UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended June 30, 2021March 31, 2022

 

☐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 000-55191

 

Brazil Minerals, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada 39-2078861
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

 

Rua Vereador João Alves PraesBahia, 2463, nº 95-ASuite 205

Belo Horizonte, Minas Gerais Olhos D’Água, MG30.160-01239398-000,

Brazil

(Address of principal executive offices)

 

(833)661-7900

(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. Yes ☒ No ☐

 

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 ☒ No ☐

 

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”,filer,” “smaller reporting company”,company,” and “emerging growth company”,company,” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer☐Accelerated filer☐
Non-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
Common Stock BMIX 

OTCQBPink Open Market, a marketplace of

OTC Markets Group

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of AugustMay 13, 2021,2022, the registrant had 2,925,793,3273,370,472,433 shares of common stock, par value $0.001 per share, issued and outstanding.

 

 

 

 

 

TABLE OF CONTENTS

 

  Page

PART I-I - FINANCIAL INFORMATION

 
   
Item 1.Financial Statements 
   
 Condensed Consolidated Balance Sheets as of June 30,March 31, 2021 (Unaudited) and December 31, 2020F-12
   
 Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30,March 31, 2020 and 2021 (Unaudited)F-23
   
 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30,March 31, 2020 and 2021 (Unaudited)4F-3
   
 Condensed Consolidated Statements of Cash Flows for the SixThree Months Ended June 30,March 31, 2020 and 2021 (Unaudited)6F-4
   
 Notes to the Condensed Consolidated Financial Statements (Unaudited)7F-5
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.153
   
Item 3.Quantitative and Qualitative Disclosures About Market Risk616
   
Item 4.Controls and Procedures.617
   
PART II-II - OTHER INFORMATION 18
   
Item 6.Exhibits818
   
Signatures199
   
Exhibits/Certifications 

 

12

Table of Contents

PART I - FINANCIAL INFORMATION

 

Item 1 FINANCIAL STATEMENTS

 

BRAZIL MINERALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

June 30, 2021March 31, 2022 and December 31, 20202021

  June 30,  December 31, 
  2021  2020 
       
ASSETS        
Current assets:        
Cash and cash equivalents $62,088  $253,598 
Accounts receivable  801   20,106 
Taxes recoverable  18,417   17,726 
Inventory  12,132   11,676 
Deposits and advances  3,835   2,039 
Total current assets  97,273   305,145 
Property and equipment, net  67,328   89,276 
Intangible assets, net  1,452,952   407,467 
Equity investments  150,000   150,000 
Total assets $1,767,553  $951,888 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
Current liabilities:        
Accounts payable and accrued expenses $1,108,915  $652,119 
Convertible notes payable  86,815   872,720 
Loans payable  -   235,308 
Related party notes and other payables  566,743   566,743 
Total current liabilities  1,762,473   2,326,890 
Other noncurrent liabilities  124,736   121,250 
Total liabilities  1,887,209   2,448,140 
         
Stockholders’ deficit:        
Series A preferred stock, $0.001 par value. 10,000,000 shares authorized; 1 share issued and outstanding issued and outstanding as of June 30, 2021 and December 31, 2020, respectively  1   1 
Common stock, $0.001 par value. 3,250,000,000 shares authorized; 2,925,793,327 and 1,997,930,297 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively  2,925,793   1,997,930 
Additional paid-in capital  49,932,050   47,489,116 
Accumulated other comprehensive loss  (740,410)  (775,113)
Accumulated deficit  (53,727,767)  (52,185,071)
Total Brazil Minerals, Inc. stockholders’ deficit  (1,610,333)  (3,473,137)
Non-controlling interest  1,490,677   1,976,885 
Total stockholders’ deficit  (119,656)  (1,496,252)
Total liabilities and stockholders’ deficit  1,767,553  $951,888 

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

2

BRAZIL MINERALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

For the Three and Six Months Ended June 30, 2021 and 2020

  

Three Months Ended

June 30,

  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

  

Six Months Ended

June 30,

 
  2021  2020  2021  2020 
             
Revenue $1,645  $8,936  $6,104  $11,566 
Cost of revenue  24,105   30,664   47,094   59,897 
Gross loss  (22,460)  (21,728)  (40,990)  (48,331)
Operating expenses:                
Professional fees  19,506   28,225   101,797   74,295 
General and administrative  260,106   110,873   533,157   268,276 
Compensation and related costs  134,961   102,329   180,469   163,298 
Stock based compensation  325,967   26,934   1,037,413   48,234 
Total operating expenses  740,540   268,361   1,852,836   554,103 
Loss from operations  (763,000)  (290,089)  (1,893,826)  (602,434)
Other expense (income):                
Interest on promissory notes  96,493   125,879   161,243   178,293 
Amortization of debt discounts and other fees  1,834   -   1,834   151,339 
Extinguishment of debt  224,812   -   224,812   - 
Other expense (income)  (7)  (638)  (215)  75,540 
Total other expense (income)  323,132   125,241   387,674   405,172 
Loss before provision for income taxes  (1,086,132)  (415,330)  (2,281,500)  (1,007,606)
Provision for income taxes  -   -   -   - 
Net loss  (1,086,132)  (415,330)  (2,281,500)  (1,007,606)
Loss attributable to non-controlling interest  (259,458)  (99,660)  (738,804)  (169,318)
Net loss attributable to Brazil Minerals, Inc. stockholders $(826,674) $(315,670) $(1,542,696) $(838,288)
                 
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  2,513,196,303   1,107,338,095   2,513,196,303   1,073,824,015 
                 
Comprehensive loss:                
Net loss $(1,086,132) $(415,330) $(2,281,500) $(1,007,606)
Foreign curreny translation adjustment  55,071   (84,236)  18,704   (191,127)
Comprehensive loss  (1,031,061)  (499,566)  (2,262,796)  (1,198,733)
Comprehensive loss attributable to noncontrolling interests  (302,335)  (99,660)  (754,803)  (169,318)
Comprehensive loss attributable to Brazil Minerals, Inc. stockholders $(728,726) $(399,906) $(1,507,993) $(1,029,415)

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

3

BRAZIL MINERALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

For the Three Months Ended June 30, 2021 and 2020

  Shares  Value  Shares  Value  Capital  Loss  Deficit  Interests  (Deficit) 
  Series A Preferred Stock  Common Stock  

Additional

Paid-in

  

Accumulated

Other

Comprehensive

  Accumulated  Noncontrolling  

Total

Stockholders’ Equity

 
  Shares  Value  Shares  Value  Capital  Loss  Deficit  Interests  (Deficit) 
                            
Balance, March 31, 2020  1  $1   1,030,599,388  $1,030,599  $47,854,444  $(687,848) $(51,566,026) $1,777,057  $(1,591,773)
                                     
Issuance of common stock in connection with sales made under private offerings  -   -   290,000,000   290,000   (70,000)  -   -   -   220,000 
Issuance of common stock in connection with the exercise of common stock options                                    
Issuance of common stock in connection with the exercise of common stock options, shares                                    
Issuance of common stock in exchange for consulting, professional and other services                                    
Issuance of common stock in exchange for consulting, professional and other services, shares                                    
Issuance of common stock warrants in connection with the issuance of convertible notes                                    
Issuance of common stock in connection with share exchange agreement with related party                                    
Issuance of common stock in connection with share exchange agreement with related party, shares                                    
Issuance of common stock to related parties in lieu of cash for loans payable and other accrued obligations                                    
Issuance of common stock to related parties in lieu of cash for loans payable and other accrued obligations, shares                                    
Exchange of common stock for Jupiter Gold common stock                                    
Exchange of common stock for Jupiter Gold common stock, shares                                    
Sale of Apollo Resources common stock in connection with equity offerings                                    
Conversion of convertible notes and accrued interest payable into common stock  -   -   66,863,929   66,864   (37,235)  -   -   -   29,629 
Stock based compensation  -   -   -   -   26,934   -   -   -   26,934 
Change in foreign currency translation  -   -   -   -   -   (84,236)  -   72,337   (11,899)
Sale of Jupiter Gold common stock in connection with equity offerings  -   -   -   -   -   -   -   100,000   100,000 
Net loss  -   -   -   -   -   -   (315,670)  (99,660)  (415,330)
                                     
Balance, June 30, 2020  1  $1   1,387,463,317  $1,387,463  $47,774,143  $(772,084) $(51,881,696) $1,849,734  $(1,642,439)

  Series A Preferred Stock  Common Stock  

  Additional

Paid-in

  

Accumulated

Other

Comprehensive

  Accumulated  Noncontrolling  

Total

Stockholders’ Equity

 
  Shares  Value  Shares  Value  Capital  Loss  Deficit  Interests  (Deficit) 
                            
Balance, March 31, 2021  1  $1   2,552,577,359  $2,552,577  $48,553,298  $(838,358) $(52,901,093) $1,724,262  $(909,313)
                                     
Issuance of common stock in connection with sales made under private offerings  -   -   69,591,306   69,592   330,558   -   -   -   400,150 
Issuance of common stock in connection with the exercise of common stock options  -   -   181,378,183   181,378   (106,378)  -   -   68,750   143,750 
Issuance of common stock warrants in connection with the issuance of convertible notes  -   -   -   -   356,827   -   -   -   356,827 
Conversion of convertible notes and accrued interest payable into common stock  -   -   122,246,479   122,246   471,778   -   -   -   594,024 
Stock based compensation  -   -   -   -   325,967   -   -   -   325,967 
Change in foreign currency translation  -   -   -   -   -   97,948   -   (42,877)  55,071 
Net loss  -   -   -   -   -   -   (826,674)  (259,458)  (1,086,132)
                                     
Balance, June 30, 2021  1  $1   2,925,793,327  $2,925,793  $49,932,050  $(740,410) $(53,727,767) $1,490,677  $(119,656)
  March 31,  December 31, 
  2022  2021 
       
ASSETS        
Current assets:        
Cash and cash equivalents  54,230  $22,776 
Accounts receivable  231   1,401 
Taxes recoverable  19,455   16,507 
Deposits and advances  26,826   17,246 
Total current assets  100,742   57,930 
Property and equipment, net  76,728   53,827 
Intangible assets, net  1,533,738   1,302,440 
Equity investments  150,000   150,000 
Total assets  1,861,208  $1,564,197 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
Current liabilities:        
Accounts payable and accrued expenses  911,719  $988,238 
Convertible notes payable  -   - 
Loans payable  -   - 
Related party notes and other payables  11,940   10,167 
Total current liabilities  923,659   998,405 
Other noncurrent liabilities  129,885   108,926 
Total liabilities  1,053,544   1,107,331 
         
Stockholders’ deficit:        
Series A preferred stock, $0.001 par value. 10,000,000 shares authorized; 1 share issued and outstanding as of March 31, 2022 and December 31, 2021, respectively  1   1 
Series D preferred stock, $0.001 par value. 1,000,000 shares authorized; 214,006 and 0 shares as of March 31, 2022 and December 31, 2021, respectively  214   214 
Preferred stock  214   214 
Common stock, $0.001 par value. 4,000,000,000 shares authorized; 3,250,000,000 shares as of March 31, 2022 and December 31, 2021, respectively  3,199,478   3,109,179 
Additional paid-in capital  52,162,095   51,466,376 
Accumulated other comprehensive loss  (460,316)  (712,810)
Accumulated deficit  (55,488,919)  (54,957,429)
Total Brazil Minerals, Inc. stockholders’ deficit  (587,447)  (1,094,469)
Non-controlling interest  1,395,111   1,551,335 
Total stockholders’ equity (deficit)  807,664   456,866 
Total liabilities and stockholders’ deficit  1,861,208  $1,564,197 

 

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

 

4F-1

Table of Contents

 

BRAZIL MINERALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYOPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

For the SixThree Months Ended June 30,March 31, 2022 and 2021 and 2020

 

  Series A Preferred Stock  Common Stock  

Additional

Paid-in

  

Accumulated Other 

Comprehensive

  Accumulated  Noncontrolling  

Total

Stockholders’ Equity

 
  Shares  Value  Shares  Value  Capital  Loss  Deficit  Interests  (Deficit) 
                            
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  -   -   295,000,000   295,000   (75,000)  -   -   -   220,000 
Issuance of common stock in exchange for consulting, professional and other services  -   -   5,666,594   5,667   333   -   -   -   6,000 
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 notes and accrued interest payable into common stock  -   -   100,213,975   100,214   (47,053)  -   -   -   53,161 
Exchange of common stock for Jupiter Gold common stock  -   -   (200,000,000)  (200,000)  100,000   -   -   100,000   - 
Stock based compensation  -   -   -   -   48,234   -   -   -   48,234 
Change in foreign currency translation  -   -   -   -   -   (191,127)  -   72,337   (118,790)
Sale of Jupiter Gold common stock in connection with                                    
equity offerings  -   -   -   -   -   -   -   400,000   400,000 
Net loss  -   -   -   -   -   -   (838,288)  (169,318)  (1,007,606)
                                     
Balance, June 30, 2020  1  $1   1,387,463,317  $1,387,463  $47,774,143  $(772,084) $(51,881,696) $1,849,734  $(1,642,439)

  Series A Preferred Stock  Common Stock  

Additional

Paid-in

  

Accumulated

Other

Comprehensive

  Accumulated  Noncontrolling  

Total

Stockholders’ Equity

 
  Shares  Value  Shares  Value  Capital  Loss  Deficit  Interests  (Deficit) 
                            
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)
                                     
Issuance of common stock in connection with sales made under private offerings  -   -   110,132,972   110,133   556,517   -   -   -   666,650 
Issuance of common stock in connection with sales made under private offerings  -   -   313,053,865   313,054   (238,054)  -   -   68,750   143,750 
Issuance of common stock in exchange for consulting, professional and other services  -   -   -   -   -   -   -   31,845   31,845 
Issuance of common stock warrants in connection with the issuance of convertible notes  -   -   -   -   356,827   -   -   -   356,827 
Conversion of convertible notes and accrued interest payable into common stock  -   -   504,676,193   504,676   730,231   -   -   -   1,234,907 
Stock based compensation  -   -   -   -   1,037,413   -   -   -   1,037,413 
Change in foreign currency translation  -   -   -   -   -   34,703   -   (15,999)  18,704 
Sale of Jupiter Gold common stock in connection with                                    
equity offerings  -   -   -   -   -   -   -   118,000   118,000 
Sale of Apollo Resources common stock in connection with                                    
equity offerings  -   -   -   -   -   -   -   50,000   50,000 
Net income (loss)  -   -   -   -   -   -   (1,542,696)  (738,804)  (2,281,500)
                                     
Balance, June 30, 2021  1  $1   2,925,793,327  $2,925,793  $49,932,050  $(740,410) $(53,727,767) $1,490,677  $(119,656)
  2022  2021 
  Three months ended March 31 
  2022  2021 
       
Revenue  477  $4,459 
Cost of revenue  9,855   22,989 
Gross loss  (9,378)  (18,530)
Operating expenses        
Professional fees  119,841   82,291 
General and administrative  221,465   273,051 
Compensation and related costs  97,992   45,508 
Stock based compensation  388,019   711,446 
Total operating expenses  827,317   1,112,296 
Loss from operations  (836,695)  (1,130,826)
Other expense (income)        
Interest on promissory notes  -   64,750 
Other expense (income)  (1,952)  (208)
Total other expense  (1,952)  64,542 
Loss before provision for income taxes  (834,743)  (1,195,368)
Provision for income taxes  -   - 
Net loss  (834,743)  (1,195,368)
Loss attributable to non-controlling interest  (303,253)  (479,346)
Net loss attributable to Brazil Minerals, Inc. stockholders  (531,490) $(716,022)
         
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  3,191,757,168   2,267,306,033 
         
Comprehensive loss:        
Net loss  (834,743) $(1,195,368)
Foreign currency translation adjustment  56,815   (36,367)
Comprehensive loss  (777,928)  (1,231,735)
Comprehensive loss attributable to noncontrolling interests  (308,741)  (452,468)
Comprehensive loss attributable to Brazil Minerals, Inc. stockholders  (469,187) $(779,267)

 

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

 

5F-2

Table of Contents

 

BRAZIL MINERALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

For the Three Months Ended March 31, 2022 and 2021

  Shares  Value  Shares  Value  Shares  Value  Capital  Loss  Deficit  Interests  (Deficit) 
  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  1  $1   -  $-   1,997,930,297  $1,997,930  $47,489,116  $(775,113) $(52,185,071) $1,976,885  $(1,496,252)
                                             
                                            
Conversion of related party convertible notes and other indebtedness into Series D preferred stock  -   -   214,006   214   -   -   641,804   -   -   -   642,018 
Issuance of common stock in connection with sales made under private offerings  -   -   -   -   174,019,679   174,020   766,989   -   -   -   941,009 
Issuance of common stock in connection with the exercise of common stock options  -   -   -   -   396,917,702   396,917   (246,917)  -   -   70,700   220,700 
Issuance of common stock in exchange for consulting, professional and other services  -   -   -   -   16,600,539   16,601   148,934   -   -   31,845   197,380 
Issuance of common stock warrants in connection with the issuance of convertible debenture(s)  -   -   -   -   -   -   356,827   -   -   -   356,827 
Conversion of convertible debenture(s) and other indebtedness into common stock  -   -   -   -   523,710,635   523,711   839,277   -   -   -   1,362,988 
Stock based compensation  -   -   -   -   -   -   1,470,346   -   -   -   1,470,346 
Change in foreign currency translation  -   -   -   -   -   -   -   62,303   -   (5,488)  56,815 
Sale of Jupiter Gold common stock in connection with equity offerings  -   -   -   -   -   -   -   -   -   118,000   118,000 
Sale of Apollo Resources common stock in connection with equity offerings  -   -   -   -   -   -   -   -   -   612,500   612,500 
Change in noncontrolling interest(s)  -   -   -   -   -   -   -   -   -   -   - 
Net loss  -   -   -   -   -   -   -   -   (2,772,358)  (1,253,107)  (4,025,465)
                                             
Balance, December 31, 2021  1  $1   214,006  $214   3,109,178,852  $3,109,179  $51,466,376  $(712,810) $(54,957,429) $1,551,335  $456,866 
                                             
Issuance of common stock in connection with sales made under private offerings  -   -   -   -   90,299,152   90,299   307,700   -   -   -   397,999 
                                            
Stock based compensation  -   -   -   -   -   -   388,019   -   -   (191,023)  196,996 
Change in foreign currency translation  -   -   -   -   -   -   -   252,494   -   113,052   365,546 
Sale of Jupiter Gold common stock in connection with equity offerings  -   -   -   -   -   -   -   -   -   -   - 
Sale of Apollo Resources common stock in connection with equity offerings  -   -   -   -   -   -   -   -   -   225,000   225,000 
Net loss  -   -   -   -   -   -   -   -   (531,490)  (303,253)   (834,743)
                                             
Balance, March 31, 2022  1  $1   214,006  $214   3,199,478,004  $3,199,478  $52,162,095  $(460,316) $(55,488,919) $1,395,111  $807,664 

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

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BRAZIL MINERALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the SixThree Months Ended June 30,March 31, 2022 and 2021 and 2020

  Six Months Ended June 30,  Six Months Ended June 30, 
  2021  2020 
       
Cash flows from operating activities:        
Net loss $(2,281,500) $(1,007,606)
Adjustments to reconcile net loss to cash used in operating activities:        
Stock based compensation and services  1,069,258   54,234 
Amortization of debt discounts  1,834   237,270 
Common stock issued in satisfaction of financing costs  91,996   - 
Convertible debt issued in satisfaction of financing costs  37,212   14,264 
Loss on share exchange agreement with related party  -   76,926 
Loss on extinguishment of debt  224,812   - 
Depreciation and amortization  23,608   25,122 
Changes in operating assets and liabilities:        
Accounts receivable  18,687   (32,099)
Deposits and advances  (1,611)  2,860 
Accounts payable and accrued expenses  718,461   61,633 
Accrued salary due to officer  -   99,393 
Other noncurrent liabilities  (1,157)  7,252 
Net cash used in operating activities  (98,400)  (460,751)
         
Cash flows from investing activities:        
Acquisition of property and equipment  -   (788)
Acquisition of intangible assets  (957,758)  (12,350)
Net cash used in investing activities  (957,758)  (13,138)
         
Cash flows from financing activities:        
Loan from officer  5,720   (40,670)
Net proceeds from sale of common stock  741,650   220,000 
Proceeds from sale of subsidiary common stock to noncontrolling interests  236,750   400,000 
Proceeds from convertible notes payable  399,000   - 
Proceeds from loans payable  -   26,180 
Repayment of convertible notes payable  (270,000)  - 
Repayment of loans payable  (235,308)  - 
Net cash provided by (used in) financing activities  873,812   605,510 
         
Effect of exchange rates on cash and cash equivalents  (9,164)  44,649 
Net increase (decrease) in cash and cash equivalents  (191,510)  176,270 
Cash and cash equivalents at beginning of period  253,598   151,088 
Cash and cash equivalents at end of period $62,088  $327,358 
         
Supplemental disclosure of cash flow information:        
Cash paid for interest $-  $- 
Cash paid for income taxes $-  $- 
         
Supplemental disclosure of non-cash investing and financing activities:        
Shares issued in connection with conversion of debt and accrued interest $1,234,906  $53,160 
Shares issued in connection with relief of related party payable $-  $280 
Common stock warrants issued in connection with convertible promissory notes $40,019  $- 

  2022  2021 
  Three months ended March 31 
  2022  2021 
       
Cash flows from operating activities of continuing operations:        
Net loss  (834,743)  (1,195,368)
Adjustments to reconcile net loss to cash used in operating activities:        
Stock based compensation and services  388,019   743,291 
Convertible debt issued in satisfaction of other financing costs  -   40,836 
Depreciation and amortization  7,571   12,090 
Changes in operating assets and liabilities:        
Accounts receivable  1,170   (220,759)
Taxes recoverable  (2,948)  - 
Deposits and advances  (9,580)  752 
Accounts payable and accrued expenses  (76,519)  1,108,200 
Other noncurrent liabilities  20,959   (331)
Net cash used in operating activities  (506,071)  488,711 
         
Cash flows from investing activities:        
Acquisition of capital assets  (30,472)  - 
Increase in intangible assets  (122,526)  (939,927)
Net cash used in investing activities  (152,998)  (939,927)
         
Cash flows from financing activities:        
Loan from officer  -   (2,943)
Net proceeds from sale of common stock  397,999   266,500 
Proceeds from sale of subsidiary common stock to noncontrolling interests  225,000   168,000 
Proceeds from convertible notes payable  -   270,000 
Repayment of loans payable  -   (235,308)
Net cash provided by financing activities  622,999   466,249 
         
Effect of exchange rates on cash and cash equivalents  67,524   (6,389)
Net increase (decrease) in cash and cash equivalents  31,454   8,644 
Cash and cash equivalents at beginning of period  22,776   253,598 
Cash and cash equivalents at end of period  54,230  $262,242 
         
Supplemental disclosure of non-cash investing and financing activities:        
Related party convertible note payable exchanged for stock  -  $- 
Shares issued in connection with conversion of debt and accrued interest  -  $640,883 
Shares issued in connection with relief of related party payable  -  $- 
Common stock warrants issued in connection with convertible promissory notes  -  $- 

 

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

 

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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 gold, diamonds, lithium, rare earths, titanium, iron, nickel, and sand.

 

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”) and are expressed in United States dollars. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2021,March 31, 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,March 31, 2022 and 2021, and 2020, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in Form 10-K for the fiscal year ended December 31, 20202021 filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021.29, 2022.

 

The condensed consolidated financial statements include the accounts of the Company; its 99.99% owned subsidiary, BMIX Participações Ltda. (“BMIXP”), which includes the accounts of BMIXP’s wholly-owned subsidiary, Mineração Duas Barras Ltda. (“MDB”), and BMIXP’s 50% owned subsidiary, RST Recursos Minerais Ltda. (“RST”); its 99.99% owned subsidiary, Hercules Resources Corporation (“HRC”), which includes the accounts of HRC’s wholly-owned subsidiary, Hercules Brasil Comercio e Transportes Ltda. (“Hercules Brasil”); its 30.1% equity interest in Apollo Resources Corporation (“Apollo Resources”) and its subsidiary Mineração Apollo, Ltda.; and its 10.09.84% equity interest in Jupiter Gold Corporation (“Jupiter Gold”), which includes the accounts of Jupiter Gold’s wholly-owned subsidiary, Mineração Jupiter Ltda. The Company has concluded that Apollo Resources, Jupiter Gold and their subsidiaries are variable interest entities (“VIE”) in accordance with applicable accounting standards and guidance. As such, the accounts and results of Apollo Resources, Jupiter Gold and their subsidiaries have been included in the Company’s condensed consolidated financial statements.

 

All material intercompany accounts and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results may differ from those estimates.

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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 generation of revenue from its mining operations and projects. Management’s secondary plan to cover any shortfall is selling its equity securities, including common stock in the Company, or common stock in Jupiter Gold that it owns, and obtaining debt financing. There can be no assurance the Company will be successful in these efforts.

 

7

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations except as noted below:

In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective January 1, 2024, for the Company. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. The Company is evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements, but currently does not believe ASU 2020-06 will have a significant impact on the Company’s accounting for its convertible debt instruments. The effect will largely depend on the composition and terms of the financial instruments at the time of adoption.

 

In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations. The Company is in the process of determining the effects adoption will have on its consolidated financial statements.

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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, 2021March 31, 2022 and December 31, 2020:2021:

SCHEDULE OF PROPERTY AND EQUIPMENT 

 June 30, 2021  December 31, 2020  March 31, 2022  December 31, 2021 
 Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value  Cost Accumulated Depreciation Net Book
Value		 Cost Accumulated Depreciation Net Book
Value		 
                          
Computers and office equipment $3,903  $(1,646) $2,257  $3,880  $(573) $3,307  $3,880  $(2,852) $1,028  $3,880  $(2,778) $1,063 
Machinery and equipment  360,145   (295,074)  65,296   348,376   (271,107)  77,269   364,686   (288,986)  75,700   334,253   (281,489)  52,764 
Vehicles  132,386   (132,386)  –   127,416   (118,716)  8,700   118,653   (118,653)  -   118,653   (118,653)  - 
Total fixed assets $496,434  $(429,106) $67,328  $479,672  $(390,396) $89,276  $487,219  $(410,491) $76,728  $456,747  $(402,920) $53,827 

 

For the three and six months ended June 30,March 31, 2022 and 2021, the Company recorded depreciation expense of $11,518 and $23,608, respectively, and for the three and six months ended June 30, 2020, the Company recorded depreciation expense of $11,3767,571 and $25,12212,090, respectively.

 

Intangible Assets

 

Intangible assets consist of mining rights are not amortized as the mining rights are perpetual. The carrying value was $1,452,9521,533,738 and $407,4671,302,440 at June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.

 

Equity Investments without Readily Determinable Fair Values

 

On October 2, 2017, the Company entered into an exchange agreement whereby it issued 25,000,000 shares of its common stock in exchange for 500,000 shares of Ares Resources Corporation. The Company’s chief executive officer also serves as an officer of Ares Resources Corporation, thus making it a related party under common ownership and control. The shares were recorded at $150,000, or $0.006 per share. The shares were valued based upon the lowest market price of the Company’s common stock on the date the agreement.

 

On March 11, 2020, the Company issued 53,947,368 shares of common stock to Lancaster Brazil Fund pursuant to an addendum to the share exchange agreement dated September 28, 2018. The Company recorded a loss on exchange of equity with a related party of $76,926 representing the fair value of the additional shares of common stock issued.

8

 

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.

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BRAZIL MINERALS, INC.

As of June 30, 2021, no change in the value of the Ares common stock was recorded as the recorded value still approximated fair value.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (CONTINUED)

Accounts Payable and Accrued Liabilities

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

  June 30, 2021  December 31, 2020 
Accounts payable and other accruals $358,735  $327,704 
Mineral rights payable  

749,750

   – 
Accrued interest  430   324,415 
Total $1,108,915  $652,119 

 

NOTE 3 – CONVERTIBLE PROMISSORY NOTES PAYABLE

The following tables set forth the components of the Company’s convertible debentures as of June 30, 2021 and December 31, 2020:

SCHEDULE OF CONVERTIBLE DEBENTURES

  June 30,2021  December 31, 2020 
Convertible notes payable – fixed conversion price $129,000   244,000 
Convertible notes payable – variable conversion price  –   

628,720

 

Discounts on convertible notes payable

  (42,185)   

–

 
Total convertible notes $86,815  $872,720 

The following table sets forth a summary of change in our convertible notes payable for the six months ended June 30, 2021:

SUMMARY OF CHANGE IN CONVERTIBLE NOTES PAYABLE

  June 30, 2021 
Beginning balance $872,720 
New issuances of convertible notes payable  399,000 
Lender adjustments for penalties or defaults  37,212 
Debt discounts recorded on new issuances  (44,019)
Amortization of debt discounts associated with convertible debt  1,834 
Conversion of convertible note principal into common stock  (909,932)
Repayments of convertible notes payable  (270,000)
Total convertible notes $86,815 

Convertible Notes Payable - Fixed Conversion Price

On January 7, 2014, the Company issued to a family trust a senior secured convertible promissory note in the principal amount, and received gross proceeds, of $244,000 and warrants to purchase an aggregate of 488,000 shares of the Company’s common stock at an exercise price of $62.50 per share through December 26, 2018. The Company received gross proceeds of $244,000 for the sale of such securities. The outstanding principal of the note bears interest at the rate of 12% per annum. The note is convertible at the option of the holder into common stock of the Company at a conversion rate of one share for each $50.00 of principal and interest converted. As of June 30, 2021, all warrants issued in connection with this note had expired.

The outstanding principal on the note was payable on March 31, 2015, which as of the date of these financial statements is past due and in technical default. The Company is in negotiations with the note holder to satisfy, amend the terms or otherwise resolve the obligation in default. No demand for payment has been made. As a result of the default, the interest rate on the note increased to 30% per annum. Interest was payable on September 30, 2014 and on the maturity date. In December 2020, the lender agreed to reduce the interest rate from the default rate of 30% to the stated rate of 10% retroactively. As a result, the Company recorded gain of $238,151 from the relief of interest expense to other income.

9

On February 3, 2021, the Company issued 20,000,000 shares of common stock upon conversion of $80,000 in convertible notes payable and accrued interest. On May 6, 2021, the Company issued 86,246,479 shares of common stock upon conversion of $334,986 in convertible notes payable and accrued interest. As of June 30, 2021, the balance of the note was $0.

On June 18, 2021, Company issued to one noteholder a $129,000 convertible promissory note for $125,000 in proceeds. The note bears interest at 8.0% per annum and matures one year from issuance on June 18, 2022. After six months from issuance, the note is convertible at the option of the holder at a price of $0.001. A debt discount of $4,000 for issuance costs was recorded and is being amortized over the life of the note.

ASC 470-20 requires proceeds from the sale of a debt instrument with stock purchase warrants be allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. In connection with the warrant issuance, the Company allocated an aggregate fair value of $40,019 to the stock warrants and recorded a debt discount which will be amortized to interest expense over the term of the loan using the effective interest method so the debt, at its term, is recorded at its face value. The Company estimated the fair value of this the warrant warrants at date of grant using the Black-Scholes option pricing model using the following inputs: (i) stock price on the date of grant of $0.0122, (ii) the contractual term of the warrant of 4 years, (iii) a risk-free interest rate of 0.89% and (iv) an expected volatility of the price of the underlying common stock of 443.3%.

As of June 30, 2021, the outstanding principal balance on the note was $129,000, and the associated unamortized discounts totaled $42,185.

Convertible Notes Payable - Variable Conversion Price

At various times to fund operations, the Company issues convertible notes payable in which the conversion features are variable. In addition, some of these convertible notes payable have on issuance discounts and other fees withheld.

During the year ended December 31, 2016, the Company issued to one noteholder, in various transactions, $242,144 in convertible promissory notes with fixed floors and received an aggregate of $232,344 in proceeds. The convertible promissory notes each bear interest at 8.0% per annum and mature one year from issuance ranging from July to December 2017. After six months from issuance, each convertible promissory note is convertible at the option of the holder at a 50% discount to the lowest traded price of the Company’s common stock over the previous 20 days. In addition, each note’s conversion rate has a floor of $0.0001. Total debt discounts related to the beneficial conversion features of $241,852 were recorded and are being amortized over the life of the notes. On April 9, 2021, the Company agreed to settle all outstanding principal and interest on these notes in exchange for common stock and common stock purchase warrants. See settlement disclosure below for more information. As of June 30, 2021, the outstanding principal balance on these notes total $0, and all discounts were fully amortized.

During the year ended December 31, 2017, the Company issued to one noteholder in various transactions $477,609 in convertible promissory notes with fixed floors and received an aggregate of $454,584 in proceeds. The convertible promissory notes each bear interest at 8.0% per annum and mature one year from issuance ranging from January to August 2018. After six months from issuance, each convertible promissory note is convertible at the option of the holder at a 50% discount to the lowest traded price of the Company’s common stock over the previous 20 days. In addition, each note’s conversion rate has a floor of $0.0001. Total debt discounts related to the beneficial conversion features of $447,272 were recorded and are being amortized over the life of the notes. During the six months ended June 30, 2021, the Company issued 182,872,798 shares of its common stock upon the conversion of $50,000 and $ 14,004, respectively, in note principal and accrued interest. On April 9, 2021, the Company agreed to settle all outstanding principal and interest on these notes in exchange for common stock and common stock purchase warrants. See settlement disclosure below for more information. As of June 30, 2021, the outstanding principal balance on these notes total $0, and all discounts were fully amortized.

During the year ended December 31, 2018, the Company issued to one noteholder in various transactions $137,306 in convertible promissory notes with fixed floors and received an aggregate of $130,556 in proceeds. The convertible promissory notes each bear interest at 8.0% per annum and mature one year from issuance ranging from August 2018 to April 2019. After six months from issuance, each convertible promissory note is convertible at the option of the holder at a 50% discount to the lowest traded price of the Company’s common stock over the previous 20 days. In addition, each note’s conversion rate has a floor of $0.0001. Total debt discounts related to the beneficial conversion features of $122,755 were recorded and are being amortized over the life of the notes. During the six months ended June 30, 2021, the Company issued 23,118,645 shares of its common stock upon the conversion of $118,996 and $27,496, respectively, in note principal and accrued interest. On April 9, 2021, the Company agreed to settle all outstanding principal and interest on these notes in exchange for common stock and common stock purchase warrants. See settlement disclosure below for more information. As of June 30, 2021, the outstanding principal balance on these notes total $0, and all discounts were fully amortized.

During the year ended December 31, 2019, the Company issued to one noteholder in various transactions $282,000 in convertible promissory notes with fixed floors and received an aggregate of $276,000 in proceeds. The convertible promissory notes each bear interest at 8.0% per annum and mature one year from issuance in July 2020. After six months from issuance, each convertible promissory note is convertible at the option of the holder at a 50% discount to the lowest traded price of the Company’s common stock over the previous 20 days. In addition, each note’s conversion rate has a floor of $0.0001. Total debt discounts related to the beneficial conversion features of $276,000 and $6,000 for issuance costs were recorded and are being amortized over the life of the notes. During the six months ended June 30, 2021, the Company issued 156,438,271 shares of its common stock upon the conversion of $310,200 and $40,186, respectively, in note principal and accrued interest. As of June 30, 2021, the principal balance on these notes was $0, and all discounts were fully amortized.

10

On April 9, 2021, the Company issued 36,000,000 shares of its common stock upon the conversion of $186,736 and $62,302, respectively, in note principal and accrued interest to settle all outstanding balances with the lender. In connection with the settlement, the Company agreed to issue 15,000,000 common stock purchase warrants with a cashless exercise price of $0.0125. The warrants expire on December 31, 2021. The Company allocated an aggregate fair value of $224,812 to the stock warrants and recorded a loss on the extinguishment of debt. The Company estimated the fair value of this the warrant warrants at date of grant using the Black-Scholes option pricing model using the following inputs: (i) stock price on the date of grant of $0.0158, (ii) the contractual term of the warrant of 0.7 years, (iii) a risk-free interest rate of 0.35% and (iv) an expected volatility of the price of the underlying common stock of 440.5%.

On January 19, 2021, the Company issued to one noteholder a $270,000 convertible promissory note. The note bears interest at 8.0% per annum and matures on January 19, 2025. After six months from issuance, the note is convertible at the option of the holder at a 50% discount to the lowest traded price of the Company’s common stock over the previous 20 days. The note’s conversion rate has a floor of $0.0001.

On May 7, 2021, the Company repaid $270,000 in note principal and $6,391 in accrued interest to the holder. As of June 30, 2021, the principal balance on the note was $0.

Future Potential Dilution

As of June 30, 2021, the Company’s convertible note is convertible into an aggregate of approximately 129,000,000 shares of common stock.

NOTE 4 – LOANS PAYABLE

As of December 31, 2020, the Company had $235,308 in principal outstanding from bridge loans. The loans payable bear interest at 8.0% per annum and are payable upon demand. In February 2021, the Company repaid the full principal balance of $235,308 and accrued interest of $24,654. As of June 30, 2021, the balance of these notes was $0.

  March 31, 2022  December 31, 2021 
Accounts payable and other accruals $361,644  $310,047 
Mineral rights payable  550,075   672,601 
Accrued interest  -   5,590 
Total $911,719  $988,237 

 

NOTE 53 – OTHER NONCURRENT LIABILITIES

 

Other noncurrent liabilities are comprised solely of social contributions and other employee-related costs at our operating subsidiaries located in Brazil. The Company has been funding these amounts upon the termination of a worker or employee. The balance of these employee related costs as of June 30, 2021March 31, 2022 and December 31, 20202021 amounted to $124,736129,885 and $121,250108,926, respectively.

 

NOTE 64 – STOCKHOLDERS’ DEFICIT

 

Authorized and Amendments

 

As of June 30, 2021,March 31, 2022, the Company had 3,250,000,0004,000,000,000 common shares authorized with a par value of $0.001 per share.

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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 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.

 

SixThree Months Ended June 30,March 31, 2022 Transactions

During the three months ended March 31, 2022, the Company issued 90,299,152 shares of common stock for gross proceeds of $397,999 pursuant to subscription agreements with accredited investors.

Three Months Ended March 31, 2021 Transactions

 

During the sixthree months ended June 30,March 31, 2021, the Company issued 110,132,972 40,541,666shares of common stock for gross proceeds of $666,650 266,500pursuant to subscription agreements with accredited investors. Additionally, the Company issued 504,676,193 382,429,714shares of common stock upon conversion of $1,234,906 640,883in convertible notes payable and accrued interest. Lastly, during the sixthree months ended June 30,March 31, 2021, the Company issued 313,053,865 shares of common stock for net proceeds of $143,750 upon the exercise of 334,385,769 warrants.

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Six Months Ended June 30, 2020 Transactions

During the six months ended June 30, 2020, the Company issued 295,000,000 shares of common stock to accredited investors pursuant to subscription agreements for net proceeds of $220,000. The Company issued 5,666,594 shares of common stock to non-employees for services rendered. The Company issued 100,213,975131,675,682 shares of common stock upon conversionthe cashless exercise of $53,161141,000,000 in convertible notes payable and accrued interest.warrants.

 

Additionally, during the six months ended June 30, 2020, the Company exchanged 200,000,000 sharesSee Note 6 – Related Party Transactions for additional disclosures of common stock returned by an accredited investor for 150,000issuances. shares of Jupiter Gold’s common stock held as an investment by the Company. The Company used the quoted fair value of each entity’s common stock on the dates of exchange to determine the exchange ratio.

 

Common Stock Options

 

During the sixthree months ended June 30, 2021,March 31, 2022, the Company granted options to purchase an aggregate of 180,000,00094,159,724 shares of common stock to officers and non-management directors. The options were valued at $671,430196,996 in total. The options were valued using the Black-Scholes option pricing model with the following average assumptions: our stock price on the date of the grant which ranged from $0.00040.006 to $0.008, expected dividend yield of 0.0%, historical volatility calculated between 63.979.0% and 124.4220%, risk-free interest rate ranging between 0.9% and 1.751.83%, and an expected term of 10 years.

 

The following table reflects all outstanding and exercisable options at June 30, 2021.March 31, 2022. All stock options immediately vest and are exercisable for a period of five to ten years from the date of issuance.

SCHEDULE OF OUTSTANDING AND EXERCISABLE OPTIONS ACTIVITY

  Number of Options Outstanding and Vested  

Weighted

Average

Exercise Price

  

Remaining Contractual

Life (Years)

  

Aggregated Intrinsic

Value

 
Outstanding, January 1, 2021  119,917,140  $0.0025   3.6     
Issued  180,000,000   0.0000   9.8     
Exercised  (35,845,100)  –   –     
Forfeited  (565,640)  –   –     
Outstanding and vested, June 30, 2021  263,506,400  $0.0007   7.8  $2,903,147 

See Note 8 – Related Party Transactions for more information related to stock options issued and outstanding for the Company’s subsidiaries Jupiter Gold and Apollo Resources.

  Number of Options Outstanding and Vested  Weighted Average Exercise Price  Remaining Contractual Life (Years)  Aggregated Intrinsic Value 
Outstanding, January 1, 2022  4,908,779  $0.011   2.74   19,675 
Issued  –   –   –   – 
Exercised  –   –   –   – 
Forfeited  –   –   –   – 
Outstanding and Vested, March 31, 2022  4,908,779  $0.011   2.74   19,675 

 

Stock Purchase Warrants

Stock purchaseAs of December 31, 2021, the warrants are accounted for as equity in accordance with ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equityoutstanding has an aggregated intrinsic value of $19,675.

 

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The following table reflects all outstanding and exercisable warrants at June 30, 2021. All warrants are exercisable for a period of nine months to four years from the date of issuance:

SCHEDULE OF WARRANT ACTIVITYBRAZIL MINERALS, INC.

  Number of Warrants Outstanding  

Weighted Average

Exercise Price

  Weighted Average Contractual Life (Yrs.) 
          
Outstanding, January 1, 2021  306,770,000   0.0016   0.83 
Warrants issued  89,591,306  $0.0125     
Warrants exercised  (299,000,000) $–     
Warrants forfeited  (–) $–     
Balance June 30, 2021  97,361,306  $0.0116   2.37 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 75 – COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

The Company leases office space as its principal executive offices in Pasadena, California for approximately $5,750 on a month-to-month basis. The Company also leases office space in the municipality of Olhos D’Agua, Brazil. Such costs are immaterial to the condensed consolidated financial statements.

 

NOTE 86 - RELATED PARTY TRANSACTIONS

 

Chief Executive Officer

The following tables set forth the components of the Company’s related party payables as of June 30, 2021 and December 31, 2020:

SCHEDULE OF RELATED PARTY TRASACTIONS

  June 30, 2021  December 31, 2020 
Convertible notes payable to related party $566,743  $566,743 

Effective June 30, 2018, the Company issued a convertible promissory note in the principal amount of $445,628 to its Chief Executive Officer against a portion of these unpaid compensatory balances. The note bears no interest and is payable on demand. The note is convertible at the option of the holder at the lower of (i) the average of the five lowest bid prices of the Company’s common stock over the previous 20 trading days or (ii) the lowest price per share at which the Company sold its common stock in a transaction with a person who is not a manager, officer, or director of the Company during the period from the date hereof until the giving of notice of the election to convert or the lowest price per share at which a noteholder who is not a manager, officer, or director of the Company converted any debt of the Company into shares of the Company during the period from the date hereof until the giving of notice of the election to convert. The note’s conversion rate has a floor of $0.0001. Total debt discounts related to the beneficial conversion features of $445,628 were recorded and are being amortized over a one-year period consistent with the maturity dates of convertible notes issued to third party holders. As of June 30, 2021, all discounts were fully amortized.

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On April 7, 2019, the Company’s board of directors approved the issuance of a convertible note in the principal amount of $261,631 to its Chief Executive Officer against a portion of these unpaid compensatory balances. The note bears interest at an annual rate of 6.0% and is payable on demand. The note is convertible at the option of the holder at the lower of (i) $0.00045 or (ii) the lowest price per share at which a noteholder who is not a manager, officer, or director of the Company converted any debt of the Company into common stock of the Company during the period from the date hereof until the giving of notice of the election to convert. Total debt discounts related to the beneficial conversion features of $261,631 were recorded and are being amortized over a one-year period consistent with the maturity dates of convertible notes issued to third party holders. As of June 30, 2021, there were unamortized debt discounts of $15,431 related to this note.

On April 7, 2019, the Company’s board of directors approved the exchange, initiated by a formal notice of conversion dated February 19, 2019, of $202,240 of convertible note principal due to its Chief Executive Officer for five-year stock options to purchase 224,711,111 shares of Brazil Minerals at an exercise price of $0.00001 and 505,600 shares of common stock of Jupiter Gold at an exercise price of $0.001. Per the terms of the convertible note agreement, the conversion notification permitted the holder, at his election, to receive either an issuance of 224,711,111 shares of Brazil Minerals and 505,600 shares of Jupiter Gold, or an issuance of stock options to purchase the same numbers of shares at a nominal exercise price. The options were valued at $270,255 in total. The options were valued using the Black-Scholes option pricing model with the following average assumptions: our stock price on date of grant of $0.0012, expected dividend yield of 0%, historical volatility ranging from 230.1% to 1,271.2%, risk-free interest rate of 2.50%, and an expected term of 5.00 years. In connection with the exchange, the Company recorded a loss on the extinguishment of debt totaling $68,015.

On June 30, 2019, the Company’s board of directors approved the issuance of a convertible note in the principal amount of $61,724 to its Chief Executive Officer against a portion of these unpaid compensatory balances. The note bears interest at an annual rate of 6.0% and is payable on demand. The note is convertible at the option of the holder at the lower of (i) $0.0003 or (ii) the lowest price per share at which a noteholder who is not a manager, officer, or director of the Company converted any debt of the Company into common stock of the Company during the period from the date hereof until the giving of notice of the election to convert. Total debt discounts related to the beneficial conversion features of $61,724 were recorded and are being amortized over a one-year period consistent with the maturity dates of convertible notes issued to third party holders. As of December 31, 2020, there were unamortized debt discounts of $30,862 related to this note.

On March 11, 2020, the Company issued 200,000 shares of its common stock with a fair value of $280, or $0.0014 per share, to its Chief Executive Officer in lieu of cash for loans payable and other accrued obligations.

On December 3, 2020, the Company issued 161,636,427 shares of common stock to its Chief Executive Officer in connection with the exercise stock options acquired on February 19, 2019 as described above.

Jupiter Gold Corporation

During the sixthree months ended June 30, 2021,March 31, 2022, Jupiter Gold granted options to purchase an aggregate of 210,000shares of its common stock to Marc Fogassa at prices ranging between $0.01to $1.00per share. The options were valued at $148,853 27,033and recorded to stock-based compensation. The options were valued using the Black-Scholes option pricing model with the following average assumptions: the Company’s stock price on the date of the grant ($0.19 0.25to $1.450.30), expected dividend yield of 0%, historical volatility calculated betweenat 97.3232% and 200.6%, risk-free interest rate between a range of 0.811,59% to 1.751.79%, and an expected term between 5and 10 years.

years. As of June 30,

During the three months ended March 31, 2021, Jupiter Gold granted options to purchase an aggregate of 2,505,000 Jupiter Gold105,000 shares of its common stock to Marc Fogassa at prices ranging between $0.01 to $1.00 per share. The options were outstandingvalued at $124,549 and recorded to stock-based compensation. The options were valued using the Black-Scholes option pricing model with a weightedthe following average lifeassumptions: the Company’s stock price on the date of the grant ($0.95 to $1.45), expected dividend yield of 2.9 0years%, historical volatility calculated at an average exercise price97.3%, risk-free interest rate between a range of $0.93 0.92% to 1.41%, and an aggregated intrinsic value of $expected term between 202,8255 and 10. years.

 

Apollo Resource Corporation

 

During the sixthree months ended June 30, 2021,March 31, 2022, Apollo Resources granted options to purchase an aggregate of 150,000 135,000shares of its common stock to Marc Fogassa at a price of $0.01per share. The options were valued at $217,129 163,990and 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 ($0.10to $4.005.00), expected dividend yield of 0%, historical volatility calculated betweenat 49.271% and 98.3%, risk-free interest rate between a range of 0.68% to 1.752,34%, and an expected term between 5and 10 years

years. As of June 30,

During the three months ended March 31, 2021, Apollo Resources granted options to purchase an aggregate of 150,000105,000 Apollo Resourceshares of its common stock options were outstanding withto Marc Fogassa at a weighted average life of 9.6 years at an average exercise price of $0.01 per share. The options were valued at $217,129 and recorded to stock-based compensation. The options were valued using the Black-Scholes option pricing model with the following average assumptions: the Company’s stock price on the date of the grant ($0.10 to $4.00), expected dividend yield of 0%, historical volatility calculated at 49.2%, risk-free interest rate between a range of 0.68% to 1.41%, and an aggregated intrinsic value of $expected term between 148,5005. and 10 years.

 

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BRAZIL MINERALS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 97 – RISKS AND UNCERTAINTIES

In light of the SEC’s Division of Corporate Finance Disclosure Guidance Topic Number 9, dated March 25, 2020, on the impact of COVID-19, the Company notes the following:

●The Company has not had any reports of COVID-19 among its workforce;

●The Company has been able to continue local operations of the Company in Brazil as they are located in a rural area currently unaffected by any lockdown restrictions implemented elsewhere in Brazil;

●Travel between the U.S. and Brazil has essentially ceased; this is mitigated by the use of live streaming video and other methods as needed;

●Some exploratory research of some of the Company’s projects have been delayed as certain municipalities in Brazil have unilaterally restricted the entry of outside persons; these actions are being legally challenged by branches of the state administration and the Company is monitoring all new developments;

●The Company has postponed any expenses which are not critical to it at the moment.

 

Currency Risk

 

The Company operates primarily in Brazil which exposes it to currency risks. The Company’s business activities may generate intercompany receivables or payables that are in a currency other than the functional currency of the entity. Changes in exchange rates from the time the activity occurs to the time payments are made may result in the Company receiving either more or less in local currency than the local currency equivalent at the time of the original activity.

 

The Company’s condensed consolidated financial statements are denominated in U.S. dollars. Accordingly, changes in exchange rates between the applicable foreign currency and the U.S. dollar affect the translation of each foreign subsidiary’s financial results into U.S. dollars for purposes of reporting in the consolidated financial statements. The Company’s foreign subsidiaries translate their financial results from the local currency into U.S. dollars in the following manner: (a) income statement accounts are translated at average exchange rates for the period; (b) balance sheet asset and liability accounts are translated at end of period exchange rates; and (c) equity accounts are translated at historical exchange rates. Translation in this manner affects the shareholders’ equity account referred to as the foreign currency translation adjustment account. This account exists only in the foreign subsidiaries’ U.S. dollar balance sheets and is necessary to keep the foreign subsidiaries’ balance sheets in agreement.

 

NOTE 108 - SUBSEQUENT EVENTS

 

In accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to June 30, 2021March 31, 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.

 

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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

 

Brazil Minerals is anWe are a U.S. mineral exploration and mining company with projects and properties in highly strategicessentially 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 60,077 acres (243 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 44 mineral rights spread over 45,456 acres (184 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 rare earths, titanium, nickel, and cobalt. 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 approximately 60%44.41% of the common shares 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 explorationthe development of gold projects and of a quartzite mine, and whose common shares are quoted on the OTCQB under the symbol “JUPGF.” The quartzite mine is expected to start operations and revenues in iron,2022. The results of operations from both Apollo Resources and which is advancing towards operational licensing of its first revenue-producing iron mine. We also own approximately 10% of Jupiter Gold Corporation, aare consolidated in our financial statements under accounting principles generally accepted in the United States (“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 first quarter of 2022 and continuing to date, we have been primarily focused on the geological exploration projectsand advancement of one of our mineral rights within our Minas Gerais Lithium Project. Within this one claim, our exploration team has identified three distinct pegmatitic ore bodies with spodumene, a mineral which contains lithium. Recent geochemical analysis of spodumene samples from one drill hole included a reading of 2.86% Li2O. We have two qualified persons under S-K 1300 who are responsible for the technical advancement of the project.

After the end of the first quarter of 2022, we increased the size of our nickel exploration footprint with the addition of another 11 mineral rights in the Brazilian state of Goiás.

On March 16, 2022, we terminated the Consulting Services Agreement with Jason Baybutt, who served as our Chief Financial Officer, Principal Accounting Officer, and Treasurer from December 29, 2021 to March 16, 2022.

On March 16, 2022, we appointed Gustavo Pereira de Aguiar as our Chief Financial Officer, Principal Accounting Officer, and Treasurer. From 2016 until March 15, 2022, Mr. Aguiar was the Controller of Jaguar Mining, Inc., a Canadian publicly traded company with two producing gold mines in the state of Minas Gerais in Brazil and current market capitalization of approximately $270 million. From 2013 to 2016, Mr. Aguiar was Controller at Grupo Orguel, an enterprise in the construction equipment rental sector in Brazil which received funding from Carlyle, a U.S. private equity group, and from 2010 to 2013, Mr. Aguiar worked at Mirabella Mineração, which at the time was developing its nickel project in the state of Bahia in Brazil. From 2006 to 2010, Mr. Aguiar was an auditor with Deloitte in Brazil. Mr. Aguiar has undergraduate degrees in Business Administration and in Accounting from Universidade FUMEC in Brazil. He has an executive MBA and further post-graduate education in finance from Fundação Dom Cabral in Brazil. Mr. Aguiar is advancing towards operational licensing of its first revenue-producing quartzite mine.fluent in Portuguese and English and is a licensed accountant in Brazil.

 

Results of Operations

 

The Three Months Ended June 30, 2021March 31, 2022 Compared to the Three Months ended June 30, 2020March 31, 2021

 

Revenue for the three months ended June 30, 2021March 31, 2022 totaled $1,645,$477, compared to revenue of $8,936$4,459 during the three months ended June 30, 2020March 31, 2021 representing a decrease of 81.6%89%. We anticipate that revenues will begin to increase withThis revenue comes from sales of industrial sand during the licensing of new high-quality areas for production in future periods.raining season. Industrial sand is a residual business line as the Company is primarily focused on its lithium exploration as described above.

 

Cost of goods sold for the three months ended June 30, 2021March 31, 2022 totaled $24,105,$9,855, as compared to cost of goods sold of $30,664$22,989 during the three months ended June 30, 2020March 31, 2021 representing a decrease of 21.4%57.13%. 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 the Company’sour exploratory efforts and the risks and uncertainties surrounding COVID-19.efforts.

 

Gross loss for the three months ended June 30, 2021March 31, 2022 totaled $22,460,$9,378, compared to gross loss of $21,728$18,530 during the three months ended June 30, 2020March 31, 2021, representing an increaseimprovement of 3.4%49.4%.

 

Operating expenses for the three months ended June 30, 2021March 31, 2022 totaled $740,540,$827,317, compared to operating expenses of $268,361$1,112,296 during the three months ended June 30, 2020March 31, 2021, representing an increasea decrease of 176.0%25.6%. The increasedecrease was mostly due to lower general and administrative expenses related to public company costs and increased financing efforts, and stock-based compensation from issuances of stock options to officers and directors.

Other expenses for the three months ended June 30, 2021 totaled $323,132, compared to other expenses of $125,241 during the three months ended June 30, 2020 representing an increase of 158.0%. The Company realized a decrease in interest expense on promissory notes due to reduced debt levels during the period ended June 30, 2021. Additionally, the Company recorded a $224,812 loss on the extinguishment of debt related to common stock purchase warrants issued in a settlement with a noteholder during the three months ended June 30, 2021.

 

As a result, we incurred a net loss attributable to our stockholders of $826,674,$531,490, or $0.00 per share, for the three months ended June 30, 2021,March 31, 2022, compared to a net loss attributable to our stockholders of $315,670,$716,022, or $0.00 per share, during the three months ended June 30, 2020.

The Six Months Ended June 30, 2021 Compared to the Six Months ended June 30, 2020

Revenue for the six months ended June 30, 2021 totaled $6,104, compared to revenue of $11,566 during the six months ended June 30, 2020 representing a decrease of 47.2%. 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 six months ended June 30, 2021 totaled $47,094, as compared to cost of goods sold of $59,897 during the six months ended June 30, 2020 representing a decrease of 21.4%. 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 the Company’s exploratory efforts and the risks and uncertainties surrounding COVID-19.

Gross loss for the six months ended June 30, 2021 totaled $40,990, compared to gross loss of $48,331 during the six months ended June 30, 2020 representing a decrease of 15.2%.

Operating expenses for the six months ended June 30, 2021 totaled $1,852,836, compared to operating expenses of $554,103 during the six months ended June 30, 2020 representing an increase of 234.4%. The increase was mostly due to general and administrative expenses related to public company costs and increased financing efforts, and stock-based compensation from issuances of stock options to officers and directors.

Other expenses for the six months ended June 30, 2021 totaled $387,674, compared to other expenses of $405,172 during the six months ended June 30, 2020 representing a decrease of 4.3%. The Company realized a decrease in interest expense on promissory notes due to reduced debt levels during the period ended June 30,March 31, 2021. Additionally, the Company recorded a $224,812 loss on the extinguishment of debt related to common stock purchase warrants issued in a settlement with a noteholder during the six months ended June 30, 2021, as compared to a $76,178 loss due to a fair market value adjustment provision included in a share exchange agreement with a related party during the six months ended June 30, 2020.

As a result, we incurred a net loss attributable to our stockholders of $1,542,696, or $0.00 per share, for the six months ended June 30, 2021, compared to a net loss attributable to our stockholders of $838,288, or $0.00 per share, during the six months ended June 30, 2020.

 

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Liquidity and Capital Resources

 

As of June 30,March 31, 2021, we had cash and cash equivalents of $62,088$54,230 and a working capital deficit of $1,665,200.$822,917.

 

Net cash used inby operating activities totaled $98,400$506,071 for the sixthree months ended June 30, 2021,March 31, 2022, compared to net cash usedgeneration of $460,751$488,711 during the sixthree months ended June 30, 2020March 31, 2021 representing a decrease in cash used of $362,351$994,782 or 78.6%203.5%. Net cash used in investing activities totaled $957,758$152,998 for the sixthree months ended June 30, 2021,March 31, 2022, compared to net cash used of $13,138$939,927 during the sixthree months ended June 30, 2020March 31, 2021, representing an increasea decrease in cash used of $944,620$786,929 or 7,190.0%83.7%. Net cash provided by financing activities totaled $873,812$622,999 for the sixthree months ended June 30, 2021,March 31, 2022, compared to $605,510$466,249 during the sixthree months ended June 30, 2020March 31, 2021, representing an increase in cash provided of $268,302$156,750 or 44.3%33.62%.

 

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 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.

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 itus 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, 2021,March 31, 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. generally accepted accounting principles.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)), the Company iswe are not required to provide the information required by this Item as it iswe are a “smaller reporting company,” as defined by Rule 229.10(f)(1).

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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, 2021.March 31, 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 Securities Exchange Act of 1934, as amended (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

(b)

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 March 31, 2022.

(c) Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred in the second quarter of 2021ended March 31, 2022 that materially affected, or would be reasonably likely to materially affect, our internal control over financial reporting.

 

(c)(d) Limitations of the Effectiveness of Internal Controls

 

The effectiveness of the Company’sour 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 Company’sour disclosure controls and procedures and internal control over financial reporting will detect all errors or fraud. However, the Company’sour control systems have been designed to provide reasonable assurance of achieving theirout objectives, and the Company’sour Principal Executive Officer and Principal Financial Officer have concluded that the Company’sout 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, 20202021 filed with the Securities and Exchange Commission on March 31, 2021.29, 2022.

 

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

During the three months ended June 30, 2021,March 31, 2022, we received an aggregate of $75,000$250,000 in gross proceeds from the exercise of cash warrants and sale of shares of our unregistered common stock to four investors and one institutional investor.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
   
10.1Consulting Services Agreement between the Company and Jason Baybutt.*
10.2Employment Agreement between the Company and Gustavo Pereira de Aguiar.*
10.3Form of Securities Purchase Agreement between the Company and Investors.
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 InlineInline 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)

 

* Management contract or compensatory plan or arrangement.

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SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized.

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 BRAZIL MINERALS, INC.TitleDate
   
 By:
/s/ Marc Fogassa
  Marc FogassaMay 13, 2022
Date: August 20, 2021Marc Fogassa Chief Executive Officer (Principal Executive Officer) and Chairman of the Board
/s/ Gustavo Pereira de AguiarMay 13, 2022
Gustavo Pereira de AguiarChief Financial Officer (Principal Financial and Accounting Officer)

 

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