mr. Fogassa shall receive no cash compensation,
and is remunerated monthly with five-year options to purchase 25,000 shares of our common stock at $1.00 per share. Under the agreement,
Mr. Fogassa received five-year options to purchase 100,000 shares of our common stock at $1.25 per share when a draft of the
Registration Statement on F-1 was filed with the Commission on September 30, 2016. Additionally, he received options to purchase
250,000 shares of our common stock at $1.25 per share when the Registration Statement on Form F-1 became effective. On October
30, 2017, our Board of Directors voted to award Mr. Fogassa five-year options to purchase 250,000 shares of our common stock at
$1.00 per share for his work on our initial public offering. Mr. Fogassa has also entered into a director and chairmanship agreement
with us commencing September 1, 2016. Under the agreement, he receives no cash compensation and is remunerated monthly with options
to purchase 5,000 shares of our common stock at the fair market value per share. The employment and director and chairmanship agreements
have been filed herewith as Exhibit 10.8 and 10.11 respectively.
Board members will
be reimbursed for reasonable travel expenses associated with attending any meetings of the Board of Directors or committees of
the Board of Directors.
Item 6.C. Board Practices.
Our business is managed by
the directors who exercise all the powers of the Company, subject to the Business Corporations Act of the Republic of the Marshall
Islands 1990, our Articles of Incorporation and our Bylaws, and any special resolution of the Board of Directors. Our Bylaws specify
the procedures for the election and removal of directors. Our Bylaws have been filed herewith as Exhibit 1.3.
Item 6.D. Employees.
As of December 31, 2018, we had two full time
equivalent employees. We also had two part-time employees and various consultants with specific expertise being utilized.
We have no labor-related litigation.
Item 6.E. Share Ownership.
The following table sets forth certain information
as of May 3, 2019 regarding the beneficial ownership of our Common Stock by: each of our executive officers, each member of
our board of directors and all officers and directors as a group. The number and percentage of our Common Stock beneficially owned
by each person is based on 4,634,599 shares of our Common Stock outstanding as of May 3, 2019 and the Common Stock owned by such
person determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 (the "Exchange Act"). The information
contained in the table below is not necessarily indicative of beneficial ownership for any other purpose.
Beneficial ownership is determined in accordance
with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that
person, shares issuable upon the exercise of stock options or warrants or the conversion of other securities held by that person
that are exercisable or convertible within 60 days are deemed to be issued and outstanding. These shares, however, are not
deemed outstanding for the purposes of computing percentage ownership of each other shareholder.
|
Name and Address of Shareholder (1)
|
|
|
Number of Shares
|
|
|
|
|
Percentage of
Shares
Beneficially
Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc Fogassa
|
|
|
4,441,994 (2)(3)
|
|
|
|
|
70.01%
|
|
|
|
|
General Antônio Florêncio
da Silva
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
Joel de Paiva Monteiro, Esq.
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
All Officers and Directors as a Group (3 persons)
|
|
|
4,441,994 (2)(3)
|
|
|
|
|
70.01%
|
|
|
|
|
|
(1)
|
The address for each officer is: c/o Jupiter Gold Corporation, Rua Vereador João Alves Praes
nº 95-A, Olhos D'Água, MG 39398-000, Brazil.
|
|
|
(2)
|
Includes 2,277,559 shares of common stock owned by both Brazil Minerals, of which company Mr. Fogassa
is the Chief Executive Officer and Chairman, and a subsidiary of Brazil Minerals. Also includes 1,710,000 shares of common stock
issuable to Mr. Fogassa upon exercise of options, most of which awarded in lieu of any cash salary, with an average exercise price
of $1.07 per share and an average maturity of 3.36 years (expiration dates from 09/30/2021 to 05/01/2014).
|
|
|
(3)
|
Mr. Fogassa owns the only outstanding share of our Series A Convertible Preferred Stock ("Preferred
A Stock"). The Certificate of Designations, Preferences and Rights of our Preferred A Stock provides that for so long as Preferred
A Stock is issued and outstanding, the holders of Preferred A Stock shall vote together as a single class with the holders of our
common stock, with the holders of Preferred A Stock being entitled to 51% of the total votes on all matters regardless of the actual
number of shares of Preferred A Stock then outstanding, and the holders of our common stock being entitled to their proportional
share of the remaining 49% of the total votes based on their respective voting power. Mr. Fogassa is thus deemed to have voting
control on all matters requiring a stockholder vote.
|
Item 7. Major Shareholders and Related Party
Transactions.
The following table sets forth certain information
as of May 3, 2019 regarding the beneficial ownership of our Common Stock by our major shareholders who beneficially own more
than 5% of our voting securities as of May 3, 2019. The number and percentage of our Common Stock beneficially owned by each person
is based on 4,634,599 shares of our Common Stock outstanding as of May 3, 2019 and the Common Stock owned by such person determined
in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 (the "Exchange Act"). The information contained
in the table below is not necessarily indicative of beneficial ownership for any other purpose.
Beneficial ownership is determined in accordance
with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that
person, shares issuable upon the exercise of stock options or warrants or the conversion of other securities held by that person
that are exercisable or convertible within 60 days are deemed to be issued and outstanding. These shares, however, are not
deemed outstanding for the purposes of computing percentage ownership of each other shareholder.
|
Name and Address of Shareholder (1)
|
|
Number of Shares
|
|
Percentage
of Shares
Beneficially
Owned
|
|
|
|
|
|
|
|
Marc Fogassa
|
|
4,441,994 (2)(3)
|
|
70.01%
|
|
|
(1)
|
The mailing address for each listed shareholder is c/o Jupiter Gold Corporation, Rua Vereador João
Alves Praes nº 95-A, Olhos D'Água, MG 39398-000, Brazil.
|
|
|
(2)
|
Includes 2,277,559 shares of common stock owned by both Brazil Minerals, of which company Mr. Fogassa
is the Chief Executive Officer and Chairman, and a subsidiary of Brazil Minerals. Also includes 1,710,000 shares of common stock
issuable to Mr. Fogassa upon exercise of options, most of which awarded in lieu of any cash salary, with an average exercise price
of $1.07 per share and an average maturity of 3.36 years (expiration dates from 09/30/2021 to 05/01/2014).
|
|
|
(3)
|
Mr, Fogassa owns the only outstanding share of our Series A Convertible Preferred Stock ("Preferred
A Stock"). The Certificate of Designations, Preferences and Rights of our Preferred A Stock provides that for so long as Preferred
A Stock is issued and outstanding, the holders of Preferred A Stock shall vote together as a single class with the holders of our
common stock, with the holders of Preferred A Stock being entitled to 51% of the total votes on all matters regardless of the actual
number of shares of Preferred A Stock then outstanding, and the holders of common stock being entitled to their proportional share
of the remaining 49% of the total votes based on their respective voting power. Mr. Fogassa is thus deemed to have voting control
on all matters requiring a stockholder vote.
|
To the best of our knowledge, as of May 3,
2019, a total of 4,451,105 or 96.04% of the outstanding shares of our common stock were beneficially owned by U.S. residents,
and there were 52 record holders of our common stock who are U.S. residents.
We are not aware of any arrangement that may,
at a subsequent date, result in a change of control of our company.
Item 7.B. Related Party Transactions.
As of December 31, 2018, Jupiter Gold was owed
$172,095 by Brazil Minerals, Inc. and its subsidiaries for expenses paid or loans made on behalf of the group, and for consideration
paid in connection with the acquisition of fixed assets from the group, offset nominally by amounts accrued under the new service
agreement. Details are available in the footnotes to the attached financial statements.
Item 7.C. Interests of Experts and Counsel.
Not applicable.
Item 8. Financial Information.
Item 8.A. Consolidated Statements and Other
Financial Information.
Our consolidated financial statements are stated
in U.S. Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP").
The financial statements as required under
Item 18 of Form 20-F are attached hereto and found immediately following the text of this Annual Report. The audit report of BF
Borgers CPA P.C., our independent auditors, is included herein immediately preceding the financial statements.
Item 8.A.7. Legal/Arbitration Proceedings.
None that are material.
Item 8.A.8. Policy on Dividend Distributions.
No dividends are intended to be declared or paid by us in the foreseeable
future.
Item 8.B. Significant Changes.
None
Item 9. The Offer and Listing.
The common stock is not currently listed or traded on any stock
exchange or other market.
Item 10. Additional Information.
Item 10.A.
As of December 31, 2018, we
had 4,634,599 shares of our common stock, par value $0.001 per share and 1 share of our preferred stock, par value $0.001 per share
issued and outstanding.
As of December 31, 2018, we
had 40 million
common shares and 10 million preferred shares authorized.
Item 10.B. Memorandum and Articles of Association.
Our Articles of Incorporation have been filed herewith
as Exhibit 1.1.
Item 10.C. Material Contracts.
The following descriptions of the material
provisions of the referenced agreements do not purport to be complete and are subject to, and qualified in their entirety by reference
to the agreements which have been filed as exhibits to this report.
Stock Agreement
The Stock Agreement provided for us to acquire
from Brazil Minerals 99.99% of Mineração Jupiter Ltda. ("MJL"), a Brazilian company. Prior to this acquisition,
MJL held title to two minerals rights for manganese. These two manganese mineral rights will be transferred out of MJL into a company
to be designated by Brazil Minerals. In exchange for this 99.99% stake in MJL and the receipt of $4,000 from Brazil Minerals, we
transferred 4 million of its common shares to Brazil Minerals and entered into a registration rights agreement with Brazil Minerals
for such shares. Additionally, we agreed in the Stock Agreement that any mineral project in which MJL is involved with, and that
accrues any revenues or dividends (in cash, stock, or otherwise), shall be subject to a ten percent (10%) annual royalty stream
("Royalty Stream") due to Brazil Minerals. The Royalty Stream will be calculated on the amounts actually received by
MJL and/or Jupiter Gold, and shall be paid within thirty (30) days of any such receipt.
The Stock Agreement is incorporated by reference
as Exhibit 10.1.
GRU Agreement
The GRU Agreement provides that we
have the right to place its gold retrieved units (each a "GRU" and collectively "GRUs") in mineral rights areas
for gold in Brazil owned by Brazil Minerals (the "Gold Rights"). Pursuant to the GRU Agreement, Brazil Minerals shall
periodically present to us a list of its available Gold Rights which meet the necessary Brazilian mining and environmental regulations
for mining of gold, and for which Brazil Minerals has the necessary operational infrastructure (the "Permissible Gold Rights").
We shall periodically choose from the Permissible Gold Rights, the one or more areas in which to place one or more GRUs.
Pursuant to the GRU Agreement, we may periodically
request that one or more GRUs be moved from any of the Permissible Gold Rights to another. Brazil Minerals shall use its best
efforts to comply with each such request within 30 days thereafter. Brazil Minerals will solely operate all of the GRUs placed
with Brazil Minerals, and will use its best efforts so as to not cause any damage to such GRUs, except for normal wear and tear.
All revenues derived from the sale of gold obtained by the operation of GRUs shall be promptly split 50% to us and 50% to Brazil
Minerals. The GRU Agreement may be terminated by us upon 30 (thirty) days' advance written notice, or by Brazil Minerals effective
immediately upon written notice if and when Brazil Minerals does not control any Permissible Gold Rights.
This GRU Agreement is incorporated by reference
as Exhibit 10.3.
Service Agreement
Starting on October 31, 2017, we
pay a fixed monthly fee of $1,250 to Brazil Minerals for infrastructure support.
Registration Rights Agreement
The Registration Rights Agreement provides
that whenever we propose to register any of its securities under the Securities Act of 1933, as amended (the "Securities Act")
and the registration form to be used may be used for the registration and contemplated disposition of Registrable Securities (a
"Piggyback Registration"), we will give prompt written notice to Brazil Minerals of its intention to effect such a registration
so that such notice is received by Brazil Minerals at least twenty (20) days before the anticipated filing date. We will
include in such registration all securities covered by the Registration Agreement ("Registrable Securities") with respect
to which we has received a written request for inclusion therein subject to any limitations on the number of shares that may be
registered for resale that may be imposed by law, including positions of the staff of the SEC. In connection with each Piggyback
Registration, all of the expenses incurred in compliance with the aforesaid, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of our counsel and our blue sky fees and expenses will be paid by us and
Brazil Minerals shall pay all of the underwriting discounts and selling commissions applicable to the sale of Registrable Securities
and all fees and disbursements of counsel for Brazil Minerals attributable to the sale of its securities pursuant to the Piggyback
Registration.
The Registration Rights Agreement is incorporated
by reference as Exhibit 10.2.
Item 10.D. Exchange Controls
Brazilian Laws n. 4.131, of September 03, 1962,
and n. 11.371, of November 28, 2006, as amended, regulate foreign investments in Brazil, requiring that foreign investments in
Brazil be registered with Brazil’s Central Bank (the equivalent to the U.S. Federal Reserve) to enable foreign remittance
of profits and/or interest on equity, and repatriation of foreign capital invested in Brazil.
The Brazilian legislation allows the investment
in the capital market by individuals or legal entities, by means of the acquisition of shares and other securities. These investments,
designated "portfolio investments", when performed by non-residents, are subject to registration with the Brazilian Central
Bank and Brazilian Securities Commissions ("CVM"), and according to the Resolution n. 4.373, of September 29, 2014 of
the Brazil Monetary Council ("CMN") can be made through Depositary Receipts, with the investor represented by institution
authorized to work by Brazil’s Central Bank.
The non-resident investors must indicate one
or more attorneys-in-fact in Brazil, which should be institution authorized to work by Central Bank and will be responsible mainly
for the provision of information and for the registrations with the Central Bank and the CVM. The registration of the portfolio
investments with the Central Bank's electronic system constitutes an obligatory requirement for remittances abroad as distribution
of profits and/or interest on equity, and repatriation of the capital invested. Such remittances may be made by means of a foreign
exchange contract between the Brazilian company remitting the funds and a Brazilian commercial bank duly authorized to operate
in the foreign exchange market (Depositary Receipts). Such foreign exchange contract reflects the exchange of Brazilian currency
into foreign currency, at the rate agreed with the Brazilian commercial bank.
Under current Brazilian legislation, the federal
government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an
anticipated serious imbalance of Brazil's balance of payments. For approximately six months in 1989 and early 1990, the federal
government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors, in
order to conserve Brazil's foreign currency reserves. These amounts were subsequently released in accordance with federal government
directives. There can be no assurance that the federal government will not impose similar restrictions on foreign repatriations
in the future.
The likelihood of the imposition of such restrictions
by the Brazilian government may be affected by, among other factors, the extent of Brazil's foreign currency reserves, the availability
of sufficient foreign currency on the date a payment is due, the size of Brazil's debt service burden relative to the economy as
a whole, Brazil's policy towards the International Monetary Fund and political constraints to which Brazil may be subject.
Item 10.E. Taxation
Investors should consult their own tax advisor
regarding the specific tax consequences of owning and disposing of our common stock, including eligibility for the benefits of
any treaty for the avoidance of double taxation, the applicability or effect of any special rules to which they may be subject,
and the effect of any state, local, or other tax laws.
Marshall Islands Tax Considerations
The following is applicable only to persons
who are not citizens of and do not reside in, maintain offices in or engage in business, transactions or operations in the Marshall
Islands.
Because we do not, and we do not expect that
we or any of our future subsidiaries will, conduct business, transactions or operations in the Marshall Islands, and because we
anticipate that all documentation related to any offerings of our securities will be executed outside of the Marshall Islands,
under current Marshall Islands law our shareholders will not be subject to Marshall Islands taxation or withholding tax on our
distributions. In addition, our shareholders will not be subject to Marshall Islands stamp, capital gains or other taxes on the
purchase, ownership or disposition of our common shares, and our shareholders will not be required by the Marshall Islands to file
a tax return related to our common shares.
Item 10.F. Dividends and Paying Agents.
Not required.
Item 10.G. Statement by Experts.
Not required
Item 10.H. Documents on Display.
We are subject to the informational requirements
of the Exchange Act applicable to foreign private issuers and, in accordance with these requirements, we file reports with the
SEC. As a foreign private issuer, we are exempt from the rules under the Exchange Act relating to the furnishing and content of
proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short swing profit recovery
provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic
reports and financial statements with the Securities and Exchange Commission as frequently or as promptly as U.S. companies whose
securities are registered under the Exchange Act.
You may read and copy any documents that
we file with the SEC, including this Report and the related exhibits, without charge at the Securities and Exchange Commission's
public reference room at 100 F Street, N.W., Washington, D.C. 20549. You may also obtain copies of the documents at prescribed
rates by writing to the public reference room of the Commission at 100 F Street, N.W., Washington, D.C. 20549. Please call the
Commission at 1-800-SEC-0330 for further information on the public reference room. In addition, the documents incorporated by reference
into this Report are publicly available through the web site maintained by the Securities and Exchange Commission at www.sec.gov.
Item 10.I. Subsidiary Information.
Not applicable.
Item 11. Quantitative and Qualitative Disclosure
about Market Risk.
Foreign Exchange Risk
We are subject to risk brought about by the
possibility of a significant change in the rate of exchange of the U.S. Dollar for the Brazilian Real.
Interest Rate Risk
None; as of December 31, 2018, we had no fixed
or floating rate indebtedness.
Item 12. Description of Securities Other
than Equity Securities.
Not applicable.
The accompanying notes are an integral
part of the consolidated financial statements.
The accompanying notes are an integral
part of the consolidated financial statements.
The accompanying notes are an integral
part of the consolidated financial statements.
The accompanying notes are an integral
part of the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 – ORGANIZATION, BUSINESS
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of
Business
On July 27, 2016, Jupiter Gold Corporation
("Jupiter Gold" or the "Company") was incorporated under the laws of the Republic of the Marshall Islands.
Concurrently, Brazil Minerals, Inc. ("Brazil Minerals"), a U.S. corporation, exchanged its 99.99% ownership in Mineração
Jupiter Ltda ("MJL"), a Brazilian company, for 4,000,000 shares of Jupiter Gold's common stock. Brazil Minerals held
an approximate 51.7% interest in the Company as of December 31, 2018. The remaining 0.01% in MJL that was not exchanged is to accommodate
regulations in Brazil that require a minimum of two owners in a company. This additional 0.01% ownership interest is held by a
director of Jupiter Gold.
The Company is a producer of gold from
the modular gold recovery plant that it owns and which is located in a mining concession in Brazil. Additionally, Jupiter Gold
owns nine mineral rights for gold and two mineral rights for manganese, all in exploratory phase and located in known mining districts
in Brazil.
On December 16, 2016, Jupiter Gold's
Registration Statement on Form F-1 was declared effective by the Securities and Exchange Commission ("SEC"). In 2017,
Jupiter Gold conducted an initial public offering of its common stock in which $254,000 in gross proceeds were raised at a price
of $1.00 per common share. The Company trades on the OTC Pink Market under the symbol JUPGF.
Basis
of Presentation
The consolidated
financial statements of the Company have been prepared in accordance with generally accepted accounting principles ("GAAP")
of the United States of America and are expressed in United States dollars. For the years ended December 31, 2018 and 2017 and
the period ending December 31, 2016, the consolidated financial statements include the accounts of the Company and its 99.99% owned
subsidiary, Mineração Jupiter Ltda.
All material
intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingencies at the date of the financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results may differ from those estimates.
Going Concern
The consolidated financial statements have
been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities in the normal
course of business. The Company has limited working capital, has incurred losses since its inception, and has not yet generated
material revenues from the sale of its products or services. These factors create substantial doubt about the Company's ability
to continue as a going concern. The consolidated financial statements do not include any adjustment that might be necessary if
the Company is unable to continue as a going concern.
The ability of the Company to continue as a
going concern is dependent on the Company generating cash from its operations, the sale of its stock and/or obtaining debt financing.
During the year ended December 31, 2018, the Company funded operations primarily through the sale of equity securities and to a
lessor effect the receipt of proceeds from gold sales. Management's plan to fund its capital requirements and ongoing operations
include an increase in cash received from sales of gold and minerals recovered from mining areas that the Company expects will
become operational during 2019. Management's secondary plan to cover any shortfall is selling its equity securities and obtaining
debt financing. There can be no assurance the Company will be successful in these efforts.
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
Fair Value of Financial Instruments
Jupiter Gold follows the guidance of
Accounting Standards Codification ("ASC") Topic 820 – Fair Value Measurement and Disclosure. Fair value is defined
as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring
fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most
observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability
and are developed based on market data obtained from sources independent of Jupiter Gold. Unobservable inputs are inputs that reflect
Jupiter Gold's assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes
three levels of inputs that may be used to measure fair value:
Level 1. Observable inputs such
as quoted prices in active markets;
Level 2. Inputs, other than the
quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in
which there is little or no market data, which require the reporting entity to develop its own assumptions.
As of December 31, 2018, Jupiter Gold
did not have any level 2 or 3 assets or liabilities.
Jupiter Gold's financial instruments
consist of cash and cash equivalents, accounts payable, and accrued expenses. The carrying amount of these financial instruments
approximates fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise
disclosed in these consolidated financial statements.
Cash and Cash Equivalents
The Company considers all highly liquid
instruments purchased with a maturity of three months or less to be cash equivalents to the extent that the funds are not being
held for investment purposes. Funds held in Brazilian banks are insured up to 250,000 Brazilian Real (approximately $64,519 based
on the December 31, 2018 exchange rate).
Property and Equipment
Property and equipment are stated at
cost. Major improvements and betterments are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is computed
using the straight-line method over the estimated useful life. At the time of retirement or other disposition of property and equipment,
the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the statements
of operations as other gain or loss, net.
The diamond and gold processing plant
and other machinery are depreciated over an estimated useful life of ten years; vehicles are depreciated over an estimated life
of five years; and computer and other office equipment over an estimated useful life of three years.
Mineral Properties
Costs of exploration,
carrying and retaining unproven mineral lease properties are expensed as incurred. Mineral property acquisition costs, including
licenses and lease payments, are capitalized. Impairment losses are recorded on mineral properties used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying
amount. As of December 31, 2018 and 2017, Jupiter Gold did not recognize any impairment losses related to mineral properties held.
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For intangible
assets purchased in a business combination, the estimated fair values of the assets received are used to establish their recorded
values. For intangible assets acquired in a non-monetary exchange, the estimated fair values of the assets transferred (or the
estimated fair values of the assets received, if more clearly evident) are used to establish their recorded values, unless the
values of neither the assets received nor the assets transferred are determinable within reasonable limits, in which case the assets
received are measured based on the carrying values of the assets transferred. Valuation techniques consistent with the market approach,
income approach and/or cost approach are used to measure fair value. Intangible assets consist of mineral rights held by MJL and
hold a recorded value of $2,044, the cost of fees paid to the Brazilian national mining department. These rights are held in perpetuity
provided the Company remains in compliance with various government regulations and industry requirements.
Impairment of Long-Lived Assets
For long-lived
assets, such as property and equipment and intangible assets subject to amortization, Jupiter Gold continually monitors events
and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events
or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the
carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash
flows is less than the carrying amount of those assets, Jupiter Gold recognizes an impairment loss based on the excess of the carrying
amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair
value less costs to sell.
Revenue
Recognition
The Company generates
revenue from the sale of gold and other minerals excavated from its modular gold recovery plant located in a mining concession
in Brazil.
On January 1, 2018,
the Company adopted ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"), using the modified retrospective
method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after
January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance
with our historic accounting under ASC 605. As of December 31, 2018, the consolidated financial statements were not materially
impacted as a result of the application of Topic 606 compared to Topic 605.
The Company recognizes
revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the new revenue standard is that a company
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve
that core principle:
|
|
·
|
Step 1: Identify the contract with the customer
|
|
|
·
|
Step 2: Identify the performance obligations in the contract
|
|
|
·
|
Step 3: Determine the transaction price
|
|
|
·
|
Step 4: Allocate the transaction price to the performance obligations in the contract
|
|
|
·
|
Step 5: Recognize revenue when the company satisfies a performance obligation
|
In order to identify
the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract
and identify each promised good or service that is distinct. A performance obligation meets ASC 606's definition of a "distinct"
good or service (or bundle of goods or services) if both of the following criteria are met:
|
|
·
|
The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer
|
|
|
·
|
The entity's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract
|
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
If a good or service
is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified
that is distinct.
The transaction
price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services
to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When
determining the transaction price, an entity must consider the effects of all of the following:
|
|
·
|
Constraining estimates of variable consideration
|
|
|
·
|
The existence of a significant financing component in the contract
|
|
|
·
|
Consideration payable to a customer
|
Variable consideration
is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative
revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The transaction
price is allocated to each performance obligation on a relative standalone selling price basis.
The transaction
price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time
or over time as appropriate.
Stock-Based Compensation
The Company records stock-based compensation
in accordance with ASC Topic 718, Compensation - Stock Compensation. ASC 718 requires companies to measure compensation cost for
stock-based employee compensation at fair value at the grant date and recognize the expense over the employee's requisite service
period. Under ASC 718, volatility is based on the historical volatility of our stock or the expected volatility of the stock of
similar companies. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination
behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at
the time of grant.
The Company utilizes the Black-Scholes option-pricing
model, which was developed for use in estimating the fair value of options. Option-pricing models require the input of highly complex
and subjective variables including the expected life of options granted and the expected volatility of our stock price over a period
equal to or greater than the expected life of the options. Because changes in the subjective assumptions can materially affect
the estimated value of our employee stock options, it is management's opinion that the Black-Scholes option-pricing model may not
provide an accurate measure of the fair value of our employee stock options. Although the fair value of employee stock options
is determined in accordance with ASC Topic 718 using an option-pricing model, that value may not be indicative of the fair value
observed in a willing buyer/willing seller market transaction.
Foreign Currency
Jupiter Gold's subsidiary, MJL, uses
its local currency as its functional currency. Resulting translation gains or losses are recognized as a component of accumulated
other comprehensive income. Transaction gains or losses related to balances denominated in a currency other than the functional
currency are recognized in the consolidated statements of operations.
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
Basic Earnings (Loss) Per Share
The Company computes loss per share in accordance
with ASC Topic 260, Earnings per Share, which requires presentation of both basic and diluted earnings per share on the face of
the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted
average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common
shares outstanding during the period. As of December 31, 2018, the Company's potentially dilutive securities relate to common stock
issuable in connection with options. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02,
“Leases (Topic 842)” (“ASC 842”) that amends the accounting guidance on leases for both lessees and lessors.
The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease
liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement. The FASB also subsequently
issued amendments to the standard, including providing an additional and optional transition method to adopt the new standard,
described below, as well as certain practical expedients related to land easements and lessor accounting. The amendments in this
accounting standard update are effective for the Company on January 1, 2019, with early adoption permitted. The Company will adopt
this accounting standard update effective January 1, 2019.
The accounting standard update originally required
the use of a modified retrospective approach reflecting the application of the standard to leases existing at, or entered into
after, the beginning of the earliest comparative period presented in the financial statements with the option to elect certain
practical expedients. A subsequent amendment to the standard provides an additional and optional transition method that allows
entities to initially apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening
balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented
in the financial statements in which it adopts the new leases standard will continue to be in accordance with ASC Topic 840 if
the optional transition method is elected. The Company plans to adopt the standard using the optional transition method with no
restatement of comparative periods and a cumulative effect adjustment, if any, recognized as of the date of adoption. The Company
does not expect that this standard to have a material effect on its consolidated financial statements due to the recognition of
new ROU assets and lease liabilities for lessee activities.
As part of the implementation process, the
Company assessed its lease arrangements and evaluated practical expedient and accounting policy elections to meet the reporting
requirements of this standard. The Company has also evaluated the changes in controls and processes that are necessary to implement
the new standard, and no material changes were required. The new standard provides a number of optional practical expedients in
transition. The Company expects to elect the ‘package of practical expedients’ which permits us not to reassess under
the new standard the prior conclusions about lease identification, lease classification, and initial direct costs. The Company
does not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable
to the Company. Consequently, on adoption, the Company expects to recognize additional operating liabilities ranging from $22,000
to $43,000, with corresponding ROU assets of approximately the same amount based on the present value of the remaining minimum
rental payments under current leasing standards for existing operating leases.
The new standard also provides practical expedients
for an entity’s ongoing accounting. The Company currently expects to elect the short-term lease recognition exemption for
all leases that qualify. As a result, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities,
including for existing short-term leases of those assets in transition. The Company also currently expects to elect the practical
expedient to not separate lease and non-lease components for the majority of its leases as both lessee and lessor.
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
In June 2018, the FASB issued ASU 2018-07,
Compensation - Stock Compensation (Topic 718)
which simplifies certain aspects of the accounting for nonemployee share-based
payment transactions resulting from expanding the scope of Topic 718,
Compensation - Stock Compensation
, to include share-based
payment transactions for acquiring goods and services from nonemployees. Certain areas of the simplification apply only to nonpublic
entities. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods
or services to be used or consumed in a grantor's own operations by issuing share-based payment awards. The amendments also clarify
that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted
in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606,
Revenue from
Contracts with Customers
. The amendments of the ASU are effective for public business entities for fiscal years beginning after
December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. We are currently evaluating
the impact of the adoption of this standard on our consolidated financial statements.
We have reviewed other recent accounting pronouncements
issued to the date of the issuance of these consolidated financial statements, and we do not believe any of these pronouncements
will have a material impact on the Company.
NOTE 2 –ACQUISITIONS
Mineração Jupiter
Ltda. ("MJL")
On July 27, 2016, Jupiter Gold acquired
from Brazil Minerals a 99.99% ownership in MJL in exchange for 4,000,000 shares of Jupiter Gold's common stock, plus Brazil Minerals'
agreement to pay the par value cost of such shares amounting to $4,000. Since this acquisition was made from a related party, all
assets and liabilities were reflected at cost, and no goodwill was recognized on the transaction.
NOTE 3 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT
ITEMS
Property and Equipment, Net
The following table sets forth the components of the Company's
property and equipment at December 31, 2018 and December 31, 2017:
|
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
Cost
|
|
|
Accumulated Depreciation
|
|
|
Net Book
Value
|
|
|
Cost
|
|
|
Accumulated Depreciation
|
|
|
Net Book
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computers and office equipment
|
|
$
|
803
|
|
|
$
|
(–
|
)
|
|
$
|
803
|
|
|
$
|
–
|
|
|
$
|
(–
|
)
|
|
$
|
–
|
|
|
Machinery and equipment
|
|
|
145,287
|
|
|
|
(54,860
|
)
|
|
|
90,427
|
|
|
|
170,180
|
|
|
|
(47,241
|
)
|
|
|
122,939
|
|
|
Vehicles
|
|
|
11,614
|
|
|
|
(4,224
|
)
|
|
|
7,390
|
|
|
|
13,603
|
|
|
|
(2,227
|
)
|
|
|
11,376
|
|
|
Total fixed assets
|
|
$
|
157,704
|
|
|
$
|
(59,084
|
)
|
|
$
|
98,620
|
|
|
$
|
183,783
|
|
|
$
|
(49,468
|
)
|
|
$
|
134,315
|
|
For the years ended December 31, 2018
and 2017, the Company recorded depreciation expense of $17,978 and $7,736, respectively. For the period ended December 31, 2016,
the Company recorded depreciation expense of $616.
Related Party Receivables
As of December 31, 2018, related party
receivables totaled $172,095. This amount was comprised of the following components, (i) $78,242 is owed from a Brazil Minerals
subsidiary to MJL for expenses paid on behalf of such subsidiary and (ii) $93,853 is owed from Brazil Minerals for short term loans
made and expenses paid by Jupiter Gold and MJL.
As of December 31, 2017, related party
receivables totaled $119,599. This amount was comprised of the following components, (i) $74,030 is owed from a Brazil Minerals
subsidiary to MJL for expenses paid on behalf of such subsidiary and (ii) $45,569 is owed from Brazil Minerals for short term loans
made and expenses paid by Jupiter Gold and MJL.
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 4 – STOCKHOLDERS' DEFICIT
Issued and Authorized
As of December 31, 2018, Jupiter Gold
had 4,634,599 shares of its common stock and 1 share of its preferred stock issued and outstanding. As of December 31, 2018, Jupiter
Gold had 40 million
common shares and 10 million preferred shares authorized.
Common Stock
During the year ended December 31, 2018,
Jupiter Gold issued and sold 5,000 shares of common stock for cash proceeds of $5,000. Additionally, the Company issued 200,000
shares of its common stock in exchange for fees and services totaling $125,000, or an average price of $0.63 per share which approximated
fair market value.
During the year ended December 31, 2017,
Jupiter Gold issued and sold 250,100 shares of common stock for cash proceeds of $250,100.
On September 29, 2017, Jupiter Gold
agreed to issue 176,332 shares of common stock on behalf of MJL to purchase various capital assets valued at approximately $175,000
(or 554,000 Brazilian Reais) from BMIX Participações Ltda., a related party.
On September 29, 2017, Jupiter Gold agreed
to issue 176,332 shares of common stock on behalf of MJL to purchase various capital assets valued at approximately $175,000 (or
554,000 Brazilian Reais) from BMIX Participações Ltda., a related party.
On September 18, 2017, the Company issued 1,367
shares of common stock with a fair value of $1,367 in satisfaction of certain accounts payable and 1,800 shares of common stock
with a fair value of $1,800 to consultants and other professionals in lieu of cash payments.
On July 27, 2016, Jupiter Gold issued 4,000,000
shares of its common stock to Brazil Minerals, a related party, with respect to the transaction detailed in Note 1.
Preferred A Stock
Jupiter Gold has issued to one of its
directors one share of a Series A Convertible Preferred Stock ("Preferred A Stock"). The Certificate of Designations,
Preferences and Rights of Preferred A Stock provides that for so long as it is issued and outstanding, its holders shall vote together
as a single class with the holders of the Company's common stock, with the holders of Preferred A Stock being entitled to 51% of
the total votes on all such matters regardless of the actual number of shares of Preferred A Stock then outstanding, and the holders
of common stock are entitled to their proportional share of the remaining 49% of the total votes based on their respective voting
power.
Options
During the year ended December 31, 2018,
the Company granted to directors as contractual compensation options to purchase an aggregate of 365,000 shares of its common stock.
The options were valued at $204,319 in total. The options were valued using the Black-Scholes option pricing model with the following
average assumptions: our stock price on date of grant ($1.00 to $1.13), the strike price $1.00), expected dividend yield of 0%,
historical volatility of 63.08%, risk-free interest rate of 2.25% to 2.94%, and an expected term of five years.
During the year ended December 31, 2017,
the Company granted to directors as contractual compensation options to purchase an aggregate of 670,000 shares of its common stock.
The options were valued at $363,443 in total. The options were valued using the Black-Scholes option pricing model with the following
average assumptions: our stock price on date of grant ($1.00), the strike price ($1.25 or $1.00 according to the specific issuance),
expected dividend yield of 0%, historical volatility of 63.08%, risk-free interest rate of 1.93%, and an expected term of five
years.
During the period ended December 31,
2016, the Company granted to directors as contractual compensation options to purchase an aggregate of 610,000 shares of its common
stock. The options were valued at $302,002 in total. The options were valued using the Black-Scholes option pricing model with
the following average assumptions: our stock price on date of grant ($1.00), the strike price ($1.25 or $1.00 according to the
specific issuance), expected dividend yield of 0%, historical volatility of 63.08%, risk-free interest rate of 1.93%, and an expected
term of five years.
With
the untimely death of director Paul Durand on December 18, 2017, the 110,000 options awarded to him were forfeited effective as
of December 31, 2017.
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
The following table reflects all outstanding and exercisable
options at December 31, 2018. All stock options are exercisable for a period of five years from the date of issuance.
|
|
|
Number of Options Outstanding
|
|
|
Weighted Average Exercise Price
|
|
|
Remaining Contractual Life (Years)
|
|
|
Balance, December 31, 2016
|
|
|
610,000
|
|
|
$
|
1.23
|
|
|
|
4.88
|
|
|
Issued
|
|
|
670,000
|
|
|
|
1.00
|
|
|
|
4.59
|
|
|
Exercised
|
|
|
(–
|
)
|
|
|
–
|
|
|
|
–
|
|
|
Forfeited
|
|
|
(110,000
|
)
|
|
|
1.16
|
|
|
|
–
|
|
|
Balance, December 31, 2017
|
|
|
1,170,000
|
|
|
$
|
1.10
|
|
|
|
4.27
|
|
|
Issued
|
|
|
365,000
|
|
|
|
1.00
|
|
|
|
4.46
|
|
|
Exercised
|
|
|
(–
|
)
|
|
|
–
|
|
|
|
–
|
|
|
Forfeited
|
|
|
(–
|
)
|
|
|
–
|
|
|
|
–
|
|
|
Balance, December 31, 2018
|
|
|
1,535,000
|
|
|
$
|
1.10
|
|
|
|
3.55
|
|
The remaining contractual life of the options outstanding
as of December 31, 2018 ranges from 2.67 to 4.92 years.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
Service Agreement
Jupiter Gold had a contractual agreement
with Brazil Minerals by which it used that company's infrastructure in Brazil, including office and some personnel time, for $2,500
monthly. This agreement was terminated effective April 1, 2017. All amounts under this agreement were paid as of December 31, 2017.
Commencing November 1, 2017, Jupiter
Gold established a similar cost sharing arrangement with Brazil Minerals whereby it agreed to pay $1,250 per month for support
services including facilities and personnel.
Loans
Jupiter Gold and MJL have, from time
to time, received loans from Brazil Minerals and its subsidiaries. These loans, when made, bear no interest and are payable on
demand.
Monthly Honorarium
MJL pays as honorarium to its administrator, Jupiter Gold's
Chief Executive Officer, the minimum monthly salary as set annually by the Brazilian government. The minimum monthly salary was
approximately $246 (or 954 Brazilian Reais) during 2018, $283 (or 937 Brazilian Reais) during 2017, and $270 (or 880 Brazilian
Reais) during 2016.
NOTE 6 - SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10 Subsequent
Events, the Company has analyzed its operations subsequent to December 31, 2018 to the date these consolidated financial statements
were issued, and has determined that it does not have any material subsequent events to disclose in these consolidated financial
statements.