U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
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þ
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For
the Fiscal Year Ended December 31, 2020
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission
File Number 000-55191
Brazil
Minerals, Inc.
(Exact
name of registrant as specified in its charter)
Nevada
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39-2078861
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(State
or other jurisdiction of
|
(IRS
Employer
|
incorporation
or organization)
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Identification
No.)
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Rua
Vereador João Alves Praes, nº 95-A
Olhos
DÁgua, MG 39398-000, Brazil
(Address
of principal executive offices)
Issuers
telephone number, including area code: (833) 661-7900
Securities
registered pursuant to Section 12(b) of the Act: None.
Securities
registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No þ
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. Yes
þ No o
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). Yes þ No o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K þ
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or, an emerging growth company. See the definitions of large accelerated filer, accelerated filer,
smaller reporting company, and emerging growth company, in Rule 12b-2 of the Exchange Act.
Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer þ
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Smaller
reporting company þ
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Emerging
growth company o
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If
an emerging growth company, 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. o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
As
of June 30, 2020, the last business day of the Registrants most recently completed second fiscal quarter, the aggregate market
value of the Registrants common stock held by non-affiliates (based on the closing sales price of such shares on such date as
reported by otcmarkets.com) was approximately $1,188,000. For the purpose of this report it has been assumed that all officers
and directors of the Registrant, as well as all stockholders holding 10% or more of the Registrants stock, are affiliates of
the Registrant.
As
of March 26, 2021, there were outstanding 2,498,625,381 shares of the registrants
common stock.
Documents
incorporated by reference: None.
TABLE
OF CONTENTS
FORWARD
LOOKING STATEMENTS
This
Annual Report contains forward-looking statements. Forward-looking statements for Brazil Minerals, Inc. reflect current expectations,
as of the date of this Annual Report, and involve certain risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of various factors. Factors that could cause future results
to materially differ from the recent results or those projected in forward-looking statements include, among others: unprofitable
efforts resulting not only from the failure to discover mineral deposits, but also from finding mineral deposits that, though
present, are insufficient in quantity and quality to return a profit from production; market fluctuations; government regulations,
including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection;
competition; the loss of services of key personnel; unusual or infrequent weather phenomena, sabotage, government or other interference
in the maintenance or provision of infrastructure as well as general economic conditions.
PART
I
Item
1. Business.
Overview
Brazil
Minerals, Inc.
with its subsidiaries (“Brazil Minerals”,
the “Company”, “we”, “us”, or “our”) is a mineral exploration company currently
primarily focused on the development of its two 100%-owned hard-rock lithium projects. Our initial goal is to be able to enter
commercial production of spodumene concentrate, a lithium bearing commodity.
We also have 100%-ownership of projects
in other highly strategic minerals: rare earths, titanium, and nickel/cobalt. We have mining concessions and other mineral
rights for alluvial gold and diamonds and in one of these areas we also mine and sell sand for construction usage, which
currently is our primary revenue producer.
As of the date of this Annual Report on Form
10-K (“Annual Report”), we own approximately 60% of Apollo Resources Corporation, a private company currently primarily
focused on the development of its initial iron mine. We own 30% of Jupiter Gold Corporation, a company focused on the development
of gold projects and of a quartzite mine, and whose common shares are quoted on otcmarkets.com under the symbol “JUPGF”.
We have consolidated our results as of December
31, 2020 in this Annual Report. All of our mineral properties are in Brazil. Our common shares are quoted on otcmarkets.com under the symbol “BMIX”.
Markets
In 2020, we increased our transition the development
of mining sites for gold and diamond to the exploration of recently acquired mineral rights for strategic minerals, including lithium,
rare earths, titanium, nickel, and cobalt. We believe that strategic minerals give us a higher return potential, particularly because
such minerals are scarce and in demand, in particular for high growth areas such as batteries for electric vehicles and other high
technology applications.
Lithium
Lithium is on the list of the 35 minerals considered
critical to the economic and national security of the United States as first published by the U.S. Department of the Interior on
May 18, 2018.
The only lithium production in the United States
is from a brine operation in Nevada. Two companies produce a wide range of downstream lithium compounds in the United States from
domestic or imported lithium carbonate, lithium chloride, and lithium hydroxide. Although lithium markets vary by location, the
top global end-use markets are estimated as follows: 71% for batteries and 14% for ceramics and glass. Lithium consumption for
batteries has increased significantly in recent years because rechargeable lithium batteries are used extensively in the growing
market for portable electronic devices and increasingly are used in electric tools, electric vehicles, and grid storage applications.
Lithium minerals were used directly as ore concentrates in ceramics and glass applications.
Lithium supply security has become a top priority
for technology companies in the United States and Asia. Strategic alliances and joint ventures among technology companies and exploration
companies continued to be established to ensure a reliable, diversified supply of lithium for battery suppliers and vehicle manufacturers.
Source: Lithium – Mineral Commodity Summary
2021, U.S. Geological Service
Rare
Earths
The rare earth elements (“REE”)
are also on the list of the 35 minerals considered critical to the economic and national security of the United States as first
published by the U.S. Department of the Interior on May 18, 2018.
REEs consist of the lanthanide series (lanthanum,
cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium,
and lutetium) as well as scandium and yttrium.
REEs are classified as light and heavy based on atomic number. Light REEs (LREEs): lanthanum through
gadolinium (atomic numbers 57 through 64). Heavy REEs (HREEs): terbium through lutetium (atomic numbers 65 through 71) and yttrium
(atomic number 39), which has similar chemical and physical attributes with the other heavy REEs.
Neodymium
and praseodymium (LREEs) are key critical materials in the manufacturing of neodymium-iron-boron (NdFeB) magnets. NdFeB magnets
have the highest magnetic strength (energy product) among commercially available magnets and enable high energy density and high
energy efficiency in energy technologies. Dysprosium and terbium (HREEs) are key critical materials often added to the NdFeB alloy
to increase the operating temperature of the magnets. HREEs tend to be less abundant and more expensive than LREEs. The deployment
of energy technologies such as wind turbines and electric vehicles (EVs) could lead to imbalances of supply and demand for these
key materials.
Source:
Critical Materials Rare Earths Supply Chain: A Situational White Paper, U.S. Department of Energy, April 2020.
Titanium
Titanium is also on the list of the 35 minerals
considered critical to the economic and national security of the United States as first published by the U.S. Department of the
Interior on May 18, 2018.
The electronics and automotive sectors offer an abundance
of opportunities for the titanium metal market where its ability to withstand high temperatures and non-magnetic nature which prevents
interference with data storage are fundamental. Regulations which emphasize the production of fuel-efficient vehicles should increase
demand for titanium.
Source: “Titanium Metal Market Research Report
- Global Forecast till 2023", Market Research Future.
Nickel
& Cobalt
Nickel and cobalt are key battery metals needed
for the growth phase in electric vehicle (EV) production world-wide. Cobalt is also on the list of the 35 minerals considered critical
to the economic and national security of the United States as first published by the U.S. Department of the Interior on May 18,
2018.
The greater the amount of nickel and cobalt,
the greater the energy density of an electric vehicle battery, a factor that contributes to the storage of more energy, according
to its real weight. A practical example: vehicles whose batteries have a higher energy density can run more kilometers than a lower
energy density.
Source: Translated and adapted from “Recursos
Minerais de Minas Gerais”, CODEMGE report, Brazil, 2019.
Demand for Potential Products
We have received an unsolicited indication
of interest from a potential buyer of spodumene concentrate. We expect the demand for our strategic minerals, once in production,
to be facilitated by Brazil’s strong mining tradition and its substantial annual trade with China, the United States, and
the European Union, all likely sources of buyers. We intend on utilizing intermediaries for sales as to focus on our core competencies
of exploration and extraction.
Raw Materials
We do not have any material dependence on any
raw materials or raw material supplier. All of the raw materials that we need are available from numerous suppliers and at market-driven
prices.
Intellectual Property
We do not own or license any intellectual property
which we consider to be material.
Government
Regulation
Mining
Regulation and Compliance
Mining
regulation in Brazil is carried out by the mining department, a federal entity, and each state in Brazil has an office
of this federal entity. For each mineral right that we own, we file any paperwork related to it in the office of the mining department
in the state in which such mineral right is located. We believe that we maintain a good relationship with the mining department
and that our methods of monitoring are adequate for our current needs.
The mining department normally inspects our
operations once a year via an unannounced visit. We estimate that it costs us $5,000-$10,000 annually to maintain compliance
with various mining regulations.
Environmental Regulation and Compliance
Environmental regulation in Brazil is carried
out by a state-level agency, which may have multiple offices, one for each region of the state. For each mineral right that we
own, we file any paperwork related to it in the local office of the environmental agency that has the applicable geographical jurisdiction.
We believe that we maintain a good relationship with the offices of the environmental agency and believe that our methods of monitoring
are adequate for our current needs.
The environmental agency normally inspects
our operations once every one or two years which is the standard practice for companies in good standing. We estimate that it costs
us $25,000-$50,000 annually to maintain compliance with various environmental regulations.
Surface disturbance from any open pit mining
performed by us is in full compliance with our mining plan as approved the local regulatory agencies. We regularly recuperate areas
that have been exploited. The current environmental regulations state that after all mining has ceased (however long that may take),
there would still be five years of available time for any necessary recuperation to be performed. Our mining and recovery processing
for diamonds and gold does not use any chemical products. Tests are conducted regularly and there are no records of groundwater
contamination.
Employees and Independent Contractors
As of
the date of this Annual Report, we have 11 full-time employees. We also retain consultants to provide specific services deemed
necessary. We consider our employee relations to be very good.
Form and Year of Organization & History to Date
We were incorporated in the State of Nevada
on December 15, 2011 under the name Flux Technologies, Corp. From inception until December 2012, we were focused in the software
business, which was discontinued when the current management team and business focus began. The Company changed its name to Brazil
Minerals, Inc. in December 2012.
Available Information
We maintain a website at www.brazil-minerals.com.
We make available free of charge, through the Public Filings section of the Investors tab on our website, our Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), as
soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange
Commission (the “SEC”). The information on our website is not, and shall not be deemed to be, a part hereof or incorporated
into this or any of our other filings with the SEC.
Our
SEC filings are available from the SECs internet website at www.sec.gov which contains reports, proxy and information statements
and other information regarding issuers that file electronically. These reports, proxy statements and other information may also
be inspected and copied at the SECs Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.
Item
1A. Risk Factors.
Some, but not all, of our operating risk factors
and the risks of any investment in our stock are listed below.
Risks Related to Our Operations
We have a limited operating history.
Investors should evaluate an investment in
us in light of the uncertainties encountered by developing companies in a competitive environment. Our business is dependent upon
the implementation of our business plan. There can be no assurance that our efforts will be successful or that we will ultimately
be able to attain profitability.
Our ability to execute our business plan
depends primarily on the continuation of a favorable mining environment in Brazil.
Mining operations in Brazil are heavily regulated.
Any significant change in mining legislation or other changes in Brazil’s current mining environment may slow down or alter
our business prospects.
We may be unable to find sources of funding
if and when needed, resulting in the failure of our business.
As of today, we need additional equity or debt
financing beyond our existing cash to operate. This additional financing may not become available and, if available, may not be
available on terms that are acceptable to us. If we do obtain acceptable funding, the terms and conditions of receiving such capital
would likely result in further dilution. If we are not successful in raising capital or sufficient capital, we will have to modify
our business plans and substantially reduce or eliminate operations, or as an extreme measure seek reorganization. In these events,
the holders of our securities could lose a substantial part or all of their investment.
Our quarterly and annual operating and
financial results and our revenue are likely to fluctuate significantly in future periods.
Our quarterly and annual operating and financial
results are difficult to predict and may fluctuate significantly from period to period. Our revenues, net income, and results of
operations may fluctuate as a result of a variety of factors that are outside our control including, but not limited to, lack of
sufficient working capital, equipment malfunction and breakdowns, inability to timely find spare machines or parts to fix the broken
equipment, regulatory or licensing delays, and severe weather phenomena.
We do not intend to pay regular future
dividends on our common stock and thus stockholders must look to appreciation of our common stock to realize a gain on their investments.
We have never paid a dividend and we do not
have any plans to pay dividends in the foreseeable future. Our future dividend policy is within the discretion of our Board of
Directors and will depend upon various factors, including future earnings, if any, our capital requirements and general financial
condition, and other factors. Accordingly, stockholders must look solely to appreciation of our common stock to realize a gain
on their investment. This appreciation may not occur, or may occur over a longer timeframe that is less interesting to short-term
oriented investors.
We depend upon Marc Fogassa, our Chief
Executive Officer and Chairman.
Our success is largely dependent upon the personal
efforts of Marc Fogassa. Currently he is our only management team member that is fluent and fully conversant in both Portuguese,
the language of Brazil, and English. The loss of the services of Mr. Fogassa would have a material adverse effect on our business
and prospects. We maintain key-man life insurance on the life of Mr. Fogassa.
Risks
Related to Our Capital Stock
Our
Series A Preferred Stock has the effect of concentrating voting control over us in Marc Fogassa, our Chairman and Chief Executive
Officer.
One
share of our Series A Preferred Stock is issued, outstanding and held since 2012 by Marc Fogassa, our Chairman and Chief Executive
Officer. The Certificate of Designations, Preferences and Rights of our 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 Common
Stock and any other class or series of capital stock entitled to vote with the Common Stock being entitled to their proportional
share of the remaining 49% of the total votes based on their respective voting power.
Our
stock price may be volatile.
The
market price of our Common Stock has been and is likely to continue to be volatile and could fluctuate in price in response to
various factors, many of which are beyond our control, including the following:
(1)
|
our
ability to grow and/or maintain revenue;
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(2)
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our
ability to achieve profitability;
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(3)
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our
ability to raise capital when needed;
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(4)
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our
sales of our common stock;
|
(5)
|
our
ability to execute our business plan;
|
(6)
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our
ability to acquire additional mineral properties;
|
(7)
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legislative,
regulatory, and competitive developments; and
|
(8)
|
economic
and other external factors.
|
In
addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated
to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market
price of our common stock.
Because
our common stock trades on the over-the-counter (OTC) market, you may not be able to buy and sell our common stock at optimum
prices and you may face liquidity issues.
The
trading and quotation of our common stock on otcmarkets.com imposes,
among others, the following risks:
●
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Availability
of quotes and order information
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●
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Liquidity
risks
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●
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Dealers
spreads
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Our
convertible debt securities outstanding may adversely affect the market price for our common stock.
To
the extent that any remaining convertible debt securities are converted into our common stock, the existing stockholder percentage
ownership will be diluted and any sales in the public market of the common stock underlying such options may adversely affect
prevailing market prices for our common stock. A similar situation occurs if our outstanding options and warrants are exercised.
We
may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing capital stock that would
dilute your ownership.
We
may largely finance our operations by issuing equity securities, which would materially reduce the percentage ownership of our
existing stockholders. Furthermore, any newly issued securities could have rights, preferences, and privileges senior to those
of our existing common stock. Moreover, any issuances by us of equity securities may be at or below the prevailing market price
of our stock and in any event may have a dilutive impact on ownership interest of existing common stockholders, which could cause
the market price of stock to decline. We may also raise additional funds through the incurrence of debt or the issuance or sale
of other securities or instruments senior to our common shares. The holders of any debt securities or instruments we may issue
could have rights superior to the rights of our common stockholders.
Our
common stock is currently defined as penny stock and the rules imposed on the sale of the shares may affect your ability
to resell any shares you may purchase, if at all.
Our
common stock has traded below $5 and is therefore defined as a penny stock under the Securities Exchange Act of 1934,
as amended (the Exchange Act) and rules of the SEC. The Exchange Act and such penny stock rules generally impose
additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain
accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with a net worth in excess
of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly with spouse, or in transactions not recommended by the
broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination
for each purchaser and receive the purchasers written agreement prior to the sale. In addition, the broker-dealer must
make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and
offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures
required by the SEC. Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or
trade our common stock and may also affect a stockholders ability to resell any of our shares in the public markets.
Item
1B. Unresolved Staff Comments.
None.
Item
2. Properties.
Mineral
Properties
Our
mineral properties are listed in the following table and summarized below.
Mineral(s)
|
Location
in Brazil
|
Total
Area
(acres)
|
Status
|
Lithium
|
Minas
Gerais
|
57,855
|
Research
Exploration
|
Lithium
|
Rio
Grande do Norte, Paraíba
|
23,079
|
Research
Exploration
|
Rare
Earths
|
Goiás,
Tocantins
|
15,810
|
Research
Exploration
|
Rare
Earths
|
Bahia
|
24,162
|
Research
Exploration
|
Nickel/Cobalt
|
Goiás
|
9,553
|
Research
Exploration
|
Titanium
|
Minas
Gerais
|
13,810
|
Research
Exploration
|
Diamond
|
Minas
Gerais
|
21,871
|
Pre-Mining
|
Sand
|
Minas
Gerais
|
23,363
|
Commercial
Mining
|
None
of our projects currently has reserves in accordance with the definition of such term by the SEC. One of our projects
has had an NI 43-101 technical report issued (see details below).
The
projects owned by Jupiter Gold Corporation (an approximately 30% owned subsidiary) are summarized in the table below. Jupiter
Gold provides details of its properties in its Annual Report on Form 20-F filed with the SEC.
Mineral
|
Project
Name & Location in Brazil
|
Total
Area
(acres)
|
Status
|
Gold
|
Alpha
Project - Minas Gerais
|
34,899
|
Research
Exploration
|
Gold
|
Alta
Floresta – Mato Grosso
|
24,395
|
Research
Exploration
|
Gold
|
Apuí
- Amazonas
|
69,330
|
Research
Exploration
|
Gold
|
Brotas
- Bahia
|
4,821
|
Research
Exploration
|
Gold
|
Cavalcante
- Goiás
|
4,771
|
Research
Exploration
|
Gold
|
Crixás
- Goiás
|
3,068
|
Research
Exploration
|
Gold
|
Paracatu
- Minas Gerais
|
733
|
Research
Exploration
|
Quartzite
|
Diamantina
- Minas Gerais
|
233
|
Pre-Mining
Licensing
|
None
of the Jupiter Gold Corporation projects currently has reserves in accordance with the definition of such term by
the SEC.
The
projects owned by Apollo Resources Corporation (an approximately 60% owned subsidiary)
are summarized in the table below.
Mineral
|
Project
Name & Location in Brazil
|
Total
Area
(acres)
|
Status
|
Iron
|
Rio
Piracicaba Project – Iron Quadrangle, Minas Gerais
|
641
|
Pre-Mining
Licensing
|
Iron
|
Barão
de Cocais Project– Iron Quadrangle,
Minas Gerais
|
363
|
Research
Exploration
|
Iron
|
Itabira
Project – Iron Quadrangle, Minas Gerais
|
3,792
|
Research
Exploration
|
Iron
|
Grão
Mogol Project – Minas Gerais
|
16,727
|
Research
Exploration
|
Iron
|
Alagoas
Project – Alagoas
|
31,173
|
Research
Exploration
|
Iron
|
Corumbá
– Mato Grosso do Sul
|
4,869
|
Research
Exploration
|
None
of the Apollo Resources Corporation projects currently has reserves in accordance with the definition of such term
by the SEC.
Details of
our properties follow below.
Minas
Gerais Lithium Project
Overview:
Our
Minas Gerais Lithium Project encompasses 43 mineral rights for lithium in the Brazilian Western Pegmatite Province in the municipalities
of Araçuai, Coronel Murta, Itinga, Rubelita, Taiobeiras, and Virgem da Lapa. Mineralizations are described in metric to
decametric pegmatite bodies, with tear geometry, with well-defined zoning, accessible both on surface and in galleries. The lithium
ore occurs as crystals of centimetric to metric sizes of spodumene among masses of lepidolite and albite. We have a dedicated
exploratory geology team responsible for the detailed mapping, systematic sampling and analysis of the pegmatite occurrences within
our project area.
Commodity:
Lithium
Ownership:
100%
Location:
State of Minas Gerais
Infrastructure:
Paved highway, water, nearby electrical power grid
Size:
57,855 acres
Geology:
In
our Minas Gerais Lithium Project area there are schist and meta-gravels of the Salinas
Formation as well as schist of the Chapada Acauã Formation outcrop, both with occurrence of cordierite and andalusite. These
rocks are arranged in structures accommodating the deformation imposed by t granitic intrusions, which would be the parent material
in which the fluid responsible for the lithium mineralization’s was derived. The structures to which the rocks of Fm. Salinas
and Fm. Chapada Acauã are conditioned, are the same responsible for the transport, accommodation, and accumulation of the
fluids responsible for the lithium mineralization. Our project areas are marked by numerous occurrences of gemological and industrial
spodumene and has a decades-long history of mining in the region.
Map:
Northeast
Lithium Project
Overview:
Our
Northeast Lithium Project encompasses 7 mineral rights for lithium in the surroundings of Parelhas and Jardim do Seridó,
State of Rio Grande do Norte, and São José do Sabugi, State of Paraíba in Brazil. The Borborema Province
located in the Northeast Region of Brazil has a wide variety of geological / tectonic environments that contain different types
of mineral deposits, varying between the classes of metals, non-metals, gems and precious metals. The pegmatitic province of Seridó
corresponds to an important mining district located in the northeast of Brazil between the states of Paraíba and Rio Grande
do Norte. This province is characterized by important mineral occurrences, which include several minerals with industrial application.
Commodity:
Lithium
Ownership:
100%
Location:
States of Rio Grande do Norte and Paraíba
Infrastructure:
Paved highway, water, nearby electrical power grid
Size:
23,079 acres
Geology:
In
our Northeast Lithium Project mineralizations are described in metric to decametric pegmatite bodies with exotic geometry, accessible
both at surface and in underground galleries. Lithium ore occurs as crystals of varying size of spodumene and ambligonite, rarely
petalite, these develop in varying paragenesis. In general, the fertile pegmatite bodies occur horst in the metasedimentary rocks
of the Seridó Formation and Equador Formation, the latter being responsible for sustaining the relief. Our project is located
within the Borborema Province, a macroregion of continental deformation accommodation, our mineral rights are arranged along large
dome structures generated at the time of ascent of lithium fertile bodies. These structures are the same ones that condition the
accommodation of the pegmatite bodies containing lithium mineralization. Our Northeast Lithium Project is marked by numerous occurrences
of industrial spodumene, which is treated as tailings from gem mines in the region.
Map:
Goiás/Tocantins
Rare Earths Project
Overview:
The
Goiás/Tocantins Rare Earths Project is located within the states of Goiás and Tocantins in the Center-West of Brazil.
This Project is further divided into 2 component projects according to the local geology, Serra Dourada and Serra do Mendes. The
Serra Dourada Project comprises three mineral rights. One located SW of the state of TO, and one NW of the GO state. We have confirmed
presence of all rare earth elements via geochemical sample testing. The Serra do Mendes Project contains a mineral right located
in the NE region of the GO state.
Commodity:
Rare Earths
Ownership:
100%
Location:
States of Goiás and Tocantins
Infrastructure:
Paved highway, water, nearby electrical power grid
Size:
15,810 acres
Geology:
The
Goiás/Tocantins Rare Earth Elements Project is inserted within the Goiás Tin Province (PEG), which is developed
within the geological province of the Goiás Magmatic Arc. The region is marked by numerous magmatic events that developed
in an orchestrated manner by the tectonics of the time. The PEG is characterized by a zone with type A granitic intrusions rich
in tin and rare earth elements. These fertile granites are responsible for the formation of supergene deposits with exotic minerals
such as fluocerite-Ce, ETR oxifluorides, bastnaesite, monazite, allanite, solid solutions of zircon-torite and xenotite-torite
in addition to apatite, rich in rare earth elements (REE). PREG/T targets regions bordering the dome of these granites, since
it is understood that the REE-enriched deposits would form as regolith of the generating fertile granite, being formed by sediments,
transported and deposited in nearby depressions. The area has a history of Sn deposits in PEG, so its potential for REE was not
explored until the last decade, after which the regions potential for world-class deposits was understood.
Map:
Bahia
Rare Earths Project
Overview:
The
Project is located in the SW portion of State of Bahia in the Northeast Region of Brazil. The Project comprises a total of 5 mineral
rights.
Commodity:
Rare Earths
Ownership:
100%
Location:
State of Bahia
Infrastructure:
Paved highway, water, nearby electrical power grid
Size:
24,162 acres
Geology:
The
Bahia Rare Earth Elements Project is inserted within the regions of Serra do Ramalho
and Serra Pitarana which are located in the São Francisco sedimentary basin, an extensive Proterozoic cover of the São
Francisco Craton, where the Bambuí Group, which is part of the upper part of the São Francisco Supergroup, is represented
by a thick carbonatic-pelitic sequence. The Bambuí Group sits directly on a gneissic–migmatitic base of the ancient
Archean crust, occurring sub-horizontally in the center-north portion of the area. Serra do Ramalho stands out as one of the main
geomorphological features of the region. It has a relatively flat top and steep flanks, with ruiniform or “lapiês”
erosional structures typical of the calcitic limestone dissolution processes, supported by the Sete Lagoas Formation limestone
units.
Map:
Titanium
Project
Overview:
Our
Titanium Project is located in the central-western region of the state of Minas Gerais in Brazil, and is composed of 5 mineral
rights.
Commodity:
Titanium
Ownership:
100%
Location:
State of Minas Gerais
Infrastructure:
Paved highway, water, nearby electrical power grid
Size:
13,810 acres
Geology:
Our
Titanium Projects target region is situated within the São Francisco Basin and approximately 60km from the alkaline carbonate
complex of Alto Paranaíba. The complex is formed by carbonatitic intrusions of exotic chemistry associated with a local
paleo hotspot, this igneous activity influenced the percolation of fluids into the subsequent sediments generating the basic to
ultrabasic complexes of the Mata da Corda Group host in the rocks of the Bambuí Group (São Francisco Basin). It
is the rocks of this igneous complex (Mata da Corda Group) that host ilmenite mineralizations and form titanium deposits.
Map:
Nickel/Cobalt
Project
Overview:
Our
Nickel/Cobalt Project is located in the states of Goiás and Piauí in Brazil, and composed of 3 mineral rights.
Commodity:
Nickel and Cobalt
Ownership:
100%
Location:
States of Goiás and Piauí
Infrastructure:
Paved highway, water, nearby electrical power grid
Size:
9,553 acres
Geology:
Our
Nickel/Cobalt Projects target region in the Goiás magmatic arc. The region is marked by numerous intrusions enriched in
heavy elements. The deposit is formed through supergene enrichment and soil formation, derived from ultramafic rocks from mantle
intrusions and therefore forms metric layers of soil with high Nickel and Cobalt contents. Access to the mineralized layers occurs
on surface, facilitating blasting and exploitation operations. In Piauí, the nickel deposits occur constrained to the fold
belts Riacho do Pontal. This geological structure depicts tectonic stresses responsible for the rise of basic to ultrabasic fluids
that crystallize element-rich minerals such as Nickel and Cobalt. The presence of these mineralized rocks added to the arid climate
of the region results in the formation of soil layers enriched in these elements, such as in Goiás.
Maps:
Diamond
Project
Overview:
Our
Diamond Project is located in the State of Minas Gerais and comprises a total of 24
mineral rights, including 10 mining concessions, the highest level of mining title in Brazil. All our diamond rights are located
along the banks of the Jequitinhonha River in the northern part of Minas Gerais. This river rises within the Diamantina Plateau,
a region where more than alluvial diamond produced in the world for more than 200 years. The Diamantina region stands out not only
for being the place where diamonds were first discovered in the country, in 1714, but also for being responsible for most of the
Brazilian production to date.
Commodity:
Diamonds
Ownership:
100%
Location:
State of Minas Gerais
Infrastructure:
Paved highway, water, nearby electrical power grid
Size:
21,871 acres
Geology:
Serra
do Espinhaço is a mountain range that extends for more than 1,000 km, in a south-north direction, from the east of the
Quadrilátero Ferrífero (central region of Minas Gerais) to the border of the states of Bahia with Piauí.
Throughout this extension, diamonds occur in several locations, in addition to involving Chapada Diamantina, in the state of Bahia.
In this province, the diamond districts of Diamantina, Grão Mogol, Serra do Cabral and Itacambira are included.
Serra
do Espinhaço is mostly supported by quartzites, with subordinated phyllites and conglomeratic rocks, in addition to local
occurrences of metamagmatic rocks, all members of the Espinhaço Supergroup. In the Diamantina region, the Espinhaço
Supergroup is subdivided into the Diamantina and Conselheiro Mata groups; the first consisting mainly of continental sedimentary
deposits and the upper, by deposits of marine origin. Such sedimentation occurred in a rift-type basin, which evolved during the
Paleoproterozoic and Mesoproterozoic periods.
The
diamonds in the latter area originated from the conglomeratic rocks of the Sopa-Brumadinho Formation, one of the units of the
Diamantina Group. Primary rocks such as kimberlites or lamproites, even if metamorphosed, are not known along the mountain spike.
The main diamond rocks are conglomerates and loopholes in that formation, which flourishes mainly in the highest mountain portions.
Such rocks were sedimented in fluvial and alluvial fan systems, which probably collected diamonds from some area west of the mountain,
where the São Francisco River basin is currently located.
From
an original distribution of kimberlitic or lamproitic rocks, still unknown, the diamonds were initially invested in the conglomerates
and crevices of the Sopa-Brumadinho Formation. From Proterozoic to recent, a complex multiphase evolutionary history of diamond
deposits present in this province can be summarized from data compiled from studies by several authors. Although some of these
ages are not absolute, most of them are well established by radiometric dating (case of proterozoic deposits) or by fossils and
inferences about major climatic events at the regional level (case of phanerozoic deposits).
Map:
Sand
Project
Overview:
Our
sand deposits are located on the banks and on the Jequitinhonha River in the state of Minas Gerais. High-quality, commercial grade
sand for construction use is found in our deposits. A professional mining engineer surveyor measured one of our deposits to contain
1,140,400 cubic meters of sand in the surveyed area, with an average modeled body thickness of 3.07 m, very close to the average
of 3.19 m found in the 13 sampled holes. Several other deposits of similar size are thought to exist in our overall project area.
Commodity:
Sand
Ownership:
100%
Location:
State of Minas Gerais
Infrastructure:
Paved highway, water, nearby electrical power grid
Size:
23,363 acres
Map:
Item
3. Legal Proceedings.
We are not a party to any pending legal proceedings
which we consider to be material.
Item
4. Mine Safety Disclosures.
Not
applicable.
PART
II
Item
5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market
Information and Current Stockholders
Our
common stock is traded under the symbol “BMIX” and quotations for our
common stock are available on otcmarkets.com. The following table sets forth, for each of the quarterly periods indicated, the
range of high and low sales prices, in U.S. dollars, for our common stock for each quarter in 2019 and 2020.
|
|
Year Ended
|
|
Quarters
|
|
December 31, 2019
|
|
|
|
High
|
|
|
Low
|
|
2019
|
|
|
|
|
|
|
First (1/1-3/31)
|
|
$
|
0.0024
|
|
|
$
|
0.0009
|
|
Second (4/1-6/30)
|
|
$
|
0.0015
|
|
|
$
|
0.0006
|
|
Third (7/1-9/30)
|
|
$
|
0.0090
|
|
|
$
|
0.0009
|
|
Fourth (10/1-12/31)
|
|
$
|
0.0043
|
|
|
$
|
0.0014
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Quarters
|
|
December 31, 2020
|
|
|
|
High
|
|
|
Low
|
|
2020
|
|
|
|
|
|
|
First (1/1-3/31)
|
|
$
|
0.0018
|
|
|
$
|
0.0009
|
|
Second (4/1-6/30)
|
|
$
|
0.0021
|
|
|
$
|
0.0008
|
|
Third (7/1-9/30)
|
|
$
|
0.0019
|
|
|
$
|
0.0008
|
|
Fourth (10/1-12/31)
|
|
$
|
0.0027
|
|
|
$
|
0.0007
|
|
As
of March 26, 2021, we had 202 holders of record of our common stock as such term is defined in SEC rules, according to records
maintained by our transfer agent.
Dividends
We
have not paid any cash dividends since our inception and do not expect to declare any cash dividends in the foreseeable
future.
Equity
Compensation Plan
In
2017, our Board of Directors approved our 2017 Stock Incentive Plan under which we can offer eligible employees, consultants,
and non-employee directors cash and stock-based compensation and/or incentives to compensate, attract, retain, or reward such
individuals. We have no other equity compensation plan. The table below sets forth certain information as of December 31, 2020
with respect to the 2017 Stock Incentive Plan.
Plan Category
|
|
Number of
securities
to
be issued
upon
exercise
of
outstanding
options,
warrants,
and rights
(a)
|
|
|
Weighted-
average
exercise
price of
outstanding
options,
warrants
and rights
(b)
|
|
|
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(c)
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders (2017 Stock Incentive Plan)
|
|
|
25,000,000
|
|
|
$
|
n/a
|
|
|
|
25,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
25,000,000
|
|
|
$
|
n/a
|
|
|
|
25,000,000
|
|
Item
6. Selected Financial Data.
Not applicable.
Item
7. Managements Discussion and Analysis of Financial Condition and Results of Operation.
The
following discussion of our financial condition and results of operations should be read in
conjunction with our audited consolidated financial statements and the notes to those financial statements appearing elsewhere
in this Annual Report.
This
Annual Report contains forward-looking statements. Forward-looking statements for Brazil Minerals, Inc. reflect current expectations,
as of the date of this Annual Report, and involve certain risks and uncertainties. Actual results could differ materially from
those anticipated in these forward- looking statements as a result of various factors. Factors that could cause future results
to materially differ from the recent results or those projected in forward-looking statements include, among others: unprofitable
efforts resulting not only from the failure to discover mineral deposits, but also from finding mineral deposits that, though
present, are insufficient in quantity and quality to return a profit from production; market fluctuations; government regulations,
including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection;
competition; the loss of services of key personnel; unusual or infrequent weather phenomena, sabotage, government or other interference
in the maintenance or provision of infrastructure as well as general economic conditions.
Overview
Brazil
Minerals, Inc. with its subsidiaries (“Brazil Minerals”, the “Company”, “we”, “us”,
or “our”) is a mineral exploration company currently primarily focused on the development of our two 100%-owned hard-rock
lithium projects.. Our initial goal is to be able to enter commercial production of spodumene concentrate, a lithium bearing commodity.
We also have
100%-ownership of projects in other highly strategic minerals: rare earths, titanium, and nickel/cobalt. We have mining
concessions and other mineral rights for diamonds, and in one of these areas we also mine and sell sand for construction
usage, which was our primary source of our revenues in 2020.
As of the date of
this Annual Report, we own approximately 60% of Apollo Resources Corporation, a private company primarily focused on the development
of its initial iron mine. We own approximately 30% of Jupiter Gold Corporation, a company focused on the development of gold projects
and of a quartzite mine, and whose common shares are quoted on otcmarkets.com under the symbol “JUPGF”.
We
have consolidated our results as of December 31, 2020 in this Annual
Report. All of our mineral properties are in Brazil. Our common stock is quoted on otcmarkets.com under the symbol “BMIX”.
Mineral(s)
|
Location in Brazil
|
Total Area
(acres)
|
Status
|
Lithium
|
Minas Gerais
|
57,855
|
Research Exploration
|
Lithium
|
Rio Grande do Norte, Paraíba
|
23,079
|
Research Exploration
|
Total – Lithium
|
|
80,934
|
|
Rare Earths
|
Goiás, Tocantins
|
15,810
|
Research Exploration
|
Rare Earths
|
Bahia
|
24,162
|
Research Exploration
|
Total – Rare Earths
|
|
39,972
|
|
Nickel/Cobalt
|
Goiás
|
9,553
|
Research Exploration
|
Titanium
|
Minas Gerais
|
13,810
|
Research Exploration
|
Diamond
|
Minas Gerais
|
21,871
|
Pre-Mining
|
Sand
|
Minas Gerais
|
23,363
|
Commercial Mining
|
None
of our projects currently has reserves in accordance with the definition of such term by the SEC. One of our projects
has had an NI 43-101 technical report issued (see details below).
The
projects owned by Jupiter Gold Corporation are summarized in the table below. Jupiter Gold provides details of its properties
in its Annual Report on Form 20-F filed with the SEC. We currently own approximately 30% of Jupiter Gold Corporation.
Mineral
|
Project
Name & Location in Brazil
|
Total
Area
(acres)
|
Status
|
Gold
|
Alpha
Project - Minas Gerais
|
34,899
|
Research
Exploration
|
Gold
|
Alta
Floresta – Mato Grosso
|
24,395
|
Research
Exploration
|
Gold
|
Apuí
- Amazonas
|
69,330
|
Research
Exploration
|
Gold
|
Brotas
- Bahia
|
4,821
|
Research
Exploration
|
Gold
|
Cavalcante
- Goiás
|
4,771
|
Research
Exploration
|
Gold
|
Crixás
- Goiás
|
3,068
|
Research
Exploration
|
Gold
|
Paracatu
- Minas Gerais
|
733
|
Research
Exploration
|
Quartzite
|
Diamantina
- Minas Gerais
|
233
|
Pre-Mining
Licensing
|
None
of the Jupiter Gold Corporation projects currently has “reserves” in accordance with the definition of such term by
the SEC.
The projects owned by Apollo Resources Corporation
are summarized in the table below. We currently own approximately 60% of Apollo Resources Corporation.
Mineral
|
Project
Name & Location in Brazil
|
Total
Area
(acres)
|
Status
|
Iron
|
Rio
Piracicaba Project – Iron Quadrangle, Minas Gerais
|
641
|
Pre-Mining
Licensing
|
Iron
|
Barão
de Cocais Project– Iron Quadrangle,
Minas Gerais
|
363
|
Research
Exploration
|
Iron
|
Itabira
Project – Iron Quadrangle, Minas Gerais
|
3,792
|
Research
Exploration
|
Iron
|
Nova
Aurora Project – Minas Gerais
|
16,727
|
Research
Exploration
|
Iron
|
Alagoas
Project – Alagoas
|
31,173
|
Research
Exploration
|
Iron
|
Corumbá
– Mato Grosso do Sul
|
4,869
|
Research
Exploration
|
None
of the Apollo Resources Corporation projects currently has reserves in accordance with the definition of such term
by the SEC.
During
the year 2020 and in 2021 to the date of this Annual Report, we strengthened
our mineral property portfolio significantly. Some of the highlights are as follows:
|
●
|
Lithium:
we increased our portfolio of hard-rock lithium properties by 463% from 17,487 acres to an aggregate
of 80,934 acres by increasing the size of our original project (in the State of Minas Gerais) and adding a second project in the
Northeast of Brazil (in the States of Rio Grande do Norte and Paraíba). Both projects are located in areas rich in pegmatites
which contain spodumene as the primary lithium-bearing mineral. Spodumene has an 8.03% lithium content.
|
|
●
|
Rare
Earths: we increased our portfolio of rare earths properties by 363% from 11,001 acres
to 39,972 acres by adding a second project in the State of Bahia.
|
|
●
|
Nickel/Cobalt:
we increased our portfolio of rare earths properties by 191% from 4,991 acres to 9,553 acres by adding a second project in the
State of Bahia.
|
|
●
|
Iron:
we acquired and currently own approximately 60% of Apollo Resources Corporation,
a private company which is developing its first iron mine.
|
Results
of Operations
Fiscal
Year Ended December 31, 2020 Compared to Fiscal Year Ended December 31, 2019
Revenue
for the year ended December 31, 2020 totaled $23,446, compared to revenue of $15,393 during the year ended December 31, 2019 representing
an increase of 52.3%. We anticipate that revenues will begin to increase with the licensing of new high-quality areas for production
in future periods.
Cost
of goods sold for the year ended December 31, 2020 totaled $129,943, compared to cost of goods sold of $182,168 during the year
ended December 31, 2019 representing a decrease of 28.7%. Cost of goods sold is primarily comprised of labor, fuel, and repairs
and maintenance on our mining equipment. The decrease is explained by reduced costs resulting from more efficient mining activities
and the risks and uncertainties surrounding COVID-19.
Gross
loss for the year ended December 31, 2020 totaled $106,497, compared to gross loss of $166,775 for the year ended December 31,
2019 representing a decrease of 36.1%.
Operating
expenses for the year ended December 31, 2020 totaled $1,175,056, compared to operating expenses of $1,097,569 for the year ended
December 31, 2019 representing an increase of $77,487 or 7.1%. This increase was primarily caused by increased general and administrative
expenses and professional services.
Other
expenses for the year ended December 31, 2020 totaled $264,482, compared to other expenses of $821,537 for the year ended December
31, 2019 representing a decrease of $557,055 or 67.8%. The decrease was primarily the result of lower amortization expense related
to debt discounts and the relief of $238,151 in interest expense accrued against a convertible note, offset in part by a $76,926
loss due to a fair market value adjustment provision included in a share exchange agreement with a related party.
As
a result, we incurred a net loss attributable to our shareholders of $1,141,663, or approximately $0.00 per share, for the year
ended December 31, 2020, compared to a net loss attributable to our shareholders of $1,862,077, or approximately $0.00 per share,
for the year ended December 31, 2019.
Liquidity
and Capital Resources
As
of December 31, 2020, we had total current assets of $305,145 compared to total current liabilities of $2,326,890 for a current
ratio of 0.13 to one and a working capital deficit of $2,021,745. By comparison we had total current assets of $193,777 compared
to current liabilities of $2,154,356 for a current ratio of 0.09 to one and a working capital deficit of $1,960,579 as of December
31, 2019. Our principal sources of liquidity were from the sale of equity and issuance of debt for the years ended December 31,
2020 and 2019.
Net
cash used in operating activities totaled $996,781 for the year ended December 31, 2020, compared to $791,072 for the year ended
December 31, 2019 representing an increase in cash used of $205,709 or 26.0%. Net cash used in investing activities totaled $13,643
for the year ended December 31, 2020, compared to $677 for the year ended December 31, 2019 representing a decrease of $12,966
or 1,915.2%. Net cash provided by financing activities totaled $1,104,549 for the year ended December 31, 2020, as compared to
$941,852 for the year ended December 31, 2019 representing an increase of $162,697 or 17.3%.
During
the year ended December 31, 2020, our sources of liquidity were primarily derived from the proceeds of equity sales by the Company
and two of its subsidiaries. Our ability to continue as a going concern is dependent upon our capability to generate cash flows
from operations and successfully raise new capital through debt issuances and sales of our equity. We believe that we will be
successful in the execution of our initiatives, but there can be no assurance. We have no plans for any significant cash acquisitions
in the foreseeable future.
Recent Developments
On March 3, 2021, we provided the necessary
60-day notice of intent to fully redeem a note issued by us in 2014 with $244,000 in original principal and held by a Trust. After
such redemption, past-maturity third-party convertible debt remaining would aggregate $186,736 in principal and we intend to fully
extinguish it within the second quarter of 2021.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming we will continue as a going concern, which contemplates
realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following
the date of these financial statements. 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
Companys 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.
Off-Balance
Sheet Arrangements
The
Company currently has no off-balance sheet arrangements.
Critical
Accounting Policies and Estimates
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.
Fair Value of Financial Instruments
We follow 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 us. Unobservable inputs are inputs that reflect our 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, 2020 and 2019, our derivative
liabilities were considered a level 2 liability. We do not have any level 3 assets or liabilities.
Our 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.
Property and Equipment
Property and equipment are stated at cost,
net of accumulated depreciation. 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 four 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. Although we have taken steps to verify title to mineral properties in which it has
an interest, these procedures do not guarantee our rights. Such properties may be subject to prior agreements or transfers and
title may be affected by undetected defects.
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, 2020 and 2019, we
did not recognize any impairment losses related to mineral properties held.
Impairment of Intangible
Assets with Indefinite Useful Lives
We account for intangible
assets in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other (“ASC
350”). ASC 350 requires that intangible assets with indefinite useful lives no longer be amortized, but instead be evaluated
for impairment at least annually. On an annual basis, in the fourth quarter of the fiscal year, we review our intangible assets
with indefinite useful lives for impairment by first assessing qualitative factors to determine whether the existence of events
or circumstances makes it more-likely-than-not that the fair value of an intangible asset is less than its carrying amount. If
it is determined that it is more-likely-than-not that the fair value of an intangible asset is less than its carrying amount, the
intangible asset is further tested for impairment by comparing the carrying amount to its estimated fair value using a discounted
cash flow. Impairment, if any, is measured as the amount by which an indefinite-lived intangible asset’s carrying amount
exceeds its fair value.
Application of impairment
tests requires significant management judgment, including the determination of fair value of each indefinite-lived intangible asset.
Judgment applied when performing the qualitative analysis includes consideration of macroeconomic, industry and market conditions,
overall financial performance of the entity, composition, or strategy changes affecting the recoverability of asset groups. Judgments
applied when performing the quantitative analysis includes estimating future cash flows, determining appropriate discount rates
and making other assumptions. Changes in these judgments, estimates and assumptions could materially affect the determination of
fair value for each indefinite-lived intangible asset.
Impairment of Long-Lived
Assets
For long-lived assets,
such as property and equipment and intangible assets subject to amortization, we continually monitor 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, we assess 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, we recognize 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.
Convertible Instruments
We evaluate and account for conversion options
embedded in convertible instruments in accordance with ASC 470-20, “Debt with Conversion and Other Options”.
Applicable GAAP requires companies to bifurcate
conversion options from their host instruments and account for them as free-standing derivative financial instruments according
to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative
instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument
that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with
changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument.
We account for convertible instruments (when
it has been determined that the embedded conversion options should not be bifurcated from their host instruments) by recording,
when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based
upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the
effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related
debt to their stated date of redemption.
Variable Interest Entities
We determine at the inception of each arrangement
whether an entity in which we hold an investment or in which we have other variable interests in is considered a variable interest
entity. We consolidate VIEs when we are the primary beneficiary. The primary beneficiary of a VIE is the party that meets both
of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE;
and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant
to the VIE. Periodically, we assess whether any changes in the interest or relationship with the entity affect the determination
of whether the entity is still a VIE and, if so, whether we are the primary beneficiary. If we are not the primary beneficiary
in a VIE, we account for the investment under the equity method or cost method in accordance with the applicable GAAP.
We have concluded that Apollo Resources,
Jupiter Gold and their subsidiaries are VIEs in accordance with applicable accounting
standards and guidance; and although the operations of Apollo Resources and Jupiter Gold are independent of ours, through governance
rights, we have the power to direct the activities that are most significant to Apollo Resources and Jupiter Gold. Therefore, we
concluded that we are the primary beneficiary of both Apollo Resources and Jupiter Gold.
Stock-Based Compensation
We record 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.
We utilize 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.
On June 20, 2018, the FASB issued ASU 2018-07
which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of
the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees.
Equity classified share-based payments for employees was fixed at the time of grant. Equity-classified nonemployee share-based
payment awards are measured at the grant date of the award which is the same as share-based payments for employees. We adopted
the requirements of the new rule as of January 1, 2019, the effective date of the new guidance.
Foreign Currency
Our foreign subsidiaries use a local currency
as the 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. Net foreign currency transaction losses included in our consolidated statements of
operations were negligible for all periods presented.
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
Our
consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. Our significant
accounting policies are described in Note 1 of the financial statements. We have reviewed all recent accounting pronouncements
issued to the date of the issuance of these financial statements, and we do not believe any of these pronouncements will have
a material impact on us.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk.
The
information to be reported under this Item is not required of smaller reporting companies.
Item
8. Financial Statements and Supplementary Data.
Our
financial statements, including the notes thereto, together with the report from our independent registered public accounting
firm are presented beginning at page F-1.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item
9A. Controls and Procedures.
(a)
Evaluation of Disclosure Controls and Procedures
The
Companys management, with the participation of the Companys Principal Executive Officer and Principal Financial Officer, has
evaluated the design, operation, and effectiveness of the Companys disclosure controls and procedures, as defined in Rules 13a-15(e)
and 15d-15(e) of the Exchange Act as of December 31, 2020. On the basis of that evaluation, management concluded that
the Companys disclosure controls and procedures are designed, and are effective, to provide reasonable assurance that the information
required to be disclosed in reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in the rules and forms of the Commission, and that such information is accumulated and communicated
to management, including its Principal Executive Officer and Principal Financial Officer as appropriate, to allow timely decisions
regarding required disclosure.
(b)
Managements Report on Internal Control Over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Exchange Act Rule 13a-15(f). The Companys internal control system is designed to provide reasonable assurance to management
and to the Companys Board of Directors regarding the preparation and fair presentation of published financial statements. Under
the supervision and with the participation of management, including the Companys Principal Executive Officer and Principal Financial
Officer, management conducted an evaluation of the effectiveness of the Companys internal control over financial reporting based
on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on managements evaluation under the framework in Internal Control—Integrated
Framework, management concluded that the Companys internal control over financial reporting was effective as of December 31,
2020.
This
Annual Report does not include an attestation report of the Companys registered public accounting firm regarding internal control
over financial reporting. Since the Company is a non-accelerated filer, managements report is not subject to attestation
by the Companys registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002. As
a result, this Annual Report contains only managements report on internal controls.
(c) Changes
in Internal Control over Financial Reporting
There
were no changes in the Companys internal control over financial reporting that occurred in the fourth quarter of 2020 that materially
affected, or would be reasonably likely to materially affect, the Companys internal control over financial reporting.
(d) Limitations
of the Effectiveness of Internal Controls
The
effectiveness of the Companys system of disclosure controls and procedures and internal control over financial reporting is subject
to certain limitations, including the exercise of judgment in designing, implementing and evaluating the control system, the assumptions
used in identifying the likelihood of future events, and the inability to eliminate fraud and misconduct completely. As a result,
there can be no assurance that the Companys disclosure controls and procedures and internal control over financial reporting
will detect all errors or fraud. However, the Companys control systems have been designed to provide reasonable assurance of
achieving their objectives, and the Companys Principal Executive Officer and Principal Financial Officer have concluded that
the Companys disclosure controls and procedures and internal control over financial reporting are effective at the reasonable
assurance level. The Company has utilized the 1992 Committee of Sponsoring Organizations
of the Treadway Commissions internal control framework.
Item
9B. Other Information.
None.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance.
The
following table sets forth certain information as of March 26, 2020 concerning our directors and executive officers:
Name
|
|
Age
|
|
Position
|
Marc
Fogassa
|
|
54
|
|
Director,
Chairman, Chief Executive Officer,
President,
Chief Financial Officer, and Treasurer
|
|
|
|
|
|
Ambassador
Robert Noriega
|
|
61
|
|
Director
|
|
|
|
|
|
Brian
Bernier
|
|
63
|
|
Vice-President,
Business Development and Investor Relations
|
|
|
|
|
|
Joel
de Paiva Monteiro, Esq.
|
|
31
|
|
Vice-President,
Administration and Operations, and Secretary
|
|
|
|
|
|
Areli
Nogueira da Silva Júnior
|
|
41
|
|
Vice-President,
Mineral Exploration
|
Marc
Fogassa, age 54, has been a director and our Chairman and Chief Executive Officer since 2012. He is also the Chairman and Chief
Executive Officer of Jupiter Gold Corporation, one of our subsidiaries. He has over 17 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 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. We appointed
Mr. Fogassa as a director and our Chairman of the Board and President because of his substantial management and fundraising skills,
prior experience as a director of several private companies, venture capital and private equity experience, judgment and his knowledge
of, and contacts in, Brazil.
Ambassador
Roger Noriega, age 61, has been a director since 2012. He has extensive experience in Latin America. Ambassador Noriega was appointed
by President George W. Bush and confirmed by the U.S. Congress as U.S. Assistant Secretary of State, and served from July 2003
to October 2005. In that capacity, Ambassador Noriega managed a 3,000-person team of professionals in Washington and in 50 diplomatic
posts to design and implement political and economic strategies in Canada, Latin America, and the Caribbean. Prior to this
assignment, Ambassador Noriega served as U.S. Ambassador to the Organization of American States (OAS) from August
2001 to July 2003. Since February 2009 Ambassador Noriega has been the Managing Director of Vision Americas, a Latin America-focused
consulting group that he founded. Ambassador Noriega has a Bachelor of Arts degree from Washburn University of Topeka, Kansas. We
appointed Ambassador Noriega as a director because of his extensive experience in Latin America, business and government
contacts, management skills and judgment.
Brian
W. Bernier, age 63, has been a consultant to us since 2019 and became our Vice-President, Business Development and Investor Relations
in 2020. Mr. Bernier has worked in the business development and investor relations sector for over three decades, and was most
recently at a regional investment bank. He graduated with a degree in Management from Boston University.
Joel de Paiva Monteiro, Esq., age 31, has been
a consultant to us since 2017 and became our Vice-President, Administration and Operations, in 2020. Previously he was 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 has worked with all aspects of Brazilian business law, and has extensive experience in a wide range
of areas from strategic business planning to litigation. His prior clients included 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. Mr. Monteiro
is also a director of Jupiter Gold Corporation and of Apollo Resources Corporation.
Areli Nogueira da Silva Júnior, age
41, has been a consultant to us since 2018 and became our Vice-President, Mineral Exploration, in 2021. He is the Founder and was
the Chief Technical Officer of MineXplore, a consultancy focused on mineral rights in Brazil. Mr. da Silva Júnior has been
a consultant geologist with GeoEspinhaço, a firm that undertakes geological
studies in a variety of minerals across Brazil. Mr. da Silva Júnior has also been a college faculty member teaching geology.
Previously, he worked at the Brazilian mining department) and before that as a geologist at Usimimas Mineração.
Mr. da Silva Júnior has a Master of Geology degree from the Federal University of Rio de Janeiro, and an undergraduate degree
in Geological Engineering from the School of Mines of the Federal University of Ouro Preto, a premier and the oldest mining-focused
college in Brazil. Mr. da Silva is also a director of Jupiter Gold Corporation.
Board
Composition
Our
Board of Directors is currently composed of two members, Marc Fogassa and Ambassador Roger Noriega.
There
are no family relationships among our directors and executive officers. There is no arrangement or understanding between or among
our executive officers and directors pursuant to which any director or officer was or is to be selected as a director or officer,
and there is no arrangement, plan, or understanding as to whether non-management shareholders will exercise their voting rights
to continue to elect the current board of directors.
Our
directors and executive officers have not, during the past ten years:
●
|
had
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer,
either at the time of the bankruptcy or within two years prior to that time,
|
|
|
●
|
been
convicted in a criminal proceeding and is not subject to a pending criminal proceeding,
|
|
|
●
|
been
subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction,
permanently, or temporarily enjoining, barring, suspending, or otherwise limiting his involvement in any type of business,
securities, futures, commodities, or banking activities; or
|
|
|
●
|
been
found by a court of competent jurisdiction (in a civil action), the Securities Exchange Commission, or the Commodity Futures
Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed,
suspended, or vacated.
|
We
do not have standing audit, nominating, or compensation committees. Currently, our entire Board of Directors is responsible for
the functions that would otherwise be handled by these committees.
Code
of Ethics
Our
Board of Directors will adopt a new code of ethics that applies to all of our directors, officers, and employees, including our
principal executive officer, principal financial officer, and principal accounting officer. The new code will address, among other
things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure
requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of violations of
the code.
Audit
Committee Financial Expert
Our
entire Board of Directors currently acts as our audit committee. We do not currently have an independent member of our Board
of Directors who qualifies as an audit committee financial expert as defined in Item 407(e)(5) of Regulation
S-K.
Item
11. Executive Compensation.
The
following table sets forth information concerning cash and non-cash compensation paid by us to our Chief Executive Officer for
each of the two years ended December 31, 2019 and 2020. No employee or independent contractor received compensation in excess
of $100,000 for either of those two years.
Name and
Principal
Position
|
|
Year
Ended
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
M. Fogassa
|
|
12/31/2019
|
|
|
16,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,500
|
|
CEO
|
|
12/31/2020
|
|
|
37,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
37,500
|
|
Director
Compensation
The
following table sets forth a summary of compensation for the fiscal year ended December 31, 2020 that we paid to each director
other than its Chief Executive Officer, whose compensation is fully reflected in the Summary Compensation Table. We
do not sponsor a pension benefits plan, a non-qualified deferred compensation plan, or a non-equity incentive plan for directors;
therefore, these columns have been omitted from the following table. No other or additional compensation for services
were paid to any of the directors.
Name
|
|
Fees
Earned
or Paid
in Cash
($)
|
|
|
Option
Awards
($) (1)
|
|
|
Stock
Awards
($)
|
|
|
Total
($)
|
|
Roger Noriega
|
|
|
—
|
|
|
$
|
50,000
|
|
|
|
|
|
|
$
|
50,000
|
|
|
(1)
|
The
amounts in this column reflect the aggregate grant date fair value of stock options granted in 2020 to each director calculated
in accordance with FASB ASC Topic 718. See the notes to our consolidated financial statements included in this Annual
Report on Form 10-K for the year ended December 31, 2020 for a discussion of all assumptions made in the calculation of this amount.
|
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The
following table sets forth information regarding beneficial ownership of our Common Stock and Series A Preferred Stock as of March
26, 2021 by (i) any person or group with more than 5% of any class of voting securities, (ii) each director, (iii) our chief
executive officer and each other executive officer whose cash compensation for the most recent fiscal year exceeded $100,000 and
(iv) all executive officers and directors as a group. Except as indicated in the footnotes to this table and subject
to applicable community property laws, the persons named in the table to our knowledge have sole voting and investment power with
respect to all shares of securities shown as beneficially owned by them. The Certificate of Designations, Preferences and Rights
of our 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 Common Stock being entitled to their proportional share of the remaining
49% of the total votes based on their respective voting power.
|
|
|
|
|
|
|
|
|
Percentage of Voting
|
|
|
|
|
|
|
|
|
|
Power of all
Outstanding
|
Name and Address
(1)
|
|
Office
|
|
Shares Beneficially
Owned (2)(3)
|
|
|
Percent of Class (3)
|
|
Classes of
Company Stock (4)
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc Fogassa
|
|
Director, Chairman, Chief Executive Officer, Chief Financial Officer, and Treasurer
|
|
|
323,739,052
|
|
|
12.70%
|
|
6.22%
|
|
|
|
|
|
|
|
|
|
|
|
Ambassador Roger Noriega
|
|
Director
|
|
|
113,269,436
|
|
|
4.34%
|
|
2.12%
|
|
|
|
|
|
|
|
|
|
|
|
Brian Bernier
|
|
Vice-President, Business Development and Investor Relations
|
|
|
28,685,962
|
|
|
1.15%
|
|
0.56%
|
|
|
|
|
|
|
|
|
|
|
|
Joel Monteiro, Esq.
|
|
Vice-President, Administration and Operations
|
|
|
7,776,033
|
|
|
0.31%
|
|
0.15%
|
|
|
|
|
|
|
|
|
|
|
|
Areli Nogueira
|
|
Vice-President, Mineral Exploration
|
|
|
2,250,343
|
|
|
0.09%
|
|
0.04%
|
|
|
|
|
|
|
|
|
|
|
|
All executive officers and directors as a group (4 people)
|
|
|
|
|
475,720,826
|
|
|
17.80%
|
|
8.72%
|
|
|
|
|
|
|
|
|
|
|
|
Series A Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc Fogassa
|
|
Director
|
|
|
1
|
|
|
100.00%
|
|
51.00%
|
|
|
|
|
|
|
|
|
|
|
|
All executive officers and directors as a group (4 people)
|
|
|
|
|
1
|
|
|
100.00%
|
|
51.00%
|
|
(1)
|
The
mailing address of each of the officers, directors, and affiliates set forth below is c/o Brazil Minerals, Inc., Rua Vereador
João Alves Praes nº 95-A, Olhos DAgua, MG 39.398-000, Brazil.
|
|
(2)
|
Beneficial
ownership is determined in accordance with rules promulgated by the SEC.
|
|
(3)
|
Based
on 2,498,625,381 shares of common stock issued and outstanding as of March 26, 2021
and additional shares issuable in accordance with rules promulgated by the SEC.
|
|
(4)
|
The
holders of our Series A Stock vote together as a single class with the holders of our Common Stock, with the holders of Series
A Stock being entitled to 51% of the total votes on all matters regardless of the actual number of shares of Series 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. Based on their beneficial ownership of shares of Series A Stock and Common Stock as of
April 10, 2019, each person set forth in the table had the approximate percentage of the voting power of the common and preferred
stock voting together as a single class as of such date set forth opposite their name.
|
Item
13. Certain Relationships and Related Transactions, and Director Independence.
Director
Independence
We
believe that Ambassador Roger Noriega is independent as such term is defined with respect to directors by the NASDAQ
Stock Market Rules.
Item
14. Principal Accounting Fees and Services.
Audit
Fees
In
December 2020, the Company engaged BF Borgers CPA PC (“Borgers”) as the Company’s
independent registered public accounting firm for the audit of the Company’s financial statements as of December 31, 2020.
Borgers was also retained as the Company’s independent registered public accounting firm for the audit of the Company’s
financial statements as of December 31, 2019. The fee that was billed by Borgers for the audit of our financial statements as of
December 31, 2019 and for quarterly reviews during such year was $44,820. The Company expects that the total fees payable to Borgers
for the audit of the Company’s financial statements and for quarterly reviews during the year ended December 31, 2020 will
be $44,820.
Audit-Related
Fees
During
2019 or 2020, there were no fees paid to Borgers in connection with our compliance with Section 404 of the Sarbanes-Oxley Act
of 2002.
No
other fees were billed by Borgers for the last two years that were reasonably related to the performance of the audit or review
of our financial statements and not reported under Audit Fees above.
Tax
Fees
There
were no fees billed by Borgers during the last two fiscal years for professional services rendered for tax compliance, tax advice,
or tax planning. Accordingly, none of such services were approved pursuant to pre-approval procedures or permitted waivers thereof.
All
Other Fees
There
were no other non-audit-related fees billed to us by Borgers in 2019 or 2020.
Pre-Approval
Policies and Procedures
Engagement
of accounting services by us is not made pursuant to any pre-approval policies and procedures. Rather, we believe that our accounting
firm is independent because all of its engagements by us are approved by our Board of Directors prior to any such engagement.
Our
Board of Directors will meet periodically to review and approve the scope of the services to be provided to us by its independent
registered public accounting firm, as well as to review and discuss any issues that may arise during an engagement. The Board
is responsible for the prior approval of every engagement of our independent registered public accounting firm to perform audit
and permissible non-audit services for us, such as quarterly financial reviews, tax matters, and consultation on new accounting
and disclosure standards.
Before
the auditors are engaged to provide those services, our Chief Financial Officer and Controller will make a recommendation to the
Board of Directors regarding each of the services to be performed, including the fees to be charged for such services. At the
request of the Board of Directors, the independent registered public accounting firm and/or management shall periodically report
to the Board of Directors regarding the extent of services being provided by the independent registered public accounting firm,
and the fees for the services performed to date.
PART
IV
Item
15. Exhibits, Financial Statement Schedules
(a)
|
Documents
filed as part of this report.
|
|
|
|
|
(i)
|
Financial
Statements - see Item 8. Financial Statements and Supplementary Data
|
|
|
|
|
(ii)
|
Financial
Statement Schedules – None
|
|
|
|
|
|
(Financial
statement schedules have been omitted either because they are not applicable, not required, or the information required to
be set forth therein is included in the financial statements or notes thereto.)
|
|
|
|
(iii)
|
Report
of Independent Registered Public Accounting Firm.
|
|
|
|
(iv)
|
Notes
to Financial Statements.
|
|
|
(b)
|
Exhibits
|
|
|
|
The
exhibits listed on the accompanying Exhibit Index are filed as part of this Annual Report.
|
BRAZIL
MINERALS, INC.
|
|
TABLE
OF CONTENTS
|
DECEMBER
31, 2020
|
Report
of Independent Registered Public Accounting Firm
To the shareholders
and the board of directors of Brazil Minerals, Inc.
Opinion on the
Financial Statements
We have audited the
accompanying consolidated balance sheets of Brazil Minerals, Inc. (the "Company") as of December 31, 2020 and 2019, the
related consolidated statements of operations and comprehensive loss, stockholders' equity (deficit), and cash flows for each of
the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended
December 31, 2020, in conformity with accounting principles generally accepted in the United States.
Going Concern Uncertainty
The accompanying financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in
Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of
our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion.
Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit
Matter
The critical audit
matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication
of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on
the accounts or disclosures to which they relate.
Valuation of long-lived
assets
As described in the
Note 1 to the financial statements, the Company continually monitors events and changes in circumstances that could indicate carrying
amounts of long-lived assets, including property and equipment and definite-life intangible assets, may not be recoverable. In
addition, the Company review the impairment of indefinite-life intangible assets at least annually, or more frequent when impairment
indicators are present. As of December 31, 2020, carrying value of property and equipment and intangible assets were $89,726 and
$407,467, respectively.
Auditing the valuation of long-lived assets
involved complex judgment due to the significant estimation required in determining the recoverability or fair value of the long-lived
assets. Specifically, the cash flow forecasts were sensitive to significant assumptions about future market and economic conditions.
Significant assumptions used in the Company’s fair value estimates included sales volume, pricing, cost of labor, marketing
spending, general and administrative expenses, tax rates, as applicable.
We obtained an understanding of the controls
over the Company’s annual impairment assessments for long-lived assets and tested the future cash flows of the long-lived
assets based on our risk assessments. Our audit procedures included, among others, comparing significant inputs to observable third
party and industrial sources, and evaluating the reasonableness of management’s projected financial information by comparing
to observable average market prices of the Company’s products. We reviewed most recent available technical reports about
the Company’s mineral projects. We performed sensitivity analyses of significant assumptions to evaluate the change in the
cash flow or fair value of the long-lived assets and assessed the historical accuracy of management’s estimates. We also
assessed the Company’s disclosure of its annual impairment assessments included in Note 1.
/s/ BF Borgers CPA
PC
We have served as
the Company's auditor since 2015.
Lakewood, Colorado
March 31, 2021
BRAZIL
MINERALS, INC.
|
CONSOLIDATED
BALANCE SHEETS
|
AS
OF DECEMBER 31, 2020 AND 2019
|
|
|
December 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
253,598
|
|
|
$
|
151,088
|
|
Accounts receivable, net
|
|
|
20,106
|
|
|
|
—
|
|
Taxes recoverable
|
|
|
17,726
|
|
|
|
22,853
|
|
Inventory
|
|
|
11,676
|
|
|
|
15,054
|
|
Deposits and advances
|
|
|
2,039
|
|
|
|
4,782
|
|
Total current assets
|
|
|
305,145
|
|
|
|
193,777
|
|
Property and equipment, net
|
|
|
89,276
|
|
|
|
172,802
|
|
Intangible assets, net
|
|
|
407,467
|
|
|
|
509,862
|
|
Equity investments
|
|
|
150,000
|
|
|
|
150,000
|
|
Total assets
|
|
$
|
951,888
|
|
|
$
|
1,026,441
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
652,119
|
|
|
$
|
650,141
|
|
Convertible notes payable, net of debt discounts totaling $0 and $153,000, respectively
|
|
|
872,720
|
|
|
|
824,614
|
|
Loans payable
|
|
|
235,308
|
|
|
|
209,128
|
|
Related party notes and other payables, net of debt discounts totaling $0 and $96,270, respectively
|
|
|
566,743
|
|
|
|
470,473
|
|
Total current liabilities
|
|
|
2,326,890
|
|
|
|
2,154,356
|
|
Other noncurrent liabilities
|
|
|
121,250
|
|
|
|
192,729
|
|
Total liabilities
|
|
|
2,448,140
|
|
|
|
2,347,085
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
Series A preferred stock, $0.001 par value. 10,000,000 shares authorized; 1 share issued and outstanding as of December 31, 2020 and 2019, respectively
|
|
|
1
|
|
|
|
1
|
|
Common stock, $0.001 par value. 2,500,000,000 shares authorized; 1,997,930,297 and 1,132,435,380 shares issued and outstanding as of December 31, 2020 and 2019, respectively
|
|
|
1,997,930
|
|
|
|
1,132,435
|
|
Additional paid-in capital
|
|
|
47,489,116
|
|
|
|
47,724,570
|
|
Accumulated other comprehensive loss
|
|
|
(775,113
|
)
|
|
|
(580,957
|
)
|
Accumulated deficit
|
|
|
(52,185,071
|
)
|
|
|
(51,043,408
|
)
|
Total Brazil Minerals, Inc. stockholders’ deficit
|
|
|
(3,473,137
|
)
|
|
|
(2,767,359
|
)
|
Non-controlling interest
|
|
|
1,976,885
|
|
|
|
1,446,715
|
|
Total stockholders’ deficit
|
|
|
(1,496,252
|
)
|
|
|
(1,320,644
|
)
|
Total liabilities and stockholders’ deficit
|
|
|
951,888
|
|
|
$
|
1,026,441
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
BRAZIL
MINERALS, INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
|
|
|
Year Ended
December 31,
|
|
Year Ended
December 31,
|
|
|
2020
|
|
2019
|
Revenue
|
|
$
|
23,446
|
|
|
$
|
15,393
|
|
Cost of revenue
|
|
|
129,943
|
|
|
|
182,168
|
|
Gross loss
|
|
|
(106,497
|
)
|
|
|
(166,775
|
)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
170,071
|
|
|
|
134,770
|
|
General and administrative
|
|
|
551,584
|
|
|
|
489,877
|
|
Compensation and related costs
|
|
|
329,044
|
|
|
|
306,827
|
|
Stock based compensation
|
|
|
124,357
|
|
|
|
166,095
|
|
Total operating expenses
|
|
|
1,175,056
|
|
|
|
1,097,569
|
|
Loss from operations
|
|
|
(1,281,553
|
)
|
|
|
(1,264,344
|
)
|
Other expense (income):
|
|
|
|
|
|
|
|
|
Interest on promissory notes
|
|
|
178,043
|
|
|
|
167,551
|
|
Amortization of debt discounts and other fees
|
|
|
249,270
|
|
|
|
587,198
|
|
Extinguishment of debt
|
|
|
—
|
|
|
|
67,694
|
|
Forgiveness of accrued interest payable on note payable
|
|
|
(238,151
|
)
|
|
|
—
|
|
Loss on share exchange agreement with related party
|
|
|
76,926
|
|
|
|
—
|
|
Other expense (income)
|
|
|
(1,606
|
)
|
|
|
(906
|
)
|
Total other expense (income)
|
|
|
264,482
|
|
|
|
821,537
|
|
Loss before provision for income taxes
|
|
|
(1,546,035
|
)
|
|
|
(2,085,881
|
)
|
Provision for income taxes
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
|
(1,546,035
|
)
|
|
|
(2,085,881
|
)
|
Loss attributable to non-controlling interest
|
|
|
(404,372
|
)
|
|
|
(223,804
|
)
|
Net loss attributable to Brazil Minerals, Inc. stockholders
|
|
$
|
(1,141,663
|
)
|
|
$
|
(1,862,077
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
|
|
|
|
|
|
|
Net loss per share attributable to Brazil Minerals, Inc. common stockholders
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
1,271,251,526
|
|
|
|
802,114,793
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,546,035
|
)
|
|
$
|
(2,085,881
|
)
|
Foreign currency translation adjustment
|
|
|
(134,914
|
)
|
|
|
(14,852
|
)
|
Comprehensive loss
|
|
|
(1,680,949
|
)
|
|
|
(2,100,733
|
)
|
Comprehensive loss attributable to noncontrolling interests
|
|
|
(345,130
|
)
|
|
|
(223,804
|
)
|
Comprehensive loss attributable to Brazil Minerals, Inc. stockholders
|
|
$
|
(1,335,819
|
)
|
|
$
|
(1,876,929
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
BRAZIL
MINERALS, INC.
|
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
|
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Total
|
|
|
Series
A
|
|
|
|
|
|
Additional
|
|
Other
|
|
|
|
|
|
Stockholders’
|
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Paid-in
|
|
Comprehensive
|
|
Accumulated
|
|
Noncontrolling
|
|
Equity
|
|
|
Shares
|
|
Value
|
|
Shares
|
|
Value
|
|
Capital
|
|
Loss
|
|
Deficit
|
|
Interests
|
|
(Deficit)
|
Balance, December 31, 2018
|
|
|
1
|
|
|
$
|
1
|
|
|
|
332,260,644
|
|
|
$
|
332,260
|
|
|
$
|
46,771,464
|
|
|
$
|
(566,105
|
)
|
|
$
|
(49,181,331
|
)
|
|
$
|
1,369,081
|
|
|
$
|
(1,274,630
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in connection with sales made under private offerings
|
|
|
—
|
|
|
|
—
|
|
|
|
235,584,906
|
|
|
|
235,585
|
|
|
|
(112,085
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
123,500
|
|
Issuance of common stock in connection with the exercise of common stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
61,000,000
|
|
|
|
61,000
|
|
|
|
(60,590
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
410
|
|
Issuance of common stock in exchange for consulting, professional and other services
|
|
|
—
|
|
|
|
—
|
|
|
|
1,787,041
|
|
|
|
1,787
|
|
|
|
2,540
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
9,327
|
|
Issuance of common stock options in lieu of cash for extinguishment of convertible notes with related party
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
269,934
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
269,934
|
|
Conversion of convertible debenture(s) and other indebtedness into common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
501,802,789
|
|
|
|
501,803
|
|
|
|
(273,205
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
228,598
|
|
Recognition of beneficial conversion features related to convertible debentures
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
599,355
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
599,355
|
|
Stock based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
166,095
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
166,095
|
|
Change in foreign currency translation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(14,852
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(14,852
|
)
|
Sale of Jupiter Gold common stock in connection with equity offerings
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
260,689
|
|
|
|
260,689
|
|
Issuance of common stock purchase warrants in connection with sales of Jupiter Gold common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
361,062
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35,749
|
|
|
|
396,811
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,862,077
|
)
|
|
|
(223,804
|
)
|
|
|
(2,085,881
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
1
|
|
|
$
|
1
|
|
|
|
1,132,435,380
|
|
|
$
|
1,132,435
|
|
|
$
|
47,724,570
|
|
|
$
|
(580,957
|
)
|
|
$
|
(51,043,408
|
)
|
|
$
|
1,446,715
|
|
|
$
|
(1,320,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in connection with sales made under private offerings
|
|
|
—
|
|
|
|
—
|
|
|
|
420,000,000
|
|
|
|
420,000
|
|
|
|
(100,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
320,000
|
|
Issuance of common stock in connection with the exercise of common stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
161,636,427
|
|
|
|
161,636
|
|
|
|
(161,636
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of common stock in exchange for consulting, professional and other services
|
|
|
—
|
|
|
|
—
|
|
|
|
32,565,515
|
|
|
|
32,566
|
|
|
|
11,092
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
43,658
|
|
Issuance of common stock in connection with share exchange agreement with related party
|
|
|
—
|
|
|
|
—
|
|
|
|
53,947,368
|
|
|
|
53,947
|
|
|
|
22,979
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
76,926
|
|
Issuance of common stock to related parties in lieu of cash for loans payable and other accrued obligations
|
|
|
—
|
|
|
|
—
|
|
|
|
200,000
|
|
|
|
200
|
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
280
|
|
Conversion of convertible debenture(s) and other indebtedness into common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
397,145,607
|
|
|
|
397,146
|
|
|
|
(232,326
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
164,820
|
|
Exchange of common stock for Jupiter Gold common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
(200,000,000
|
)
|
|
|
(200,000
|
)
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
—
|
|
Stock based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
124,357
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
124,357
|
|
Change in foreign currency translation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(194,156
|
)
|
|
|
—
|
|
|
|
59,242
|
|
|
|
(134,914
|
)
|
Sale of Jupiter Gold common stock in connection with equity offerings
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
525,000
|
|
|
|
525,000
|
|
Sale of Apollo Resources common stock in connection with equity offerings
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
250,300
|
|
|
|
250,300
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,141,663
|
)
|
|
|
(404,372
|
)
|
|
|
(1,546,035
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020
|
|
|
1
|
|
|
$
|
1
|
|
|
|
1,997,930,297
|
|
|
$
|
1,997,930
|
|
|
$
|
47,489,116
|
|
|
$
|
(775,113
|
)
|
|
$
|
(52,185,071
|
)
|
|
$
|
1,976,885
|
|
|
$
|
(1,496,252
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
BRAZIL
MINERALS, INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
|
|
|
Year Ended
December 31,
|
|
|
Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities of continuing operations:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,546,035
|
)
|
|
$
|
(2,085,881
|
)
|
Adjustments to reconcile net loss to cash used in operating activities:
|
|
|
|
|
|
|
|
|
Stock based compensation and services
|
|
|
168,015
|
|
|
|
175,422
|
|
Forgiveness of accrued interest payable on note payable
|
|
|
(238,151
|
)
|
|
|
—
|
|
Amortization of debt discounts
|
|
|
249,270
|
|
|
|
587,198
|
|
Convertible debt issued in satisfaction of other financing costs
|
|
|
22,314
|
|
|
|
18,981
|
|
Loss on share exchange agreement with related party
|
|
|
76,926
|
|
|
|
—
|
|
Loss on extinguishment of debt
|
|
|
—
|
|
|
|
67,694
|
|
Depreciation and amortization
|
|
|
47,765
|
|
|
|
63,457
|
|
Provision for excess or obsolete inventory
|
|
|
—
|
|
|
|
17,166
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(30,432
|
)
|
|
|
488
|
|
Deposits and advances
|
|
|
1,698
|
|
|
|
(1,285
|
)
|
Accounts payable and accrued expenses
|
|
|
84,776
|
|
|
|
140,555
|
|
Accrued salary due to officer
|
|
|
195,786
|
|
|
|
213,322
|
|
Other noncurrent liabilities
|
|
|
(28,713
|
)
|
|
|
11,811
|
|
Net cash provided by (used in) operating activities
|
|
|
(996,781
|
)
|
|
|
(791,072
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisition of capital assets
|
|
|
(1,902
|
)
|
|
|
(677
|
)
|
Increase in intangible assets
|
|
|
(11,741
|
)
|
|
|
—
|
|
Net cash provided by (used in) investing activities
|
|
|
(13,643
|
)
|
|
|
(677
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repayment of loans from officer
|
|
|
(16,931
|
)
|
|
|
(96,366
|
)
|
Net proceeds from sale of common stock
|
|
|
320,000
|
|
|
|
123,910
|
|
Proceeds from sale of subsidiary common stock to noncontrolling interests
|
|
|
775,300
|
|
|
|
657,500
|
|
Proceeds from convertible notes payable
|
|
|
—
|
|
|
|
276,000
|
|
Proceeds from loans payable
|
|
|
26,180
|
|
|
|
202,920
|
|
Repayment of loans payable
|
|
|
—
|
|
|
|
(222,112
|
)
|
Net cash provided by (used in) financing activities
|
|
|
1,104,549
|
|
|
|
941,852
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents
|
|
|
8,385
|
|
|
|
(1,422
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
|
102,510
|
|
|
|
148,681
|
|
Cash and cash equivalents at beginning of period
|
|
|
151,088
|
|
|
|
2,407
|
|
Cash and cash equivalents at end of period
|
|
$
|
253,598
|
|
|
$
|
151,088
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
—
|
|
|
$
|
8,568
|
|
Cash paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Related party convertible note payable exchanged for stock options
|
|
$
|
—
|
|
|
$
|
202,240
|
|
Shares issued in connection with conversion of debt and accrued interest
|
|
$
|
164,820
|
|
|
$
|
228,598
|
|
Shares issued in connection with relief of related party payable
|
|
$
|
280
|
|
|
$
|
—
|
|
Conversion of related party payables into convertible notes payable
|
|
$
|
—
|
|
|
$
|
323,355
|
|
Discount for beneficial conversion features on convertible notes
|
|
$
|
—
|
|
|
$
|
276,000
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
BRAZIL
MINERALS, INC.
|
NOTES
TO THE 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
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,
2020 and 2019, the consolidated financial statements include the accounts of the Company; its 99.99% owned subsidiary, BMIX Participações
Ltda. (BMIXP), which includes the accounts of BMIXPs wholly-owned subsidiary, Mineração Duas Barras
Ltda. (MDB), and BMIXPs 50% owned subsidiary, RST Recursos Minerais Ltda. (RST); its 99.99% owned
subsidiary, Hercules Resources Corporation (HRC), which includes the accounts of HRCs 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 10.6% equity interest in Jupiter Gold Corporation
(Jupiter Gold), which includes the accounts of Jupiter Golds 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 Companys 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
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 Companys 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.
BRAZIL
MINERALS, INC.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
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 Companys 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, 2020 and 2019, the Companys derivative liabilities were considered a level 2 liability. See Note 4 for a discussion
regarding the determination of the fair market value. The Company does not have any level 3 assets or liabilities.
The
Companys 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.
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. The Companys bank accounts are deposited in FDIC insured institutions.
Funds held in U.S. banks are insured up to $250,000 and funds held in Brazilian banks are insured up to $250,000 Brazilian Reais
(translating into approximately $48,107 as of December 31, 2020).
Accounts
Receivable
Accounts
receivable are customer obligations due under normal trade terms which are recorded at net realizable value. The Company establishes
an allowance for doubtful accounts based on managements assessment of the collectability of trade receivables. A considerable
amount of judgment is required in assessing the amount of the allowance. The Company makes judgments about the creditworthiness
of each customer based on ongoing credit evaluations and monitors current economic trends that might impact the level of credit
losses in the future. If the financial condition of the customers were to deteriorate, resulting in their inability to make payments,
a specific allowance will be required.
Recovery
of bad debt amounts previously written off is recorded as a reduction of bad debt expense in the period the payment is collected.
If the Companys actual collection experience changes, revisions to its allowance may be required. After all attempts to
collect a receivable have failed, the receivable is written off against the allowance.
Inventory
Inventory
for the Company consists of ore stockpile, containing auriferous and diamondiferous gravel, which after processing in a recovery
plant yields diamonds and gold, and is stated at lower of cost or market. No value was placed on sand. The amount of any write-down
of inventories to net realizable value and all losses, are recognized in the period the write-down of loss occurs. At December
31, 2020 and 2019, inventory consisted primarily of rough ore stockpiled for further gold and diamonds recovery. During the years
ended December 31, 2020 and 2019, the Company recorded write-downs of $0 and $17,166, respectively, against the value of its inventory.
Taxes Receivable
The
Company records a receivable for value added taxes receivable from Brazilian authorities on goods and services
purchased by its Brazilian subsidiaries. The Company intends to recover the taxes through the acquisition of capital equipment
from sellers who accept tax credits as payments.
BRAZIL
MINERALS, INC.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
Property
and Equipment
Property
and equipment are stated at cost, net of accumulated depreciation. 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 four 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. Although the Company has taken steps to verify title to mineral
properties in which it has an interest, these procedures do not guarantee the Companys rights. Such properties may be subject
to prior agreements or transfers and title may be affected by undetected defects.
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, 2020 and 2019, the
Company did not recognize any impairment losses related to mineral properties held.
Intangible
Assets
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 awarded by the Brazilian national mining department and held by the Companys subsidiaries.
Impairment of
Intangible Assets with Indefinite Useful Lives
The Company accounts
for intangible assets in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill
and Other (“ASC 350”). ASC 350 requires that intangible assets with indefinite useful lives no longer be amortized,
but instead be evaluated for impairment at least annually. On an annual basis, in the fourth quarter of the fiscal year, management
reviews intangible assets with indefinite useful lives for impairment by first assessing qualitative factors to determine whether
the existence of events or circumstances makes it more-likely-than-not that the fair value of an intangible asset is less than
its carrying amount. If it is determined that it is more-likely-than-not that the fair value of an intangible asset is less than
its carrying amount, the intangible asset is further tested for impairment by comparing the carrying amount to its estimated fair
value using a discounted cash flow. Impairment, if any, is measured as the amount by which an indefinite-lived intangible asset’s
carrying amount exceeds its fair value.
Application of impairment
tests requires significant management judgment, including the determination of fair value of each indefinite-lived intangible
asset. Judgment applied when performing the qualitative analysis includes consideration of macroeconomic, industry and market
conditions, overall financial performance of the entity, composition, or strategy changes affecting the recoverability of asset
groups. Judgments applied when performing the quantitative analysis includes estimating future cash flows, determining appropriate
discount rates and making other assumptions. Changes in these judgments, estimates and assumptions could materially affect the
determination of fair value for each indefinite-lived intangible asset.
Impairment
of Long-Lived Assets
For
long-lived assets, such as property and equipment and intangible assets subject to amortization, the Company 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, the Company 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.
Convertible
Instruments
The
Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 470-20, Debt
with Conversion and Other Options.
Applicable
GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative
financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics
and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks
of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is
not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate
instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
BRAZIL
MINERALS, INC.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
The
Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated
from their host instruments) by recording, when necessary, discounts to convertible notes for the intrinsic value of conversion
options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment
date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements
are amortized over the term of the related debt to their stated date of redemption.
Variable
Interest Entities
The
Company determines at the inception of each arrangement whether an entity in which the Company holds an investment or in which
the Company has other variable interests in is considered a variable interest entity. The Company consolidates VIEs when it is
the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the
power to make decisions that most significantly affect the economic performance of the VIE; and (2) has the obligation to absorb
losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, the Company
assesses whether any changes in the interest or relationship with the entity affect the determination of whether the entity is
still a VIE and, if so, whether the Company is the primary beneficiary. If the Company is not the primary beneficiary in a VIE,
the Company accounts for the investment under the equity method or cost method in accordance with the applicable GAAP.
The
Company has concluded that Apollo Resources, Jupiter Gold and their subsidiaries
are VIEs in accordance with applicable accounting standards and guidance; and although the operations of Apollo Resources and
Jupiter Gold are independent of the Company, through governance rights, the Company has the power to direct the activities that
are most significant to Apollo Resources and Jupiter Gold. Therefore, the Company concluded that it is the primary beneficiary
of both Apollo Resources and Jupiter Gold.
Revenue
Recognition
The
Company recognizes revenue under ASC Topic 606, Revenue from Contracts with Customers (ASC 606). 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 606s 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
entitys promise to transfer the good or service to the customer is separately identifiable from other promises in the contract
(i.e.,
|
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.
BRAZIL
MINERALS, INC.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
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.
Costs
of Goods Sold
Included
within costs of goods sold are the costs of cutting and polishing rough diamonds and costs of production such as diesel fuel,
labor, and transportation.
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 employees 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 managements
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.
On
June 20, 2018, the FASB issued ASU 2018-07 which simplifies the accounting for share-based payments granted to nonemployees for
goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements
for share-based payments granted to employees. Equity classified share-based payments for employees was fixed at the time of grant.
Equity-classified nonemployee share-based payment awards are measured at the grant date of the award which is the same as share-based
payments for employees. The Company adopted the requirements of the new rule as of January 1, 2019, the effective date of the
new guidance.
BRAZIL
MINERALS, INC.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
Foreign
Currency
The
Companys foreign subsidiaries use a local currency as the 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. Net foreign currency transaction
losses included in the Companys consolidated statements of operations were negligible for all periods presented.
Income
Taxes
The
Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset
and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences,
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. As
of December 31, 2020 and 2019, the Companys deferred tax assets had a full valuation allowance.
Under
ASC 740, a tax position is recognized as a benefit only if it is more likely than not that the tax position would
be sustained in a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is
greater than 50% likely of being realized on examination. For tax positions not meeting the more likely than not test,
no tax benefit is recorded. The Company has identified the United States Federal tax
returns as its major tax jurisdiction.
On
December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (TCJA), which instituted fundamental changes
to the taxation of multinational corporations, including a reduction the U.S. corporate income tax rate to 21% beginning in 2018.
The
TCJA also requires a one-time transition tax on the mandatory deemed repatriation of the cumulative earnings of certain of the
Companys foreign subsidiaries as of December 31, 2017. To determine the amount of this transition tax, the Company must determine
the amount of earnings generated since inception by the relevant foreign subsidiaries, as well as the amount of non-U.S. income
taxes paid on such earnings, in addition to potentially other factors. The Company believes that no such tax will be due since
its Brazilian subsidiaries have, when required, paid taxes locally and that they have incurred a cumulative operating deficit
since inception.
Basic
Income (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, 2020, the Companys
potentially dilutive securities relate to common stock issuable in connection with convertible notes payable, options and warrants.
As of December 31, 2020, if all holders of preferred stock, convertible notes payable, options and warrants exercised their right
to convert their securities to common stock, the common stock issuable would be in excess of the Companys authorized, but unissued
shares of common stock.
Other
Comprehensive Income
Other
comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events
and circumstances from non-owner sources, other than net income and including foreign currency translation adjustments.
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.
BRAZIL
MINERALS, INC.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
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 Entitys Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in
an Entitys 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 entitys
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 Companys 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, Net
The
following table sets forth the components of the Companys property and equipment at December 31, 2020 and December 31, 2019:
|
|
December 31, 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
|
|
$
|
3,880
|
|
|
$
|
(573
|
)
|
|
$
|
3,307
|
|
|
$
|
2,144
|
|
|
$
|
(739
|
)
|
|
$
|
1,405
|
|
Machinery and equipment
|
|
|
348,376
|
|
|
|
(271,107
|
)
|
|
|
77,269
|
|
|
|
435,659
|
|
|
|
(298,845
|
)
|
|
|
136,814
|
|
Vehicles
|
|
|
127,416
|
|
|
|
(118,716
|
)
|
|
|
8,700
|
|
|
|
164,275
|
|
|
|
(129,692
|
)
|
|
|
34,583
|
|
Total fixed assets
|
|
$
|
479,672
|
|
|
$
|
(390,396
|
)
|
|
$
|
89,276
|
|
|
$
|
602,078
|
|
|
$
|
(429,276
|
)
|
|
$
|
172,802
|
|
For
the years ended December 31, 2020 and 2019, the Company recorded depreciation expense of $47,765 and $63,457, respectively.
Intangible
Assets
Intangible
assets consist of mining rights are not amortized as the mining rights are perpetual. The carrying value was $407,467
and $509,862 at December 31, 2020 and 2019, respectively.
BRAZIL
MINERALS, INC.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
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.
Accounts
Payable and Accrued Liabilities
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Accounts payable and other accruals
|
|
$
|
327,704
|
|
|
$
|
153,693
|
|
Accrued interest
|
|
|
324,415
|
|
|
|
496,448
|
|
Total
|
|
$
|
652,119
|
|
|
$
|
650,141
|
|
NOTE
3 – CONVERTIBLE PROMISSORY NOTES PAYABLE
The
following tables set forth the components of the Companys convertible debentures as of December 31, 2020 and December 31,
2019:
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Convertible notes payable – fixed conversion price
|
|
$
|
244,000
|
|
|
|
244,000
|
|
Convertible notes payable – variable conversion price
|
|
|
628,720
|
|
|
|
733,614
|
|
Less: loan discounts
|
|
|
(—
|
)
|
|
|
(153,000
|
)
|
Total convertible notes, net
|
|
$
|
872,720
|
|
|
$
|
824,614
|
|
The
following table sets forth a summary of change in our convertible notes payable for the years ended December 31, 2020 and 2019:
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Beginning balance
|
|
$
|
824,614
|
|
|
|
866,624
|
|
Amortization of debt discounts associated with convertible debt
|
|
|
153,000
|
|
|
|
137,300
|
|
Conversion of convertible note principal into common stock
|
|
|
(127,208
|
)
|
|
|
(198,291
|
)
|
Increase in principal amounts outstanding due to lender adjustments per terms of the note agreements
|
|
|
22,314
|
|
|
|
18,981
|
|
Issuance of convertible notes payable
|
|
|
—
|
|
|
|
282,000
|
|
Loan discounts recorded related to issuance of convertible notes payable
|
|
|
(—
|
)
|
|
|
(282,000
|
)
|
Total convertible notes, net
|
|
$
|
872,720
|
|
|
$
|
824,614
|
|
BRAZIL
MINERALS, INC.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
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 Companys 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 December 31, 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. 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. Interest was payable on September 30, 2014 and on the maturity date. As of December
31, 2020, the Company has accrued interest payable totaling $170,258 in connection with this note.
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. During
the year ended December 31, 2020, the Company issued 238,500,335 shares of its common stock upon the conversion of $75,783 and $23,519,
respectively, in note principal and accrued interest. As of December 31, 2020, the outstanding principal balance on these notes
total $115,500, 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 year ended December
31, 2020, the Company issued 158,645,272 shares of its common stock upon the conversion of $51,425 and $ 14,097,
respectively, in note principal and accrued interest. As of December 31, 2020, the outstanding principal balance on these notes
total $102,000, 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 Companys
common stock over the previous 20 days. In addition, each notes 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 December 31, 2020, the outstanding principal balance on these notes total $129,220, and all discounts were fully amortized.
During
the year ended December 31, 2020, 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 Companys common stock over
the previous 20 days. In addition, each notes 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 December 31, 2020, the outstanding principal balance on these notes total $282,000, and all discounts were fully amortized.
BRAZIL
MINERALS, INC.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
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 December 31, 2020, the Company has accrued interest payable totaling $128,904 in connection with these variable convertible
notes.
During
the years ended December 31, 2020 and 2019, $153,000 and $137,300 of the discounts were amortized to interest expense, respectively.
During
the years ended December 31, 2020 and 2019, the Company issued 397,145,607 and 501,802,789 shares of common stock upon conversion
of $164,815 and $228,598, respectively, in notes payable and accrued interest.
Future
Potential Dilution
Most
of the Companys convertible notes payable contain adjustable conversion terms with significant discounts to market. As of December
31, 2020, the Companys convertible notes are convertible into an aggregate of approximately 1,499,154,286 shares of common stock.
Due to the variable conversion prices on some of the Companys convertible notes, the number of common shares issuable is dependent
upon the traded price of the Companys common stock.
NOTE
4 – LOANS PAYABLE
During
the years ended December 31, 2020 and 2019, the Company received bridge loan proceeds aggregating $26,180 and $202,920, respectively,
from one lender in various transactions. The loans payable bear interest at 8.0% per annum. The loans are payable upon demand.
On
July 8, 2019, the Company repaid $222,112 of bridge loan principal and $17,888 of accrued interest.
As
of December 31, 2020 and 2019, the principal balance outstanding on the loans payable totaled
$235,308 and $209,128, respectively, and the Company accrued interest payable totaling $25,253 and $7,007, respectively, in connection
with the 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 December 31, 2020 and December 31, 2019 amounted to $121,250 and $192,729, respectively.
NOTE
6 – STOCKHOLDERS DEFICIT
Authorized
and Amendments
As
of December 31, 2020, the Company had 2,000,000,000 common shares authorized with a par value of $0.001 per share. On January
11, 2021, the Company amended its charter filed with the Secretary of State of Nevada to increase the number of authorized common
shares to 2,500,000,000 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
Companys 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.
BRAZIL
MINERALS, INC.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
Year
Ended December 31, 2020 Transactions
During
the year ended December 31, 2020, the Company received $320,000 in gross proceeds from the sale of 415,000,000 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 year ended December 31, 2020, the Company issued 32,565,515 shares of common stock valued at $43,658 to non-employees for
services rendered. Additionally, the Company issued 397,145,607 shares of common stock upon conversion of $164,820 in convertible
notes payable and accrued interest.
During
the year ended December 31, 2020, the Company exchanged 200,000,000 shares of common stock returned by an accredited investor
for 150,000 shares of Jupiter Golds common stock held as an investment by the Company. The Company used the quoted fair
value of each entitys 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.
Year
Ended December 31, 2019 Transactions
During
the year ended December 31, 2019, the Company received $652,500 in gross proceeds from the sale of units consisting of common
stock of its subsidiary, Jupiter Gold, and warrants to purchase the Companys common stock to accredited investors. In aggregate,
the securities the Company sold were 846,828 shares of Jupiter Gold and two-year warrants to purchase a total of 241,000,000 shares
of Brazil Minerals at prices ranging from $0.0012 to $0.004 per share.
During
the year ended December 31, 2019, the Company received $5,000 in gross proceeds from the sale of 10,000 shares of Jupiter Gold
common stock to an accredited investor.
During
the year ended December 31, 2019, the Company received $123,500 in gross proceeds from the sale of 235,584,906 shares of our common
stock to accredited investors.
During
the year ended December 31, 2019, the Company issued 501,802,789 shares of common stock upon conversion of $228,598 in convertible
notes payable and accrued interest.
During
the year ended December 31, 2019, the Company issued 1,787,041 shares of common stock valued at $4,327 in exchange for consulting,
professional and other services. Additionally, the Company issued 5,492 shares of Jupiter Gold common stock valued at $5,000 in
exchange for consulting, professional and other services.
Common
Stock Options
During
the year ended December 31, 2020, the Company granted options to purchase an aggregate of 43,915,500 shares of common stock to
non-management directors. The options were valued at $50,000 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 $0.0009 and
$0.0014, expected dividend yield of 0.0%, historical volatility calculated between 135.35% and 221.07%, risk-free interest rate
between 0.28% and 0.38%, and an expected term of 5 years.
During
the year ended December 31, 2019, the Company granted options to purchase an aggregate of 37,285,500 shares of common stock to
non-management directors. The options were valued at $50,000 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 ($0.0009 to $0.0037), expected
dividend yield of 0%, historical volatility calculated between a range of 199.2% to 223.2%, risk-free interest rate between a
range of 1.55% to 2.31%, and an expected term of 5 years.
As of December 31,
2020, the Company had 119,917,140 common stock options outstanding with a weighted average life of 3.6 years at an average exercise
price of $0.0025.
See Note 8
– Related Party Transactions for additional common stock option disclosures.
BRAZIL
MINERALS, INC.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
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 consolidated financial statements.
NOTE
8 - RELATED PARTY TRANSACTIONS
Chief
Executive Officer
The
following tables set forth the components of the Companys related party payables as of December 31, 2020 and December 31,
2019:
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
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
|
|
$
|
566,743
|
|
|
$
|
470,473
|
|
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 Companys 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 notes 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 December 31, 2020, all discounts were fully amortized.
On
April 7, 2019, the Companys 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 December 31,
2020, all discounts were fully amortized.
On
April 7, 2019, the Companys 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.
BRAZIL
MINERALS, INC.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
On
June 30, 2019, the Companys 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 year ended December 31, 2019, Jupiter Gold granted options to purchase an aggregate of 360,000 shares of its common stock
to Marc Fogassa at a price of $1.00 per share. The options were valued at $116,095 and recorded to stock-based compensation. The
options were valued using the Black-Scholes option pricing model with the following average assumptions: the Companys stock
price on the date of the grant ($0.275 to $1.125), expected dividend yield of 0%, historical volatility calculated between a range
of 63.1%, risk-free interest rate between a range of 1.39% to 2.56%, and an expected term of 5 years.
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. At 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. The impact of transaction on the Company’s accounts was eliminated in consolidation. On February
15, 2020, the Company converted the promissory note in return for 375,000 shares of Jupiter Gold common stock.
During the year ended December 31, 2020, Jupiter
Gold granted options to purchase an aggregate of 375,000 shares of its common stock to Marc Fogassa at prices ranging between $0.01
to $1.04 per share. The options were valued at $74,357 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 ($0.30 to $0.53), expected dividend yield of 0%, historical volatility calculated between a range of 63.1%, risk-free interest
rate between a range of 0.21% to 1.69%, and an expected term of 5 years.
As of December 31, 2020, Jupiter Gold had 2,295,000
common stock options outstanding with a weighted average life of 2.5 years at an average exercise price of $1.00.
Investment
in Ares Resources Corporations Common Stock
On
October 2, 2017, the Company entered into a share exchange agreement with 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. Refer to “Note 2 – Composition of Certain Financial Statement Items”
for additional information.
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 December 31, 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 CONSOLIDATED FINANCIAL STATEMENTS
|
|
NOTE
9 – RISKS AND UNCERTAINTIES
In
light of the SECs 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 March 31, 2021:
|
●
|
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 Companys 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 Companys 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
Companys 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 subsidiarys financial results
into U.S. dollars for purposes of reporting in the consolidated financial statements. The Companys 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 December 31, 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.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
|
BRAZIL
MINERALS, INC.
|
|
|
|
|
By:
|
/s/
Marc Fogassa
|
|
|
Marc
Fogassa
|
Date:
March 31, 2021
|
|
Chief
Executive Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Marc Fogassa
|
|
Chief
Executive Officer
|
|
March 31,
2021
|
Marc
Fogassa
|
|
and
Director; Chief Financial
|
|
|
|
|
Officer
and Chief Accounting Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Roger Noriega
|
|
Director
|
|
March
31, 2021
|
Roger
Noriega
|
|
|
|
|
EXHIBIT
INDEX
Exhibit
|
|
Number
|
Description
|
3.1
|
Articles of Incorporation of the Company filed with the Secretary of State of Nevada on December 15, 2011. Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 filed by the Company on April 6, 2012.
|
3.2
|
Certificate of Amendment to the Articles of Incorporation of the Company filed with the Secretary of State of the State of Nevada on December 18, 2012. Incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed with the Commission on December 26, 2012.
|
3.3
|
Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock filed with the Secretary of State of the State of Nevada on December 18, 2012. Incorporated by reference to Companys Current Report on Form 8-K filed with the Commission on December 26, 2012.
|
3.4
|
Certificate of Amendment to the Articles of Incorporation of the Company filed with the Secretary of State of the State of Nevada on December 24, 2012. Incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed with the Commission on January 28, 2013.
|
3.9
|
Amended and Restated By-laws of the Company. Incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed with the Commission on December 11, 2015.
|
3.10
|
Certificate of Amendment to the Articles of Incorporation of the Company filed with the Secretary of State of the State of Nevada on August 27, 2019. Incorporated by reference to Exhibit 3.11 to the Companys Annual Report on Form 10-K filed with the Commission on April 14, 2020.
|
3.11
|
Certificate
of Amendment to the Articles of Incorporation of the Company filed with the Secretary of State of the State of Nevada on July
16, 2020.*
|
4.1
|
Senior Secured Convertible Promissory Note of the Company dated January 8, 2014 in the principal amount of $244,000 to the order of Heather U. Baines and Lloyd McAdams AB Living Trust dated 8/1/2001. Incorporated by reference to Exhibit 4.4 to the 2013 10-K/A-1.
|
4.2
|
Warrant to Purchase 488,000 Shares of the Companys Common Stock Issued to Heather U. Baines and Lloyd McAdams AB Living Trust dated 8/1/2001on January 8, 2014. Incorporated by reference to Exhibit 4.8 to the 2013 10K/A-1.
|
4.3
|
Form of Convertible Redeemable Promissory from the Company to GW Holdings Group, LLC.. Incorporated by reference to Exhibit 4.31 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
|
10.1
|
Employment Agreement between the Company and Marc Fogassa. Incorporated by reference to Exhibit 10.6 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
|
10.2
|
Stock Purchase and Sale Agreement dated as of July 27, 2016 between the Company and Jupiter Gold Corporation (Jupiter Gold). Incorporated by reference to Exhibit 10.1 to the Jupiter Golds Registration Statement on Form F-1 filed with the Commission on December 1, 2016.
|
10.8
|
2017 Stock Incentive Plan. Incorporated by reference to Exhibit 4.1 of the Registration Statement on Form S-8 filed with the Commission on December 8, 2017.
|
21.1
|
Subsidiaries of the Company.*
|
31.1
|
Certification of the Chief Executive Officer pursuant to Section 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
31.2
|
Certification of Chief Financial Officer pursuant to Section 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
32.1
|
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 135, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
101*
|
Interactive
Data files pursuant to Rule 405 of Regulation S-T.
|
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