NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
and Description of Business
Brazil
Minerals, Inc. (“Brazil Minerals” or the “Company”) was incorporated as Flux Technologies, Corp. under the laws
of the State of Nevada, U.S. on December 15, 2011. The Company changed its management and business on December 18, 2012, to focus
on mineral exploration. Brazil Minerals, through subsidiaries, owns mineral rights in Brazil for gold, diamonds, lithium, rare earths,
titanium, iron, nickel, and sand.
Basis
of Presentation and Principles of Consolidation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) for interim financial statements and with the instructions to Form
10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”) and are expressed in
United States dollars. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial
statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of
the Company as of June 30, 2021, and the results of operations and cash flows for the periods presented. The results of operations for
the three and six months ended June 30, 2021 and 2020, are not necessarily indicative of the operating results for the full fiscal year
or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements
and related notes thereto included in Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission
(the “SEC”) on March 31, 2021.
The
condensed consolidated financial statements include the accounts of the Company; its 99.99% owned subsidiary, BMIX Participações
Ltda. (“BMIXP”), which includes the accounts of BMIXP’s wholly-owned subsidiary, Mineração Duas Barras
Ltda. (“MDB”), and BMIXP’s 50% owned subsidiary, RST Recursos Minerais Ltda. (“RST”); its 99.99% owned
subsidiary, Hercules Resources Corporation (“HRC”), which includes the accounts of HRC’s wholly-owned subsidiary, Hercules
Brasil Comercio e Transportes Ltda. (“Hercules Brasil”); its 30.1% equity interest in Apollo Resources Corporation (“Apollo
Resources”) and its subsidiary Mineração Apollo, Ltda.; and its 10.0% equity interest in Jupiter Gold Corporation
(“Jupiter Gold”), which includes the accounts of Jupiter Gold’s wholly-owned subsidiary, Mineração Jupiter
Ltda. The Company has concluded that Apollo Resources, Jupiter Gold and their subsidiaries are variable interest entities (“VIE”)
in accordance with applicable accounting standards and guidance. As such, the accounts and results of Apollo Resources, Jupiter Gold
and their subsidiaries have been included in the Company’s condensed consolidated financial statements.
All
material intercompany accounts and transactions have been eliminated in consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles 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
condensed 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 in each
of the past two years, and has not yet received material revenues from sales of 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. Historically, the Company has funded its operations primarily through the issuance of debt and
equity securities. Management’s plan to fund its capital requirements and ongoing operations include the generation of revenue
from its mining operations and projects. Management’s secondary plan to cover any shortfall is selling its equity securities, including
common stock in the Company, or common stock in Jupiter Gold that it owns, and obtaining debt financing. There can be no assurance the
Company will be successful in these efforts.
Recent
Accounting Pronouncements
The
Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not
believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position
or results of operations except as noted below:
In
August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity. ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for
convertible debt instruments and convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion
features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be
subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract,
that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible
debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the
guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting
conclusions. ASU 2020-06 will be effective January 1, 2024, for the Company. Early adoption is permitted, but no earlier than January
1, 2021, including interim periods within that year. The Company is evaluating the effect of the adoption of ASU 2020-06 on the consolidated
financial statements, but currently does not believe ASU 2020-06 will have a significant impact on the Company’s accounting for
its convertible debt instruments. The effect will largely depend on the composition and terms of the financial instruments at the time
of adoption.
In
February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments
to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting
Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller
reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years
beginning after December 15, 2022. The Company believes the adoption will modify the way the Company analyzes financial instruments,
but it does not anticipate a material impact on results of operations. The Company is in the process of determining the effects adoption
will have on its consolidated financial statements.
NOTE
2 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS
Property
and Equipment
The
following table sets forth the components of the Company’s property and equipment at June 30, 2021 and December 31, 2020:
SCHEDULE
OF PROPERTY AND EQUIPMENT
|
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
Book Value
|
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
Book Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computers
and office equipment
|
|
$
|
3,903
|
|
|
$
|
(1,646
|
)
|
|
$
|
2,257
|
|
|
$
|
3,880
|
|
|
$
|
(573
|
)
|
|
$
|
3,307
|
|
|
Machinery
and equipment
|
|
|
360,145
|
|
|
|
(295,074
|
)
|
|
|
65,296
|
|
|
|
348,376
|
|
|
|
(271,107
|
)
|
|
|
77,269
|
|
|
Vehicles
|
|
|
132,386
|
|
|
|
(132,386
|
)
|
|
|
–
|
|
|
|
127,416
|
|
|
|
(118,716
|
)
|
|
|
8,700
|
|
|
Total
fixed assets
|
|
$
|
496,434
|
|
|
$
|
(429,106
|
)
|
|
$
|
67,328
|
|
|
$
|
479,672
|
|
|
$
|
(390,396
|
)
|
|
$
|
89,276
|
|
For
the three and six months ended June 30, 2021, the Company recorded depreciation expense of $11,518
and $23,608,
respectively, and for the three and six months ended June 30, 2020, the Company recorded depreciation expense of $11,376 and $25,122,
respectively.
Intangible
Assets
Intangible
assets consist of mining rights are not amortized as the mining rights are perpetual. The carrying value was $1,452,952 and
$407,467 at June 30, 2021 and December 31, 2020, respectively.
Equity
Investments without Readily Determinable Fair Values
On
October 2, 2017, the Company entered into an exchange agreement whereby it issued 25,000,000 shares of its common stock in exchange for
500,000 shares of Ares Resources Corporation. The Company’s chief executive officer also serves as an officer of Ares Resources
Corporation, thus making it a related party under common ownership and control. The shares were recorded at $150,000, or $0.006 per share.
The shares were valued based upon the lowest market price of the Company’s common stock on the date the agreement.
On
March 11, 2020, the Company issued 53,947,368 shares of common stock to Lancaster Brazil Fund pursuant to an addendum to the share exchange
agreement dated September 28, 2018. The Company recorded a loss on exchange of equity with a related party of $76,926 representing the
fair value of the additional shares of common stock issued.
Under
ASC 321-10, the Company elected to use a measurement alternative for its equity investment that does not have a readily determinable
fair value. As such, the Company measured its investment at cost, less any impairment, plus or minus any changes resulting from observable
price changes in orderly transactions for an identical or similar investment of the same issuer. The Company owns less than 5% of the
total shares outstanding of Ares Resources Corporation.
As of June 30, 2021, no change in the value of the Ares common stock
was recorded as the recorded value still approximated fair value.
Accounts
Payable and Accrued Liabilities
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
Accounts
payable and other accruals
|
|
$
|
358,735
|
|
|
$
|
327,704
|
|
|
Mineral rights payable
|
|
|
749,750
|
|
|
|
–
|
|
|
Accrued
interest
|
|
|
430
|
|
|
|
324,415
|
|
|
Total
|
|
$
|
1,108,915
|
|
|
$
|
652,119
|
|
NOTE
3 – CONVERTIBLE PROMISSORY NOTES PAYABLE
The
following tables set forth the components of the Company’s convertible debentures as of June 30, 2021 and December 31, 2020:
SCHEDULE OF CONVERTIBLE DEBENTURES
|
|
|
June
30,2021
|
|
|
December
31, 2020
|
|
|
Convertible
notes payable – fixed conversion price
|
|
$
|
129,000
|
|
|
|
244,000
|
|
|
Convertible notes payable – variable conversion
price
|
|
|
–
|
|
|
|
628,720
|
|
|
Discounts
on convertible notes payable
|
|
|
(42,185
|
)
|
|
|
–
|
|
|
Total
convertible notes
|
|
$
|
86,815
|
|
|
$
|
872,720
|
|
The
following table sets forth a summary of change in our convertible notes payable for the six months ended June 30, 2021:
SUMMARY OF CHANGE IN CONVERTIBLE NOTES PAYABLE
|
|
|
June
30, 2021
|
|
|
Beginning
balance
|
|
$
|
872,720
|
|
|
New
issuances of convertible notes payable
|
|
|
399,000
|
|
|
Lender
adjustments for penalties or defaults
|
|
|
37,212
|
|
|
Debt
discounts recorded on new issuances
|
|
|
(44,019
|
)
|
|
Amortization
of debt discounts associated with convertible debt
|
|
|
1,834
|
|
|
Conversion
of convertible note principal into common stock
|
|
|
(909,932
|
)
|
|
Repayments
of convertible notes payable
|
|
|
(270,000
|
)
|
|
Total
convertible notes
|
|
$
|
86,815
|
|
Convertible
Notes Payable - Fixed Conversion Price
On
January 7, 2014, the Company issued to a family trust a senior secured convertible promissory note in the principal amount, and received
gross proceeds, of $244,000 and warrants to purchase an aggregate of 488,000 shares of the Company’s common stock at an exercise
price of $62.50 per share through December 26, 2018. The Company received gross proceeds of $244,000 for the sale of such securities.
The outstanding principal of the note bears interest at the rate of 12% per annum. The note is convertible at the option of the holder
into common stock of the Company at a conversion rate of one share for each $50.00 of principal and interest converted. As of June 30,
2021, all warrants issued in connection with this note had expired.
The
outstanding principal on the note was payable on March 31, 2015, which as of the date of these financial statements is past due and in
technical default. The Company is in negotiations with the note holder to satisfy, amend the terms or otherwise resolve the obligation
in default. No demand for payment has been made. As a result of the default, the interest rate on the note increased to 30% per annum.
Interest was payable on September 30, 2014 and on the maturity date. In December 2020, the lender agreed to reduce the interest rate
from the default rate of 30% to the stated rate of 10% retroactively. As a result, the Company recorded gain of $238,151 from the relief
of interest expense to other income.
On
February 3, 2021, the Company issued 20,000,000
shares of common stock upon conversion of $80,000
in convertible notes payable and accrued interest.
On May 6, 2021, the Company issued 86,246,479
shares of common stock upon conversion of $334,986
in convertible notes payable and accrued interest.
As of June 30, 2021, the balance of the note was $0.
On
June 18, 2021, Company issued to one noteholder a $129,000 convertible promissory note for $125,000 in proceeds. The note bears interest
at 8.0% per annum and matures one year from issuance on June 18, 2022. After six months from issuance, the note is convertible at the
option of the holder at a price of $0.001. A debt discount of $4,000 for issuance costs was recorded and is being amortized over the
life of the note.
ASC
470-20 requires proceeds from the sale of a debt instrument with stock purchase warrants be allocated to the two elements based on the
relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. In connection
with the warrant issuance, the Company allocated an aggregate fair value of $40,019 to the stock warrants and recorded a debt discount
which will be amortized to interest expense over the term of the loan using the effective interest method so the debt, at its term, is
recorded at its face value. The Company estimated the fair value of this the warrant warrants at date of grant using the Black-Scholes
option pricing model using the following inputs: (i) stock price on the date of grant of $0.0122, (ii) the contractual term of the warrant
of 4 years, (iii) a risk-free interest rate of 0.89% and (iv) an expected volatility of the price of the underlying common stock of 443.3%.
As
of June 30, 2021, the outstanding principal balance on the note was $129,000, and the associated unamortized discounts totaled $42,185.
Convertible
Notes Payable - Variable Conversion Price
At
various times to fund operations, the Company issues convertible notes payable in which the conversion features are variable. In addition,
some of these convertible notes payable have on issuance discounts and other fees withheld.
During
the year ended December 31, 2016, the Company issued to one noteholder, in various transactions, $242,144 in convertible promissory notes
with fixed floors and received an aggregate of $232,344 in proceeds. The convertible promissory notes each bear interest at 8.0% per
annum and mature one year from issuance ranging from July to December 2017. After six months from issuance, each convertible promissory
note is convertible at the option of the holder at a 50% discount to the lowest traded price of the Company’s common stock over
the previous 20 days. In addition, each note’s conversion rate has a floor of $0.0001. Total debt discounts related to the beneficial
conversion features of $241,852 were recorded and are being amortized over the life of the notes. On April 9, 2021, the Company agreed
to settle all outstanding principal and interest on these notes in exchange for common stock and common stock purchase warrants. See
settlement disclosure below for more information. As of June 30, 2021, the outstanding principal balance on these notes total $0, and
all discounts were fully amortized.
During
the year ended December 31, 2017, the Company issued to one noteholder in various transactions $477,609
in convertible promissory notes with fixed floors
and received an aggregate of $454,584
in proceeds. The convertible promissory notes
each bear interest at 8.0%
per annum and mature one year from issuance ranging from January to August 2018. After six months from issuance, each convertible promissory
note is convertible at the option of the holder at a 50% discount to the lowest traded price of the Company’s common stock over
the previous 20 days. In addition, each note’s conversion rate has a floor of $0.0001.
Total debt discounts related to the beneficial conversion features of $447,272
were recorded and are being amortized over the
life of the notes. During the six months ended June 30, 2021, the Company issued 182,872,798
shares of its common stock upon the conversion
of $50,000
and $ 14,004,
respectively, in note principal and accrued interest. On April 9, 2021, the Company agreed to settle all outstanding principal and interest
on these notes in exchange for common stock and common stock purchase warrants. See settlement disclosure below for more information.
As of June 30, 2021, the outstanding principal balance on these notes total $0,
and all discounts were fully amortized.
During
the year ended December 31, 2018, the Company issued to one noteholder in various transactions $137,306
in convertible promissory notes with fixed floors
and received an aggregate of $130,556
in proceeds. The convertible promissory notes
each bear interest at 8.0%
per annum and mature one year from issuance ranging from August 2018 to April 2019. After six months from issuance, each convertible
promissory note is convertible at the option of the holder at a 50% discount to the lowest traded price of the Company’s common
stock over the previous 20 days. In addition, each note’s conversion rate has a floor of $0.0001.
Total debt discounts related to the beneficial conversion features of $122,755
were recorded and are being amortized over the
life of the notes. During the six months ended June 30, 2021, the Company issued 23,118,645
shares of its common stock upon the conversion
of $118,996
and $27,496,
respectively, in note principal and accrued interest. On April 9, 2021, the Company agreed to settle all outstanding principal and interest
on these notes in exchange for common stock and common stock purchase warrants. See settlement disclosure below for more information.
As of June 30, 2021, the outstanding principal balance on these notes total $0,
and all discounts were fully amortized.
During
the year ended December 31, 2019, the Company issued to one noteholder in various transactions $282,000
in convertible promissory notes with fixed floors
and received an aggregate of $276,000
in proceeds. The convertible promissory notes
each bear interest at 8.0%
per annum and mature one year from issuance in July 2020. After six months from issuance, each convertible promissory note is convertible
at the option of the holder at a 50% discount to the lowest traded price of the Company’s common stock over the previous 20 days.
In addition, each note’s conversion rate has a floor of $0.0001.
Total debt discounts related to the beneficial conversion features of $276,000
and $6,000
for issuance costs were recorded and are being
amortized over the life of the notes. During the six months ended June 30, 2021, the Company issued 156,438,271
shares of its common stock upon the conversion
of $310,200
and $40,186,
respectively, in note principal and accrued interest. As of June 30, 2021, the principal balance on these notes was $0,
and all discounts were fully amortized.
On
April 9, 2021, the Company issued 36,000,000 shares of its common stock upon the conversion of $186,736 and $62,302, respectively, in
note principal and accrued interest to settle all outstanding balances with the lender. In connection with the settlement, the Company
agreed to issue 15,000,000 common stock purchase warrants with a cashless exercise price of $0.0125. The warrants expire on December
31, 2021. The Company allocated an aggregate fair value of $224,812 to the stock warrants and recorded a loss on the extinguishment of
debt. The Company estimated the fair value of this the warrant warrants at date of grant using the Black-Scholes option pricing model
using the following inputs: (i) stock price on the date of grant of $0.0158, (ii) the contractual term of the warrant of 0.7 years, (iii)
a risk-free interest rate of 0.35% and (iv) an expected volatility of the price of the underlying common stock of 440.5%.
On
January 19, 2021, the Company issued to one noteholder a $270,000 convertible promissory note. The note bears interest at 8.0% per annum
and matures on January 19, 2025. After six months from issuance, the note is convertible at the option of the holder at a 50% discount
to the lowest traded price of the Company’s common stock over the previous 20 days. The note’s conversion rate has a floor
of $0.0001.
On
May 7, 2021, the Company repaid $270,000 in note principal and $6,391 in accrued interest to the holder. As of June 30, 2021, the principal
balance on the note was $0.
Future
Potential Dilution
As
of June 30, 2021, the Company’s convertible note is convertible into an aggregate of approximately 129,000,000 shares of common
stock.
NOTE
4 – LOANS PAYABLE
As
of December 31, 2020, the Company had $235,308 in principal outstanding from bridge loans. The loans payable bear interest at 8.0% per
annum and are payable upon demand. In February 2021, the Company repaid the full principal balance of $235,308 and accrued interest of
$24,654. As of June 30, 2021, the balance of these notes was $0.
NOTE
5 – OTHER NONCURRENT LIABILITIES
Other
noncurrent liabilities are comprised solely of social contributions and other employee-related costs at our operating subsidiaries located
in Brazil. The Company has been funding these amounts upon the termination of a worker or employee. The balance of these employee related
costs as of June 30, 2021 and December 31, 2020 amounted to $124,736 and $121,250, respectively.
NOTE
6 – STOCKHOLDERS’ DEFICIT
Authorized
and Amendments
As
of June 30, 2021, the Company had 3,250,000,000 common shares authorized with a par value of $0.001 per share.
Series A Preferred Stock
On
December 18, 2012, the Company filed with the Nevada Secretary of State a Certificate of Designations, Preferences and Rights of Series
A Convertible Preferred Stock (“Series A Stock”) to designate one share of a new series of preferred stock. The Certificate
of Designations, Preferences and Rights of Series A Convertible Preferred Stock provides that for so long as Series A Stock is issued
and outstanding, the holders of Series A Stock shall vote together as a single class with the holders of the Company’s Common Stock,
with the holders of Series A Stock being entitled to 51% of the total votes on all such matters regardless of the actual number of shares
of Series 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.
Six
Months Ended June 30, 2021 Transactions
During
the six months ended June 30, 2021, the Company issued 110,132,972
shares of common stock for gross proceeds of
$666,650
pursuant to subscription agreements with accredited
investors. Additionally, the Company issued 504,676,193
shares of common stock upon conversion of
$1,234,906
in convertible notes payable and accrued
interest. Lastly, during the six months ended June 30, 2021, the Company issued 313,053,865
shares of common stock for net proceeds of $143,750
upon the exercise of 334,385,769
warrants.
Six
Months Ended June 30, 2020 Transactions
During
the six months ended June 30, 2020, the Company issued 295,000,000 shares of common stock to accredited investors pursuant to subscription
agreements for net proceeds of $220,000. The Company issued 5,666,594 shares of common stock to non-employees for services rendered.
The Company issued 100,213,975 shares of common stock upon conversion of $53,161 in convertible notes payable and accrued interest.
Additionally,
during the six months ended June 30, 2020, the Company exchanged 200,000,000 shares of common stock returned by an accredited investor
for 150,000 shares of Jupiter Gold’s common stock held as an investment by the Company. The Company used the quoted fair value
of each entity’s common stock on the dates of exchange to determine the exchange ratio.
Common
Stock Options
During
the six months ended June 30, 2021, the Company granted options to purchase an aggregate of 180,000,000 shares of common stock to officers
and non-management directors. The options were valued at $671,430 in total. The options were valued using the Black-Scholes option pricing
model with the following average assumptions: our stock price on the date of the grant which ranged from $0.0004 to $0.008, expected
dividend yield of 0.0%, historical volatility calculated between 63.9% and 124.4%, risk-free interest rate ranging between 0.9% and 1.75%,
and an expected term of 10 years.
The
following table reflects all outstanding and exercisable options at June 30, 2021. All stock options immediately vest and are exercisable
for a period of five to ten years from the date of issuance.
SCHEDULE
OF OUTSTANDING AND EXERCISABLE OPTIONS
|
|
|
Number of Options Outstanding and Vested
|
|
|
Weighted
Average
Exercise Price
|
|
|
Remaining Contractual
Life (Years)
|
|
|
Aggregated Intrinsic
Value
|
|
|
Outstanding, January 1, 2021
|
|
|
119,917,140
|
|
|
$
|
0.0025
|
|
|
|
3.6
|
|
|
|
|
|
|
Issued
|
|
|
180,000,000
|
|
|
|
0.0000
|
|
|
|
9.8
|
|
|
|
|
|
|
Exercised
|
|
|
(35,845,100
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
Forfeited
|
|
|
(565,640
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
Outstanding and vested, June 30, 2021
|
|
|
263,506,400
|
|
|
$
|
0.0007
|
|
|
|
7.8
|
|
|
$
|
2,903,147
|
|
See
Note 8 – Related Party Transactions for more information related to stock options issued and outstanding for the Company’s
subsidiaries Jupiter Gold and Apollo Resources.
Stock
Purchase Warrants
Stock
purchase warrants are accounted for as equity in accordance with ASC 480, Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity.
The
following table reflects all outstanding and exercisable warrants at June 30, 2021. All warrants are exercisable for a period of nine
months to four years from the date of issuance:
SCHEDULE
OF WARRANT ACTIVITY
|
|
|
Number
of Warrants Outstanding
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average Contractual Life (Yrs.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
January 1, 2021
|
|
|
306,770,000
|
|
|
|
0.0016
|
|
|
|
0.83
|
|
|
Warrants
issued
|
|
|
89,591,306
|
|
|
$
|
0.0125
|
|
|
|
|
|
|
Warrants
exercised
|
|
|
(299,000,000
|
)
|
|
$
|
–
|
|
|
|
|
|
|
Warrants
forfeited
|
|
|
(–
|
)
|
|
$
|
–
|
|
|
|
|
|
|
Balance
June 30, 2021
|
|
|
97,361,306
|
|
|
$
|
0.0116
|
|
|
|
2.37
|
|
NOTE
7 – COMMITMENTS AND CONTINGENCIES
Operating
Leases
The
Company leases office space as its principal executive offices in Pasadena, California for approximately $5,750 on a month-to-month basis.
The Company also leases office space in the municipality of Olhos D’Agua, Brazil. Such costs are immaterial to the condensed consolidated
financial statements.
NOTE
8 - RELATED PARTY TRANSACTIONS
Chief
Executive Officer
The
following tables set forth the components of the Company’s related party payables as of June 30, 2021 and December 31, 2020:
SCHEDULE
OF RELATED PARTY TRASACTIONS
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Convertible notes payable to related party
|
|
$
|
566,743
|
|
|
$
|
566,743
|
|
Effective
June 30, 2018, the Company issued a convertible promissory note in the principal amount of $445,628 to its Chief Executive Officer against
a portion of these unpaid compensatory balances. The note bears no interest and is payable on demand. The note is convertible at the
option of the holder at the lower of (i) the average of the five lowest bid prices of the Company’s common stock over the previous
20 trading days or (ii) the lowest price per share at which the Company sold its common stock in a transaction with a person who is not
a manager, officer, or director of the Company during the period from the date hereof until the giving of notice of the election to convert
or the lowest price per share at which a noteholder who is not a manager, officer, or director of the Company converted any debt of the
Company into shares of the Company during the period from the date hereof until the giving of notice of the election to convert. The
note’s conversion rate has a floor of $0.0001. Total debt discounts related to the beneficial conversion features of $445,628 were
recorded and are being amortized over a one-year period consistent with the maturity dates of convertible notes issued to third party
holders. As of June 30, 2021, all discounts were fully amortized.
On
April 7, 2019, the Company’s board of directors approved the issuance of a convertible note in the principal amount of $261,631
to its Chief Executive Officer against a portion of these unpaid compensatory balances. The note bears interest at an annual rate of
6.0% and is payable on demand. The note is convertible at the option of the holder at the lower of (i) $0.00045 or (ii) the lowest price
per share at which a noteholder who is not a manager, officer, or director of the Company converted any debt of the Company into common
stock of the Company during the period from the date hereof until the giving of notice of the election to convert. Total debt discounts
related to the beneficial conversion features of $261,631 were recorded and are being amortized over a one-year period consistent with
the maturity dates of convertible notes issued to third party holders. As of June 30, 2021, there were unamortized debt discounts of
$15,431 related to this note.
On
April 7, 2019, the Company’s board of directors approved the exchange, initiated by a formal notice of conversion dated February
19, 2019, of $202,240 of convertible note principal due to its Chief Executive Officer for five-year stock options to purchase 224,711,111
shares of Brazil Minerals at an exercise price of $0.00001 and 505,600 shares of common stock of Jupiter Gold at an exercise price of
$0.001. Per the terms of the convertible note agreement, the conversion notification permitted the holder, at his election, to receive
either an issuance of 224,711,111 shares of Brazil Minerals and 505,600 shares of Jupiter Gold, or an issuance of stock options to purchase
the same numbers of shares at a nominal exercise price. The options were valued at $270,255 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 of $0.0012, expected dividend
yield of 0%, historical volatility ranging from 230.1% to 1,271.2%, risk-free interest rate of 2.50%, and an expected term of 5.00 years.
In connection with the exchange, the Company recorded a loss on the extinguishment of debt totaling $68,015.
On
June 30, 2019, the Company’s board of directors approved the issuance of a convertible note in the principal amount of $61,724
to its Chief Executive Officer against a portion of these unpaid compensatory balances. The note bears interest at an annual rate of
6.0% and is payable on demand. The note is convertible at the option of the holder at the lower of (i) $0.0003 or (ii) the lowest price
per share at which a noteholder who is not a manager, officer, or director of the Company converted any debt of the Company into common
stock of the Company during the period from the date hereof until the giving of notice of the election to convert. Total debt discounts
related to the beneficial conversion features of $61,724 were recorded and are being amortized over a one-year period consistent with
the maturity dates of convertible notes issued to third party holders. As of December 31, 2020, there were unamortized debt discounts
of $30,862 related to this note.
On
March 11, 2020, the Company issued 200,000 shares of its common stock with a fair value of $280, or $0.0014 per share, to its Chief Executive
Officer in lieu of cash for loans payable and other accrued obligations.
On
December 3, 2020, the Company issued 161,636,427 shares of common stock to its Chief Executive Officer in connection with the exercise
stock options acquired on February 19, 2019 as described above.
Jupiter
Gold Corporation
During
the six months ended June 30, 2021, Jupiter Gold granted options to purchase an aggregate of 210,000 shares
of its common stock to Marc Fogassa at prices ranging between $0.01 to
$1.00 per
share. The options were valued at $148,853 and
recorded to stock-based compensation. The options were valued using the Black-Scholes option pricing model with the following
average assumptions: the Company’s stock price on the date of the grant ($0.19 to
$1.45),
expected dividend yield of 0%,
historical volatility calculated between 97.3%
and 200.6%,
risk-free interest rate between a range of 0.81%
to 1.75%,
and an expected term between 5 and 10 years.
As of June 30, 2021, an aggregate 2,505,000 Jupiter
Gold common stock options were outstanding
with a weighted average life of 2.9 years
at an average exercise price of $0.93 and
an aggregated intrinsic value of $202,825.
Apollo
Resource Corporation
During
the six months ended June 30, 2021, Apollo Resources granted options to purchase an aggregate of 150,000
shares of its common stock to Marc Fogassa at
a price of $0.01
per share. The options were valued at $217,129
and recorded to stock-based compensation. The
options were valued using the Black-Scholes option pricing model with the following average assumptions: the Company’s stock price
on the date of the grant ($0.10
to $4.00),
expected dividend yield of 0%,
historical volatility calculated between 49.2%
and 98.3%,
risk-free interest rate between a range of 0.68%
to 1.75%,
and an expected term between 5
and 10
years. As of June 30, 2021, an aggregate 150,000
Apollo Resource common stock options were outstanding with a weighted average life of 9.6 years at an average exercise price of $0.01
and an aggregated intrinsic value of $148,500.
NOTE
9 – RISKS AND UNCERTAINTIES
In
light of the SEC’s Division of Corporate Finance Disclosure Guidance Topic Number 9, dated March 25, 2020, on the impact of COVID-19,
the Company notes the following:
|
●
|
The
Company has not had any reports of COVID-19 among its workforce;
|
|
●
|
The
Company has been able to continue local operations of the Company in Brazil as they are located in a rural area currently unaffected
by any lockdown restrictions implemented elsewhere in Brazil;
|
|
●
|
Travel
between the U.S. and Brazil has essentially ceased; this is mitigated by the use of live streaming video and other methods as needed;
|
|
●
|
Some
exploratory research of some of the Company’s projects have been delayed as certain municipalities in Brazil have unilaterally
restricted the entry of outside persons; these actions are being legally challenged by branches of the state administration and the
Company is monitoring all new developments;
|
|
●
|
The
Company has postponed any expenses which are not critical to it at the moment.
|
Currency
Risk
The
Company operates primarily in Brazil which exposes it to currency risks. The Company’s business activities may generate intercompany
receivables or payables that are in a currency other than the functional currency of the entity. Changes in exchange rates from the time
the activity occurs to the time payments are made may result in the Company receiving either more or less in local currency than the
local currency equivalent at the time of the original activity.
The
Company’s condensed consolidated financial statements are denominated in U.S. dollars. Accordingly, changes in exchange rates between
the applicable foreign currency and the U.S. dollar affect the translation of each foreign subsidiary’s financial results into
U.S. dollars for purposes of reporting in the consolidated financial statements. The Company’s foreign subsidiaries translate their
financial results from the local currency into U.S. dollars in the following manner: (a) income statement accounts are translated at
average exchange rates for the period; (b) balance sheet asset and liability accounts are translated at end of period exchange rates;
and (c) equity accounts are translated at historical exchange rates. Translation in this manner affects the shareholders’ equity
account referred to as the foreign currency translation adjustment account. This account exists only in the foreign subsidiaries’
U.S. dollar balance sheets and is necessary to keep the foreign subsidiaries’ balance sheets in agreement.
NOTE
10 - SUBSEQUENT EVENTS
In
accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to June 30, 2021 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.