Atlas Lithium Corp - Quarter Report: 2018 March (Form 10-Q)

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.

 

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TABLE OF CONTENTS

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BRAZIL MINERALS, INC.

CONSOLIDATED BALANCE SHEETS

 

 

The accompanying notes are an integral part of the consolidated financial statements.

BRAZIL MINERALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

 

 

		Three Months Ended March 31,				Three Months Ended March 31,
		2018				2017
Revenue		$	4,915			$	3,396
Cost of revenue			35,868				33,195
Gross margin			(30,953	)			(29,799	)
Operating expenses:
Professional fees			24,841				9,793
General and administrative			79,599				60,501
Compensation and related costs			61,023				83,639
Stock based compensation			12,500				-
Total operating expenses			177,963				153,933
Loss from operations			(208,916	)			(183,732	)
Other expense (income):
Interest on promissory notes			25,389				24,339
Amortization of debt discounts and other fees			124,330				66,311
Total other expense (income)			149,719				90,650
Loss before provision for income taxes			(358,635	)			(274,382	)
Provision for income taxes			-				-
Net loss			(358,635	)			(274,382	)
Loss attributable to non-controlling interest			(9,709	)			(5,077	)
Net loss attributable to Brazil Minerals, Inc. stockholders		$	(348,926	)		$	(269,305	)
Basic and diluted loss per share
Net loss per share attributable to Brazil Minerals, Inc. common stockholders		$	-			$	(0.01	)
Weighted-average number of common shares outstanding:
Basic and diluted			138,510,812				45,795,240
Comprehensive loss:
Net loss		$	(358,635	)		$	(274,382	)
Foreign curreny translation adjustment			22,915				37,636
Comprehensive loss			(335,720	)			(236,746	)
Comprehensive loss attributable to noncontrolling interests			(9,709	)			(5,077	)
Comprehensive loss attributable to Brazil Minerals, Inc. stockholders		$	(326,011	)		$	(231,669	)

 

The accompanying notes are an integral part of the consolidated financial statements.

 

BRAZIL MINERALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

The accompanying notes are an integral part of the consolidated financial statements.

 

BRAZIL MINERALS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, cobalt, copper, lithium, manganese, nickel, precious gems (aquamarine, beryl, tourmaline) and sand, among others. In one of these rights, a mining concession, the Company currently mines diamonds, gold, and sand.

On July 27, 2016, upon approval by its Board of Directors, the Company sold a 99.99% equity interest in Mineração Jupiter Ltda to Jupiter Gold Corporation ("Jupiter Gold"), a newly created company, in exchange for 4,000,000 shares of the common stock of Jupiter Gold. On December 16, 2016, the Securities and Exchange Commission ("SEC") declared effective a Registration Statement filed by Jupiter Gold for the sale of shares in a public offering in the U.S. As of December 31, 2017, the Company has ownership of approximately 55.4% of the equity of Jupiter Gold. As such, the accounts and results of Jupiter Gold, and its subsidiary MJL, have been included in the Company's consolidated financial statements. See Note 2 for more information.

 

The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP") have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements at December 31, 2017 and 2016, as presented in the Company's Form 10-K filed on April 17, 2018 with the SEC.

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. The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

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.

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 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.

 

 

 

BRAZIL MINERALS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 sale of debt and equity securities and through the receipt of proceeds from revenues. Management's plan to fund its capital requirements and ongoing operations include an increase in cash received from sales of gold and rough diamonds recovered from a new modular processing and recovery plant. Management's secondary plan to cover any shortfall is selling its equity securities, including common stock in the Company or common stock in Jupiter Gold that it owns, and obtaining debt financing. There can be no assurance the Company will be successful in these efforts.

All share and per share amounts have been restated to give effect to a 1-for-500 reverse split of the Company's common stock which became effective on January 27, 2017.

The Company follows the guidance of Accounting Standards Codification ("ASC") Topic 820 – Fair Value Measurement and Disclosure. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of our Company. Unobservable inputs are inputs that reflect our Company's assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

The Company's financial instruments consist of cash and cash equivalents, accounts receivable, taxes recoverable, prepaid expenses, inventory, deposits and other assets, accounts payable, accrued expenses, deferred revenue 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.

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 Company's 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 $75,215 as of March 31, 2018).

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 March 31, 2018 and December 31, 2017, inventory consisted primarily of rough ore stockpiled for further gold and diamonds recovery. During the three months ended March 31, 2018 and 2017, the Company did not record any write downs against the value of its inventory.

 

 

BRAZIL MINERALS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company records a receivable for value added taxes recoverable 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.

Property and equipment are stated at cost. Major improvements and betterments are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful life. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the statements of operations as other gain or loss, net.

The diamond and gold processing plant and other machinery are depreciated over an estimated useful life of ten years; vehicles are depreciated over an estimated life of four years; and computer and other office equipment over an estimated useful life of three years.

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 Company's 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 March 31, 2018 and December 31, 2017, the Company did not recognize any impairment losses related to mineral properties held.

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 Company's subsidiaries.

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.

 

BRAZIL MINERALS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

On January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"), using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. As of and for the three months ended March 31, 2018, the consolidated financial statements were not materially impacted as a result of the application of Topic 606 compared to Topic 605.

 

 

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.

The Company records stock-based compensation in accordance with ASC Topic 718, Compensation - Stock Compensation. ASC 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee's requisite service period. Under ASC 718, volatility is based on the historical volatility of our stock or the expected volatility of the stock of similar companies. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The Company utilizes the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of options. Option-pricing models require the input of highly complex and subjective variables including the expected life of options granted and the expected volatility of our stock price over a period equal to or greater than the expected life of the options. Because changes in the subjective assumptions can materially affect the estimated value of our employee stock options, it is management's opinion that the Black-Scholes option-pricing model may not provide an accurate measure of the fair value of our employee stock options. Although the fair value of employee stock options is determined in accordance with ASC Topic 718 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

The Company has adopted a stock plan to attract, retain and motivate its directors, officers, employees, consultants and advisors. The Company's stock incentive plan provides for the issuance of up to 25,000,000 common shares for employees, consultants, directors, and advisors.

The Company's 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 Company's consolidated statements of operations were negligible for all periods presented.

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 March 31, 2018 and December 31, 2017, the Company's deferred tax assets had a full valuation allowance.

 

 

BRAZIL MINERALS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

 

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 March 31, 2018, the Company's potentially dilutive securities relate to common stock issuable in connection with convertible notes payable, options and warrants.

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.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 840), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for a public entity. Early adoption of the amendments in this standard is permitted for all entities and the Company must recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently in the process of evaluating the effect this guidance will have on its financial statements and related disclosures.

We have reviewed other recent accounting pronouncements issued to the date of the issuance of these consolidated financial statements, and we do not believe any of these pronouncements will have a material impact on the Company.

 

BRAZIL MINERALS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

The following table sets forth the components of the Company's property and equipment at March 31, 2018 and December 31, 2017:

For the three months ended March 31, 2018 and 2017, the Company recorded depreciation expense of $23,006 and $23,393, respectively.

Intangible assets consist of mining rights are not amortized as the mining rights are perpetual. The carrying value was $617,864 and $620,805 at March 31, 2018 and December 31, 2017, respectively.

 

BRAZIL MINERALS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – CONVERTIBLE PROMISSORY NOTES PAYABLE

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 (the "Note") and warrants to purchase an aggregate of 488,000 shares of the Company's common stock at an exercise price of $62.50 per share through December 26, 2018 (the "Warrants"). 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. All principal on the Note was payable on March 31, 2015 (the "Maturity Date"), which as of the date of this filing is past due and in technical default. The Company is in negotiations with the note holder to satisfy, amend the terms or otherwise resolve the obligation in default. No demand for payment has been made. As a result of the default, the interest rate on the Note increased to 30% per annum. Interest was payable on September 30, 2014 and on the Maturity Date. As of March 31, 2018, the Company has accrued interest payable totaling $255,909. 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.

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. 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.

 

 

 

BRAZIL MINERALS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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. 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 three months ended March 31, 2018, the Company issued to one noteholder in various transactions $71,586 in convertible promissory notes with fixed floors and received an aggregate of $68,826 in proceeds. The convertible promissory notes each bear interest at 8.0% per annum and mature one year from issuance. 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 $71,586 were recorded and are being amortized over the life of the notes.

As of March 31, 2018, the Company has $901,364 in principal of notes payable with remaining discounts of $166,864. The convertible notes payable incur interest at rates ranging from 8.0% to 30.0% per annum with due dates ranging from currently due to September 2018.

During the three months ended March 31, 2018 and 2017, $124,330 and $66,311 of the discounts were amortized to interest expense, respectively.

During the three months ended March 31, 2018 and 2017, the Company issued 46,880,968 and 3,329,701 shares of common stock upon conversion of $60,872 and $19,500, respectively, in notes payable and accrued interest.

Most of the Company's convertible notes payable contain adjustable conversion terms with significant discounts to market. As of March 31, 2018, the Company's convertible notes are convertible into an aggregate of approximately 547,803,000 shares of common stock. Due to the variable conversion prices on some of the Company's convertible notes, the number of common shares issuable is dependent upon the traded price of the Company's common stock.

NOTE 4 – STOCKHOLDERS' DEFICIT

The Company filed a 1-for-500 reverse split with the state of Nevada on December 15, 2016, which became effective on January 27, 2017. On February 15, 2017, the Company amended its Articles of Incorporation to increase the authorized number of shares of its common stock to 100 million shares. On October 23, 2017, an amendment of the charter of the Company filed with the Secretary of State of Nevada increased the number of authorized common shares to 250,000,000.

As of December 31, 2017, the Company had 250,000,000 common shares authorized with a par value of $0.001 per share.

On March 15, 2018, an amendment of the charter of the Company filed with the Secretary of State of Nevada increased the number of authorized common shares to 950,000,000.

As of March 31, 2018, the Company had 950,000,000 common shares authorized with a par value of $0.001 per share.

 

 

 

BRAZIL MINERALS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

On December 18, 2012, the Company filed with the Nevada Secretary of State a Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock ("Series A Stock") to designate one share of a new series of preferred stock. The Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock provides that for so long as Series A Stock is issued and outstanding, the holders of Series A Stock shall vote together as a single class with the holders of the Company's Common Stock, with the holders of Series A Stock being entitled to 51% of the total votes on all such matters regardless of the actual number of shares of Series A Stock then outstanding, and the holders of Common Stock are entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power.

During the three months ended March 31, 2018, the Company issued 46,880,968 shares of common stock upon conversion of $60,872 in convertible notes payable and accrued interest.

During the three months ended March 31, 2017, the Company issued 1,600,000 shares of common stock for cash proceeds of $26,000. Additionally, the Company issued 3,329,701 shares of common stock upon conversion of $19,500 in convertible notes payable and accrued interest.

See Note 3 for additional discussions of common stock issuances in connection with convertible notes.

 

During the year ended December 31, 2017, the Company granted options to purchase an aggregate of 10,226,100 shares of common stock to non-management directors. The options were valued at $87,500 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 (range of $0.03 to $0.07), expected dividend yield of 0%, historical volatility ranging from 221% to 234%, risk-free interest rate of 1.80%, and an expected term of 5.00 years.

During the three months ended March 31, 2018, the Company granted options to purchase an aggregate of 4,893,000 shares of common stock to non-management directors. The options were valued at $12,500 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 ($0.0026), expected dividend yield of 0%, historical volatility calculated at 217%, risk-free interest rate of 1.80%, and an expected term of 5 years.

NOTE 5 – COMMITMENTS AND CONTINGENCIES

The Company leases offices in Pasadena, California, U.S., and in the municipality of Olhos D'Agua, Brazil. Such costs are immaterial to the consolidated financial statements.

 

 

 

BRAZIL MINERALS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - RELATED PARTY TRANSACTIONS

As of March 31, 2018 and December 31, 2017, amounts payable to the Chief Executive Officer for accrued salaries, retirement contributions, and advances made net of any repayments included within related party payable were $541,238 and $502,397, respectively.

On October 2, 2017, the Company entered into an exchange agreement whereby it issued 25,000,000 shares of its common stock in exchange for 500,000 shares of Ares Resources Corporation, a related party. The shares were recorded at $150,000, or $0.006 per share. The shares were valued based upon the lowest market price of the Company's common stock on the date the agreement. As of March 31, 2018 and December 31, 2017, no change in the value of the Ares common stock was recorded as the recorded value still approximated fair value.

NOTE 7 - SUBSEQUENT EVENTS

 

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Overview

Brazil Minerals, Inc. with its controlled subsidiaries ("Brazil Minerals", the "Company", "we", "us", or "our") is an exploration project generator in Brazil with a large variety of minerals, and directly mines one area for gold, diamonds and sand. We consolidate the results of our controlled in this Annual Report.

Our progress as an exploration project generator has been steady. In early 2013 we owned mineral rights for gold and diamonds. Since then we have grown our land bank of high quality mineral properties that we own (the "BMIX Mineral Bank") several-fold to currently include mineral rights for gold, diamonds, cobalt, copper, lithium, manganese, nickel, precious gems (aquamarine, beryl, tourmaline) and sand.

In parallel, we are developing a portfolio of holdings of public mineral company equities for specific minerals and/or projects, of which the first one is Jupiter Gold Corporation ("Jupiter Gold"). Jupiter Gold has been a public company since December 16, 2016, and we own approximately 55.4% of Jupiter Gold's equity.

Mineral Properties

Our mineral properties are listed in the following table and summarized below.

 

 

 

 

Brazil Minerals, through subsidiaries, has 31 mineral rights for diamond, gold, and sand, on and near the margins of the Jequitinhonha River in the state of Minas Gerais in Brazil. The Jequitinhonha River valley is a well-known area for diamond and gold production; it has hosted alluvial production since the 18th century.

One of our mineral rights, covering 422 acres, is a mining concession for diamond, gold and sand. Our concession, awarded by the Brazilian federal government through the Brazilian mining department, is the highest level of mineral right in Brazil. It permits us to mine in perpetuity provided that environmental licenses are kept current and that mining guidelines are followed.

Mineralization

Vaaldiam, the previous owner of this mining concession, and at that time a publicly-traded Canadian company, performed detailed geological studies leading to the publication of an NI 43-101 technical report in 2007, with an update in 2008, as required by the rules of the Canadian securities administrator and filed in SEDAR. The NI 43-101 report describes the existence of mineralized materials amounting to 1,639,200 cubic meters with the following concentrations: 0.16 carats of diamonds per cubic meter and 182 milligrams of gold per cubic meter. Vaaldiam also submitted a bankable feasibility study to the Brazilian mining department in accordance with local regulations. The NI 43-101 technical report and the bankable feasibility study were not prepared in accordance with the SEC-sanctioned Industry Guide 7 for mining companies. Under such regulation, no assertion can be made about reserves and the term "resources" is not recognized.

  

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All of our equipment at the concession runs on diesel, purchased from multiple local vendors. Our water comes from lagoons that receive water from the Jequitinhonha River. We do not utilize any chemicals in any processes.

No Chemicals

All of our processing is based on washing auriferous and diamondiferous gravel with water, then applying physical processes such as sieving, shaking, followed by centrifugation. Gold and diamonds are heavy substances, allowing separation by such methods. The final step in diamond recovery uses diffraction differential in light emitted by diamonds versus non-diamonds.

  

Sand

The mining concession contains a sand bay from which in natura sand is extracted via excavator and sold to truckers. Our sand is of high-quality and sought after locally for civil construction projects.

Logistics

 

Our mining concession is an approximately one and half hour drive from Montes Claros with a population close to 700,000 people, with all needed services and the regional airport.

 

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Additional Area

We have obtained an initial permit for mining another mineral right that is located approximately 2 miles downstream from the mining concession described above. This mineral right has 1,310 acres, and our current authorization covers only a small part of this available surface area. We have drilled this area and identified presence of both gold and diamonds. We intend to move to this area for recovery after further exploitation of the mining concession described above. A map of this area is found below.

 

 

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Map

The Paracatu Project, held by our subsidiary, Jupiter Gold, consists of a mineral right for gold in this well-known gold district. This area of Brazil was settled in the early 17^th century by pioneers searching for gold.  Today Paracatu is home to the largest gold mine in Brazil, "Morro do Ouro" (Gold Hill), owned and operated by Kinross Gold, a large global producer. Morro do Ouro is an open-sky mine, with an ore body of 16 million ounces of gold, and annual production of 480,000 ounces, according to publicly-available information. The Paracatu Project area is located only a few miles downstream from Morro do Ouro.

As of May 20, 2018, Jupiter Gold is progressing in a drilling campaign of its Paracatu Project and already struck gold in eleven of twelve holes drilled. Gold particles were visually seen in all positive drill holes and confirmed in pan concentrates in samples taken. Samples being collected at one-meter intervals of depth, to be processed for quantitative geochemical analysis at a premier analytical laboratory.

 

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The Crixás Project, held by our subsidiary Jupiter Gold, consists of a mineral right for gold in this well-known gold district. This area of Brazil was settled in the 18^th century by pioneers searching for gold. Today Crixás is home to the some of the largest gold operations in Brazil, with large gold mines and projects from AngloGold Ashanti and Cleveland Mining. AngloGold Ashanti's operations in Crixás encompass three underground and two open sky mines, with an ore body of greater than 7 million ounces of gold and annual production of 132,000 ounces, according to publicly-available information.

The Itabira Project, held by our subsidiary Jupiter Gold, consists of a mineral right for gold in a region of Brazil near the city of Itabira called the "Quadrilátero Ferrífero" (Iron Quandrangle) known for large iron mines as well as gold mines.

The Diamantina Project, held by our subsidiary, Jupiter Gold, consists of two mineral rights for manganese in the region in and surrounding Diamantina where other companies have explored for manganese.

The Goiás Project, held by our subsidiary Jupiter Gold, consists of two mineral rights for cobalt, copper, and nickel in the region in and surrounding Montes Claros de Goiás, where other companies have explored for these minerals, and some of the largest Brazilian reserves of nickel are located, according to publicly-available information.

The Salinas Project consists of a mineral right for lithium, aquamarine, beryl, tourmaline, granite, and feldspar in the Salinas district, where other companies have explored for these minerals.

The Serrita Project, held by our subsidiary, Jupiter Gold, consists of three mineral rights for gold in the Serrita district, a known gold district.

The Amazonas Project, held by our subsidiary, Jupiter Gold, consists of three mineral rights for gold in the Apui area, a known gold district.

 

 

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Results of Operations

In the quarter ended March 31, 2018, we had revenues of $4,915 as compared to revenues of $3,396 in the quarter ended March 31, 2017, an increase of 44.7%. This increase is explained by more days of mining within the rainy season in 2018 as compared to the same period in 2017. The rainy season in northern Minas Gerais state normally lasts from late November to early April, and limits open-sky operations.

Our consolidated cost of goods sold in the first quarter of 2018 was $35,868, consisting entirely of production expenses, and comparable to our consolidated cost of goods sold in the first quarter of 2017, which was $33,195, an increase of 8.1%. This was attributable to the increase in the price of diesel from 2017 to 2018, and to more mining days within the rainy season in the first quarter of 2018 versus that in 2017.

Our gross loss in the first quarter of 2018 was $30,953, as compared to our gross loss in the first quarter of 2017 of $29,799, an increase of 3.9%. This result was due the simultaneous increase in revenues and decrease in the consolidated cost of goods sold.

We had an aggregate of $177,963 in operating expenses in the first quarter of 2018, as compared to an aggregate of $153,933 in operating expenses in the third quarter of 2017, an increase of 15.6%. This change was due primarily to higher general and administrative expenses and stock-based compensation in the first quarter of 2018 in comparison to the same period in 2017 and which were greater than the decline in compensation and other expenses seen in the first quarter of 2018 in relation to the first quarter of 2017.

In the first quarter of 2018, we experienced a net loss attributable to Brazil Minerals, Inc. common stockholders of $348,926, as compared to a net loss of $269,305 in the first quarter of 2017, an increase of 29.6%. This change was due to the greater loss from operations and the greater amount of total other expenses in the first quarter of 2018 versus the same period in 2017.

On a per share basis (both basic and diluted), in the first quarter of 2018, we had net loss attributable to Brazil Minerals, Inc. common stockholders of $0.00, as compared to a net loss attributable to Brazil Minerals, Inc. common stockholders of $0.01 in the first quarter of 2017. This change is primarily explained by the increase in share count between these periods which more than mitigated the change seen in net loss.

 

Net cash used in operating activities was $124,177 in the first three months of 2018, as compared to $175,198 in the first three months of 2017. Net cash used in investing activities was ($1,173) in the first three months of 2018, as compared to $6,762 in the first three months of 2017. Net cash provided by financing activities was $38,520 in the first three months of 2018, as compared to $211,675 in the first three months of 2017.

 

 

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Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

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