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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from ____________ to ____________
Commission
File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (IRS Employer | |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Indicate
by check mark whether the issuer (1) 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.
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).
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 | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
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. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Ticker symbol(s) | Name of each exchange on which registered | ||
OTCQB |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
APPLICABLE ONLY TO CORPORATE ISSUERS
As of August 12, 2022, the registrant had shares of common stock, par value $0.001 per share, issued and outstanding.
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
Item 1 FINANCIAL STATEMENTS
BRAZIL MINERALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, 2022 and December 31, 2021
| June 30, 2022 | December 31, 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Taxes recoverable | ||||||||
| Prepaid expenses | ||||||||
| Deposits and advances | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Equity investments | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Related party notes and other payables | ||||||||
| Total current liabilities | ||||||||
| Other noncurrent liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ deficit: | ||||||||
| Series A preferred stock, $ par value. shares authorized; share issued and outstanding as of June 30, 2022 and December 31, 2021 | ||||||||
| Series D preferred stock, $ par value. shares authorized; shares issued and outstanding as of June 30, 2022 and December 31, 2021 | ||||||||
| Common stock, $ par value. and shares authorized as of June 30 2022 and December 31, 2021, respectively; and shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| F-1 |
BRAZIL MINERALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
For the Three and Six Months Ended June 30, 2022 and 2021
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | ||||||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating expenses | ||||||||||||||||
| Professional fees | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Compensation and related costs | ||||||||||||||||
| Stock based compensation | ||||||||||||||||
| Other operating expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expense (income) | ||||||||||||||||
| Interest on promissory notes | ||||||||||||||||
| Amortization of debt discounts and other fees | ||||||||||||||||
| Extinguishment of debt | ||||||||||||||||
| Other expense (income) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other expense | ( | ) | ( | ) | ||||||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to stockholders | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Basic and diluted loss per share | ||||||||||||||||
| Net loss per share attributable to common stockholders | $ | $ | $ | $ | ||||||||||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| Comprehensive loss: | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Foreign currency translation adjustment | ||||||||||||||||
| Comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive loss attributable to noncontrolling interests | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive loss attributable to stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| F-2 |
BRAZIL MINERALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For the Three Months Ended June 30, 2022 and 2021
| Series A Preferred Stock | Series D Preferred Stock | Common Stock | Additional Paid-in | Accumulated
Other Comprehensive | Accumulated | Noncontrolling | Total
Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Capital | Loss | Deficit | Interests | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock in connection with sales made under private offerings | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the exercise of common stock options | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock warrants in connection with the issuance of convertible notes | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes and accrued interest payable into common stock | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series D Preferred Stock | Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Noncontrolling | Total
Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Capital | Loss | Deficit | Interests | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with sales made under private offerings | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Sale of Jupiter Gold common stock in connection with equity offerings | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Sale of Apollo Resources common stock in connection with equity offerings | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| F-3 |
BRAZIL MINERALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For the Six Months Ended June 30, 2022 and 2021
| Series A Preferred Stock | Series D Preferred Stock | Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Noncontrolling | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Capital | Loss | Deficit | Interests | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock in connection with sales made under private offerings | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with sales made under private offerings | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in exchange for consulting, professional and other services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock warrants in connection with the issuance of convertible notes | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes and accrued interest payable into common stock | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Sale of Jupiter Gold common stock in connection with equity offerings | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Sale of Apollo Resources common stock in connection with equity offerings | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series D Preferred Stock | Common Stock | Additional Paid-in | Accumulated
Other Comprehensive | Accumulated | Noncontrolling | Total
Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Capital | Loss | Deficit | Interests | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with sales made under private offerings | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Sale of Apollo Resources common stock in connection with equity offerings | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| F-4 |
BRAZIL MINERALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, 2022 and 2021
| Six months ended June 30 | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities of continuing operations: | ||||||||
| Net loss | $ | ( | ) | ( | ) | |||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Stock based compensation and services | ||||||||
| Amortization of debt discounts | ||||||||
| Common stock issued in satisfaction of other financing costs | ||||||||
| Convertible debt issued in satisfaction of other financing costs | ||||||||
| Loss on extinguishment of debt | ||||||||
| Depreciation and amortization | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Taxes recoverable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Deposits and advances | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Other noncurrent liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Acquisition of capital assets | ( | ) | ||||||
| Increase in intangible assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Loan from officer | ||||||||
| Net proceeds from sale of common stock | ||||||||
| Proceeds from sale of subsidiary common stock to noncontrolling interests | ||||||||
| Proceeds from convertible notes payable | ||||||||
| Repayment of convertible notes payable | ( | ) | ||||||
| Repayment of loans payable | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rates on cash and cash equivalents | ( | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Shares issued in connection with conversion of debt and accrued interest | $ | $ | ||||||
| Common stock warrants issued in connection with convertible promissory notes | $ | $ | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| F-5 |
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
Brazil Minerals, Inc. (“Brazil Minerals” or the “Company”) was incorporated as Flux Technologies, Corp. under the laws of the State of Nevada, U.S. on December 15, 2011. The Company changed its management and business on December 18, 2012, to focus on mineral exploration. Brazil Minerals, through subsidiaries, owns mineral rights in Brazil for lithium, nickel, rare earths, titanium, graphite, gold, diamonds, and sand, and through subsidiaries, iron, gold and quartzite.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”) and are expressed in United States dollars. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2022, and the results of operations and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2022 and 2021, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2022.
The
condensed consolidated financial statements include the accounts of the Company; its
All material intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results may differ from those estimates.
| F-6 |
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Going Concern
The condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has limited working capital, has incurred losses in each of the past two years, and has not yet received material revenues from sales of products or services. These factors create substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
The ability of the Company to continue as a going concern is dependent on the Company generating cash from its operations, the sale of its stock and/or obtaining debt financing. Historically, the Company has funded its operations primarily through the issuance of debt and equity securities. Management’s plan to fund its capital requirements and ongoing operations include the sale of of common stock in the Company, and, over time, generation of revenue from its mining operations and projects. Management’s secondary plan to cover any shortfall is selling common stock in Apollo Resources or Jupiter Gold that it owns. There can be no assurance the Company will be successful in these efforts.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations except as noted below:
In February 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.
| F-7 |
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS
Property and Equipment
The following table sets forth the components of the Company’s property and equipment at June 30, 2022 and December 31, 2021:
| June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||
| Cost | Accumulated Depreciation | Net
Book Value | Cost | Accumulated Depreciation | Net
Book Value | |||||||||||||||||||
| Computers and office equipment | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Machinery and equipment | ( | ) | ( | ) | ||||||||||||||||||||
| Vehicles | ( | ) | ( | ) | ||||||||||||||||||||
| Total fixed assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
For
the three and six months ended June 30, 2022, the Company recorded depreciation expense of $
Intangible Assets
Intangible
assets consisting of mining rights are not amortized as the mining rights are perpetual. The carrying value was $
Equity Investments without Readily Determinable Fair Values
On
October 2, 2017, the Company entered into an exchange agreement whereby it issued
shares of its common stock in exchange for
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 $
On
March 11, 2020, the Company issued 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 $
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
| F-8 |
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (CONTINUED)
Accounts Payable and Accrued Liabilities
| June 30, 2022 | December 31, 2021 | |||||||
| Accounts payable and other accruals | $ | $ | ||||||
| Mineral rights payable | ||||||||
| Accrued interest | ||||||||
| Total | $ | $ | ||||||
NOTE 3 – OTHER NONCURRENT LIABILITIES
Other
noncurrent liabilities are comprised solely of social contributions and other employee-related costs at operating subsidiaries located
in Brazil. The Company has been funding these amounts upon the termination of a worker or employee. The balance of these employee related
costs as of June 30, 2022 and December 31, 2021 amounted to $
NOTE 4 – STOCKHOLDERS’ EQUITY
Authorized and Amendments
As of June 30, 2022, the Company had shares of common stock authorized with a par value of $ per share.
| F-9 |
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 the Series A Stock provides that for so long as Series
A Stock is issued and outstanding, the holders of Series A Stock shall vote together as a single class with the holders of the
Company’s Common Stock, whereby the holders of
Six Months Ended June 30, 2022 Transactions
During
the six months ended June 30, 2022, the Company issued shares of common stock for gross proceeds of
$
Six Months Ended June 30, 2021 Transactions
During
the six months ended June 30, 2021, the Company issued shares of common stock for gross proceeds of $
Common Stock Options
During the six months ended June 30, 2022, the Company granted options to purchase an aggregate of shares of common stock to officers and non-management directors. The options were valued at $in total. The options were valued using the Black-Scholes option pricing model with the following average assumptions: the stock price on the date of the grant ranged from $ to $, expected dividend yield of %, historical volatility calculated between % and %, risk-free interest rate ranging between % and %, and an expected term of .
As of June 30, 2022, the Company has outstanding common stock options and warrants, with an average exercise price of $, an average time to expiration of years and an aggregated intrinsic value of $.
| F-10 |
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 – COMMITMENTS AND CONTINGENCIES
Operating Leases
The
Company leases office space in the U.S. for approximately $
NOTE 6 - RELATED PARTY TRANSACTIONS
Jupiter Gold Corporation
During the six months ended June 30, 2022, Jupiter Gold granted options to purchase an aggregate of shares of its common stock to Marc Fogassa at prices ranging between $ to $ per share. The options were valued at $ 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 which ranged from $ to $, expected dividend yield of %, historical volatility calculated at %, risk-free interest rate between a range of % to %, and an expected term between and .
Apollo Resource Corporation
During the six months ended June 30, 2022, Apollo Resources granted options to purchase an aggregate of shares of its common stock to Marc Fogassa at a price of $ per share. The options were valued at $ 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 which ranged from $ to $, expected dividend yield of %, historical volatility calculated at %, risk-free interest rate between a range of % to %, and an expected term between and
| F-11 |
BRAZIL MINERALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 – RISKS AND UNCERTAINTIES
Currency Risk
The Company operates primarily in Brazil which exposes it to currency risks. The Company’s business activities may generate intercompany receivables or payables that are in a currency other than the functional currency of the entity. Changes in exchange rates from the time the activity occurs to the time payments are made may result in the Company receiving either more or less in local currency than the local currency equivalent at the time of the original activity.
The Company’s condensed consolidated financial statements are denominated in U.S. dollars. Accordingly, changes in exchange rates between the applicable foreign currency and the U.S. dollar affect the translation of each foreign subsidiary’s financial results into U.S. dollars for purposes of reporting in the consolidated financial statements. The Company’s foreign subsidiaries translate their financial results from the local currency into U.S. dollars in the following manner: (a) income statement accounts are translated at average exchange rates for the period; (b) balance sheet asset and liability accounts are translated at end of period exchange rates; and (c) equity accounts are translated at historical exchange rates. Translation in this manner affects the shareholders’ equity account referred to as the foreign currency translation adjustment account. This account exists only in the foreign subsidiaries’ U.S. dollar balance sheets and is necessary to keep the foreign subsidiaries’ balance sheets in agreement.
NOTE 8 - SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to June 30, 2022 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.
| F-12 |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report.
This Quarterly Report contains forward-looking statements. Forward-looking statements for Brazil Minerals, Inc. reflect current expectations, as of the date of this Quarterly 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: 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.
Description of Business
We are a U.S. mineral exploration and mining company with projects and properties in essentially all battery metals to power the Green Energy Revolution – lithium, rare earths, nickel, cobalt, graphite, and titanium. Our current focus is on developing our hard-rock lithium project located in a premier pegmatitic district in Brazil – as lithium is essential for batteries in electric vehicles. Additionally, through subsidiaries, we participate in iron, gold, and quartzite projects. We also own multiple mining concessions for gold, diamond, and industrial sand.
All of our mineral projects and properties are located in Brazil and, as of the date of this Report, our mineral rights portfolio for battery metals includes approximately 62,926 acres (255 km2) for lithium, 30,009 acres (121 km2) for rare earths, 57,900 acres (234 km2) for nickel, 22,050 acres (89 km2) for titanium, and 14,507 acres (59 km2) for graphite. We believe that we have one of the largest battery metals exploration footprints among publicly listed companies.
Currently we are primarily focused on advancing and developing our hard-rock lithium project located in the state of Minas Gerais, Brazil, where some of our high-potential mineral rights are adjacent to or near large lithium deposits that belong to a large, publicly traded competitor. Our Minas Gerais Lithium Project is our largest endeavor and consists of 48 mineral rights spread over 46,659 acres (190 km2) and predominantly located within the Brazilian Eastern Pegmatitic Province which has been surveyed by the Brazilian Geological Survey and is known for the presence of hard rock formations known as pegmatites which contain lithium-bearing minerals such as spodumene and petalite. In general, lithium derived from pegmatites is less costly to purify for uses in high technology applications than lithium obtained from brine. Such applications include the battery supply chain for electric vehicles (“EVs”), an area of expected high growth for the next several decades.
We also own 44.41% of the shares of common stock of Apollo Resources Corporation (“Apollo Resources”), a private company currently primarily focused on the development of its initial iron mine, expected to start operations and revenues in early 2023. We also own approximately 24.56% of Jupiter Gold Corporation (“Jupiter Gold”), a company focused on the development of gold projects and a quartzite mine, and whose shares of common stock are quoted on the OTCQB under the symbol “JUPGF”. The results of operations from both Apollo Resources and Jupiter Gold are consolidated in our financial statements under U.S. GAAP.
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As the self-titled “Mineral Resources Company for the Green Energy Revolution,” we are deeply committed to Environmental, Social, and Corporate Governance (“ESG”) causes. We have an ESG Chief who coordinates our efforts in these important matters. Within the last few years, we planted more than 6,000 trees of diverse types for the benefit of local populations in areas in which we operate and constructed over 1,000 small retention walls to preserve and enhance dirt access roads used by such communities. Separately, many of our work needs have been specifically delegated to firms owned or managed by women and minorities.
We are an exploration stage company and we have no “reserves” as such term is defined by Regulation S-K, Subpart 1300 (“S-K 1300”).
Operational Update
During the second quarter of 2022 and continuing to date, we have significantly advanced our knowledge of the Neves Area, one of the 48 mineral rights that comprise our Minas Gerais Lithium Project. We have continuously drilled the Neves Area and have identified several spodumene bodies; spodumene is the main mineral containing lithium in hard rock pegmatitic projects such as ours. One of our latest drill holes yielded a zone of over 27 meters of spodumene, a result that our lithium experts qualified as very positive and indicative of the potential of the Neves Area. Geochemical results from Neves have included a reading of 2.86% Li2O. We have two qualified persons under S-K 1300 who are responsible for the technical advancement of our Minas Gerais Lithium Project. SLR Consulting Ltd., a premier independent company, is finalizing an initial report on the Neves Area.
Given our belief in the strength of our lithium holdings, and our desire to provide a clear message to our shareholders, and current and potential partners, we announced on July 18, 2022, that we will be changing our corporate name to Atlas Lithium Corporation, and such change is expected to take effect before the end of 2022.
As previously disclosed, we are actively working towards a desired uplisting to the Nasdaq Capital Market, and this process includes various steps, some of which are completed while others are in the process of being completed during the third quarter of 2022.
Results of Operations
Three Months Ended June 30, 2022 Compared to the Three Months ended June 30, 2021
Revenue for the three months ended June 30, 2022 totaled $2,367, compared to revenue of $1,645 during the three months ended June 30, 2021 representing an increase of 44%. This revenue comes from sales of industrial sand during the rainy season. Industrial sand is a residual business line as we are primarily focused on our lithium exploration as described above.
Cost of goods sold for the three months ended June 30, 2022 totaled $26,343, as compared to cost of goods sold of $24,105 during the three months ended June 30, 2021 representing a increase of 9%. Cost of goods sold is primarily comprised of labor, fuel, and repairs and maintenance on our mining equipment.
Gross loss for the three months ended June 30, 2022 totaled $23,976, compared to gross loss of $22,460 during the three months ended June 30, 2021, representing an increase of 6.75%.
Operating expenses for the three months ended June 30, 2022 totaled $989,294, compared to operating expenses of $740,540 during the three months ended June 30, 2021, representing an increase of 34%. The increase was mostly due to higher general and administrative expenses related to public company costs and higher compensation cost of officers and directors.
As a result, we incurred a net loss attributable to our stockholders of $871,016, or $0.00 per share, for the three months ended June 30, 2022, compared to a net loss attributable to our stockholders of $826,674, or $0.00 per share, during the three months ended June 30, 2021.
Six Months Ended June 30, 2022 Compared to the Six Months ended June 30, 2021
Revenue for the six months ended June 30, 2022 totaled $2,844, compared to revenue of $6,104 during the six months ended June 30, 2021 representing a decrease of 53%. This revenue comes from sales of industrial sand during the rainy season. Industrial sand is a residual business line as we are primarily focused on our lithium exploration as described above.
Cost of goods sold for the six months ended June 30, 2022 totaled $36,198, as compared to cost of goods sold of $47,094 during the six months ended June 30, 2021 representing a decrease of 23%. Cost of goods sold is primarily comprised of labor, fuel, and repairs and maintenance on our mining equipment. The decrease is explained by reduced production activities and mining costs partially attributable to our exploratory efforts.
Gross loss for the six months ended June 30, 2022 totaled $33,354, compared to gross loss of $40,990 during the six months ended June 30, 2021, representing an improvement of 19%.
Operating expenses for the six months ended June 30, 2022 totaled $1,816,611, compared to operating expenses of $1,852,836 during the six months ended June 30, 2021, representing a decrease of 2%.
As a result, we incurred a net loss attributable to our stockholders of $1,402,506, or $0.00 per share, for the six months ended June 30, 2022, compared to a net loss attributable to our stockholders of $1,542,696, or $0.00 per share, during the six months ended June 30, 2021.
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Liquidity and Capital Resources
As of June 30, 2022, we had cash and cash equivalents of $393,864 and a working capital deficit of $413,094.
Net cash used by operating activities totaled $1,327,301 for the six months ended June 30, 2022, compared to net cash used of $98.400 during the six months ended June 30, 2021 representing an increase in cash used of $1,228,901. Net cash used in investing activities totaled $247,163 for the six months ended June 30, 2022, compared to net cash used of $957,978 during the six months ended June 30, 2021, representing a decrease in cash used of $710,815. Net cash provided by financing activities totaled $1,910,960 for the six months ended June 30, 2022, compared to $877,812 during the six months ended June 30, 2021, representing an increase in cash provided of $1,033,148.
We have limited working capital, have historically incurred net operating losses, and have not yet received material revenues from the sale of products or services. These factors create substantial doubt about our ability to continue as a going concern.
Our primary sources of liquidity have been derived through proceeds from the (i) issuance of debt and (ii) sales of our equity and the equity of one of our 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 have no plans for any significant cash acquisitions in the foreseeable future.
Currency Risk
We operate primarily in Brazil which exposes us to currency risks. Our 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 us receiving either more or less in local currency than the local currency equivalent at the time of the original activity.
Our condensed consolidated financial statements are denominated in U.S. dollars. Accordingly, changes in exchange rates between the applicable foreign currency and the U.S. dollar affect the translation of each foreign subsidiary’s financial results into U.S. dollars for purposes of reporting in the consolidated financial statements. Our 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.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our financial instruments consist of cash and cash equivalents, loans to a related party, accrued expenses, and an amount due to a director. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in our financial statements. If our estimate of the fair value is incorrect at June 30, 2022, it could negatively affect our financial position and liquidity and could result in our having understated our net loss.
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Recent Accounting Pronouncements
Our consolidated financial statements are prepared in accordance with U.S. GAAP. 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), we are not required to provide the information required by this Item as we are a “smaller reporting company,” as defined by Rule 229.10(f)(1).
Item 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the design, operation, and effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of June 30, 2022. On the basis of that evaluation, management concluded that our disclosure controls and procedures designed 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 Securities and Exchange Commission (the “Commission”), and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure were effective.
(b) Management’s 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). Our internal control system is designed to provide reasonable assurance to management and to our Board of Directors regarding the preparation and fair presentation of published financial statements. Our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of our 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 their evaluation under the framework in Internal Control—Integrated Framework (2013), they concluded that our internal control over financial reporting was effective as of June 30, 2022.
(c) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred in the quarter ended June 30, 2022 that materially affected, or would be reasonably likely to materially affect, our internal control over financial reporting.
(d) Limitations of the Effectiveness of Internal Controls
The effectiveness of our 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 our disclosure controls and procedures and internal control over financial reporting will detect all errors or fraud. However, our control systems have been designed to provide reasonable assurance of achieving out objectives, and our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures and internal control over financial reporting are effective at the reasonable assurance level.
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PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None material.
Item 1A. RISK FACTORS
There have been no material changes in the risk factors applicable to us from those identified in the Annual Report on Form 10-K for the period ended December 31, 2021 filed with the Commission on March 29, 2022.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the six months ended June 30, 2022, we received an aggregate of $1,385,960 in gross proceeds from the sale of shares of our unregistered common stock to eight investors and one director.
All of the above securities were issued in accordance with an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) under Section 4(a)(2) of the Securities Act by virtue of being offered without employing any means of general solicitation and issued to purchasers which represented to us that they are accredited investors and that they were acquiring the securities for investment and could bear the economic risk of the investment.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. MINE SAFETY DISCLOSURES
None
Item 5. OTHER INFORMATION
None
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Item 6. EXHIBITS
(a) Exhibits
Exhibit Number |
Description | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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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.
| Signature | Title | Date | ||
| /s/ Marc Fogassa | Chief Executive Officer (Principal Executive Officer) | August 12, 2022 | ||
| Marc Fogassa | ||||
| /s/ Gustavo Pereira de Aguiar | Chief Financial Officer (Principal Financial and Accounting Officer) | August 12, 2022 | ||
| Gustavo Pereira de Aguiar |
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