The accompanying notes are an integral part
of the condensed consolidated financial statements.
The accompanying notes are an integral part
of the condensed consolidated financial statements.
The accompanying notes are an integral part
of the condensed consolidated financial statements.
The accompanying notes are an integral part
of the condensed consolidated financial statements.
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 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, 2020, 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, 2020 and 2019, are not necessarily indicative of the
operating results for the full fiscal year or any future period. These unaudited 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, 2019 filed with the Securities and Exchange Commission (the “SEC”) on April 14, 2020.
The condensed consolidated financial
statements include the accounts of the Company and its 99.99% owned subsidiary, BMIX Participações Ltda.
("BMIXP"), which includes the accounts of BMIXP's wholly-owned subsidiary, Mineração Duas Barras
Ltda. ("MDB").
During the year ended December 31, 2014, BMIXP
acquired an initial 25% interest in RST Recursos Minerais Ltda. ("RST"), and during the first quarter of 2015, it acquired
an additional 25% interest in RST, thus bringing its total ownership of RST to 50%. As of March 18, 2015, RST has been consolidated
within the Company's financial statements.
On April 17, 2015, BMIXP incorporated Hercules
Resources Corporation ("HRC"). On May 27, 2015, HRC formalized title to 99.99% of Hercules Brasil Comercio e Transportes
Ltda. ("Hercules Brasil"). Thus, Hercules Brasil is a wholly-owned subsidiary and has been consolidated within the Company's
consolidated financial statements.
On July 27, 2016, upon approval by its Board
of Directors, the Company sold a 99.99% equity interest in Mineração Jupiter Ltda to Jupiter Gold Corporation ("Jupiter
Gold"), a newly created company, in exchange for 4,000,000 shares of the common stock of Jupiter Gold. On December 16, 2016,
the Securities and Exchange Commission ("SEC") declared effective a Registration Statement filed by JGC for the sale
of shares in a public offering in the U.S. As of June 30, 2020, the Company has ownership of approximately 10.9% of the equity
of Jupiter Gold. The Company has concluded that Jupiter Gold and its subsidiary Mineração Jupiter are variable interest
entities (“VIE”) in accordance with applicable accounting standards and guidance. As such, the accounts and results
of Jupiter Gold and Mineração Jupiter have been included in the Company's consolidated financial statements.
All material intercompany accounts and transactions
have been eliminated in consolidation.
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
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 unaudited 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.
Fair Value of Financial Instruments
The Company 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 our Company. Unobservable inputs are inputs that reflect
our Company'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.
The Company's financial instruments consist
of cash and cash equivalents, accounts receivable, taxes receivable, prepaid expenses, deposits and other assets, accounts payable,
accrued expenses and convertible notes payable. 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.
Reclassifications
Certain prior year amounts have been reclassified to conform to
the current period presentation. These reclassifications had no impact on net earnings (loss) or and financial position.
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 December 2019, the FASB issued ASU 2019-12,
Income Taxes (“Topic 740”), which enhances and simplifies various aspects of the income tax accounting guidance,
including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership
changes in investments, and interim-period accounting for enacted changes in tax law. The amendment will be effective for public
companies with fiscal years beginning after December 15, 2020; early adoption is permitted. The Company is evaluating the impact
of this amendment on its consolidated financial statements.
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.
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED 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, 2020 and December 31, 2019:
|
|
June 30, 2020
|
|
December 31, 2019
|
|
|
Cost
|
|
Accumulated Depreciation
|
|
Net Book
Value
|
|
Cost
|
|
Accumulated Depreciation
|
|
Net Book
Value
|
Capital assets subject to depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computers and office equipment
|
|
$
|
2,737
|
|
|
$
|
(544
|
)
|
|
$
|
2,193
|
|
|
$
|
2,144
|
|
|
$
|
(739
|
)
|
|
$
|
1,405
|
|
Machinery and equipment
|
|
|
332,987
|
|
|
|
(245,971
|
)
|
|
|
87,016
|
|
|
|
435,659
|
|
|
|
(298,845
|
)
|
|
|
136,814
|
|
Vehicles
|
|
|
120,917
|
|
|
|
(104,062
|
)
|
|
|
16,855
|
|
|
|
164,275
|
|
|
|
(129,692
|
)
|
|
|
34,583
|
|
Total fixed assets
|
|
$
|
456,641
|
|
|
$
|
(350,577
|
)
|
|
$
|
106,064
|
|
|
$
|
602,078
|
|
|
$
|
(429,276
|
)
|
|
$
|
172,802
|
|
For the six months ended June 30, 2020 and
2019, the Company recorded depreciation expense of $25,122 and $37,041, respectively.
Intangible Assets
Intangible assets consist of mining rights
are not amortized as the mining rights are perpetual. The carrying value was $386,789 and $509,862 at June 30, 2020
and December 31, 2019, 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, a related party. 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.
Under ASC 321-10, Investments – Equity
Securities, 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 has recognized the cost of its
investment in Ares, which is a private company with no readily determinable fair value, at its cost of $150,000 and accounts for
the investment as an equity investment without a readily determinable fair value. The Company owns less than 5% of the total shares
outstanding of Ares Resources Corporation.
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Accounts Payable and Accrued Liabilities
|
|
June 30, 2020
|
|
December 31, 2019
|
Accounts payable and other accruals
|
|
$
|
91,095
|
|
|
$
|
141,916
|
|
Accrued interest
|
|
|
562,793
|
|
|
|
496,448
|
|
Total
|
|
$
|
653,888
|
|
|
$
|
638,364
|
|
NOTE 3 – CONVERTIBLE PROMISSORY NOTES PAYABLE
The following tables set forth the components
of the Company’s convertible debentures as of June 30, 2020 and December 31, 2019:
|
|
June 30,
2020
|
|
December 31, 2019
|
Convertible notes payable – fixed conversion price
|
|
$
|
244,000
|
|
|
|
244,000
|
|
Convertible notes payable – variable conversion price
|
|
|
706,470
|
|
|
|
733,614
|
|
Less: loan discounts
|
|
|
(12,000
|
)
|
|
|
(153,000
|
)
|
Total convertible notes, net
|
|
$
|
938,470
|
|
|
$
|
824,614
|
|
The following table sets forth a summary of change in our convertible
notes payable for the six months ended June 30, 2020:
|
|
June 30,
2020
|
Beginning balance
|
|
$
|
824,614
|
|
Amortization of debt discounts associated with convertible debt
|
|
|
141,000
|
|
Conversion of convertible note principal into common stock
|
|
|
(41,408
|
)
|
Increase in principal amounts outstanding due to lender adjustments per terms of the note agreements
|
|
|
14,264
|
|
Total convertible notes, net
|
|
$
|
938,470
|
|
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, 2020, 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. As of June 30, 2020, the Company has accrued interest payable totaling
$420,609 in connection with this note.
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
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. As of June 30, 2020, the outstanding principal balance
on these notes total $157,250, 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. As of June 30, 2020, the outstanding principal balance
on these notes total $138,000, 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. As of June 30, 2020, the outstanding principal balance
on these notes total $129,220, 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. As of June 30, 2020, the outstanding
principal balance on these notes total $282,000, and the associated unamortized discounts totaled $12,000.
While many of these convertible notes are past
their original maturity dates, the Company continues to maintain a favorable relationship and work with the lender with regard
to financing its working capital needs.
As of June 30, 2020, the Company has accrued
interest payable totaling $126,422 in connection with these variable convertible notes. During the six months ended June 30, 2020
and 2019, $141,000 and $8,299 of the discounts were amortized to interest expense, respectively.
During the six months ended June 30, 2020 and
2019, the Company issued 100,213,975 and 181,909,995 shares of common stock upon conversion of $53,160 and $64,200,
respectively, in notes payable and accrued interest.
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Future Potential Dilution
Most of the Company's convertible notes payable
contain adjustable conversion terms with significant discounts to market. As of June 30, 2020, the Company's convertible notes
are convertible into an aggregate of approximately 1,766,175,000 shares of common stock. Due to the variable conversion prices
on some of the Company's convertible notes, the number of common shares issuable is dependent upon the traded price of the Company's
common stock.
NOTE 4 – LOANS PAYABLE
As of June 30, 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. As of
June 30, 2020, the Company has accrued interest payable totaling $15,763 in connection with these loans payable.
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, 2020 and December 31, 2019 amounted to $148,296 and $192,729, respectively.
NOTE 6 – STOCKHOLDERS' DEFICIT
Authorized and Amendments
As of June 30, 2020, the Company had 1,200,000,000
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, 2020 Transactions
During the six months ended June 30, 2020,
the Company received $220,000 in gross proceeds from the sale of 290,000,000 shares of its common stock to accredited investors.
Additionally, the Company issued 5,000,000 shares of common stock to an accredited investor pursuant to a subscription agreement
dated April 18, 2018 for which the funds were received in a prior period.
During the six months ended June 30, 2020,
the Company issued 5,666,594 shares of common stock to non-employees for services rendered. Additionally, the Company issued 100,213,975
shares of common stock upon conversion of $53,161 in convertible notes payable and accrued interest.
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.
See Note 8 – Related Party Transactions
for additional disclosures of common stock issuances.
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Six Months Ended June 30, 2019 Transactions
During the six months ended June 30, 2019,
the Company received $130,000 in gross proceeds from the sale of units consisting of common stock of its subsidiary, Jupiter Gold
Corporation, and warrants to purchase the Company’s common stock to accredited investors. In aggregate, the securities the
Company sold were 104,000 shares of Jupiter Gold Corporation and two-year warrants to purchase a total of 52,000,000 shares of
Brazil Minerals at $0.0012 per share.
Additionally, the Company received $112,500
in gross proceeds from the sale of 223,584,906 shares of its common stock to accredited investors.
During the six months ended June 30, 2019,
the Company issued 310,167,762 shares of common stock upon conversion of $124,687 in convertible notes payable and accrued interest,
respectively.
Common Stock Options
During the six months ended June 30, 2020,
the Company granted options to purchase an aggregate of 19,885,500 shares of common stock to non-management directors. The options
were valued at $25,000 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 between $0.0011 and $0.0013, expected dividend yield of 0.0%,
historical volatility calculated between 219.72% and 221.07%, risk-free interest rate between 0.29% and 0.38%, and an expected
term of 5 years.
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases offices in Pasadena, California,
U.S., and in the municipality of Olhos D'Agua, Brazil. Such costs are immaterial to the 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, 2020 and December 31, 2019:
|
|
June 30,
2020
|
|
December 31, 2019
|
Salary, retirement contributions and advances payable to related party
|
|
$
|
117,988
|
|
|
$
|
11,777
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable to related party
|
|
$
|
566,743
|
|
|
$
|
566,743
|
|
Less: loan discounts
|
|
|
—
|
|
|
|
(96,270
|
)
|
Total convertible notes payable to related party, net
|
|
$
|
566,743
|
|
|
$
|
470,473
|
|
|
|
|
|
|
|
|
|
|
Total related party payables
|
|
$
|
684,731
|
|
|
$
|
482,250
|
|
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
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, 2020, 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, 2020, all debt discounts related to this note were fully amortized.
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.
Jupiter Gold Corporation
On February 12, 2020, the Company sold 900,000
shares of Jupiter Gold common stock that it held as an investment, 180,500 warrants to purchase up to 180,500 shares of Jupiter
Gold common stock at $0.60 per share, and 50,000,000 warrants to purchase up to 50,000,000 shares of Brazil Minerals common stock
at $0.0015 per share for gross proceeds of $250,000 to an accredited investor.
On February 14, 2020, the Company loaned $225,000
to Jupiter Gold in the form of a convertible promissory note. The note bears interest at 6.0% per annum and matures on December
31, 2023. As an inducement to enter into the transaction, the Company received 67,000 warrants to purchase up to 67,000 shares
of Jupiter Gold common stock at a price of $0.60 per share. After any time after issuance, the note is convertible at the option
of the holder at a rate of one share of Jupiter Gold common stock for each $0.60 of loan principal. On February 15, 2020, the Company
converted the promissory note in return for 375,000 shares of Jupiter Gold common stock.
Investment in Ares Resources Corporation's
Common Stock
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. Our 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.
As of June 30, 2020, no change in the value
of the Ares common stock was recorded as the recorded value still approximated fair value.
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 9 – RISKS AND UNCERTAINTIES
COVID-19
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 as
of August 19, 2020:
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The Company has not had any reports of COVID-19 among its workforce;
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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;
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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;
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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;
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The Company has postponed any expenses which are not critical to it at the moment.
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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, 2020 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, except for the following:
On July 16, 2020, the number of authorized
shares of common stock of the Company was increased to 1,550,000,000.
On August, 10, 2020, Jupiter Gold’s common
stock moved up from OTCPink and began trading on OTCQB.