(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report:
For the transition period from ______ to ______
Commission file number 333-214872
JUPITER GOLD CORPORATION
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
Republic of the Marshall Islands
(Jurisdiction of incorporation or organization)
Rua Vereador João Alves Praes nº 95-A
Olhos D'Água, MG 39398-000, Brazil
(Address of principal executive offices)
Marc Fogassa
Rua Vereador João Alves Praes nº 95-A Olhos D'Água, MG 39398-000, Brazil
Telephone:+55-31-3956-1109
Email: marc.fogassa@jupitergoldcorp.com
(Name, Telephone, E-mail and/or Facsimile number and Address, of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act: None
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
Common Stock, par value $0.001 per share
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.
There were 4,429,599 shares outstanding on May 10, 2018.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [X] No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934. [ ] Yes
[X] No
Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] 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). [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of "large accelerated filer,"accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| [ ] Large accelerated filer | [ ]Accelerated filer | [X] Non-accelerated filer |
| | | [X] Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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. [ ]
Indicate by check which basis of accounting the registrant has used to prepare the financial statements included in this filing:
US GAAP [ X ] International Financial Reporting Standards as issued by the International Accounting Standards Board [ ] Other [ ]
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 [ ] Item 18 [ ]
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
TABLE OF CONTENTS
| Cautionary Note Regarding Forward Looking Statements | 1 |
| | |
| Part I |
| | | |
| Item 1. | Identity of Directors, Senior Management and Advisers | 2 |
| Item 2. | Offer Statistics and Expected Timetable | 2 |
| Item 3. | Key Information | 2 |
| Item 4. | Information on the Company | 13 |
| Item 4A. | Unresolved Staff Comments | 13 |
| Item 5. | Operating and Financial Review and Prospects | 19 |
| Item 6. | Directors, Senior Management and Employees | 18 |
| Item 7. | Major Shareholders and Related Party Transactions | 46 |
| Item 8. | Financial Information | 23 |
| Item 9. | The Offer and Listing | 51 |
| Item 10. | Additional Information | 51 |
| Item 11. | Quantitative and Qualitative Disclosures About Market Risk | 57 |
| Item 12. | Description of Other Securities Other Than Equity Securities | 57 |
| | | |
| Part II |
| | | |
| Item 13. | Defaults, Dividend Arrearages and Delinquencies | 57 |
| Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds | 57 |
| Item 15. | Controls and Procedures | 58 |
| Item 16. | Reserved | 59 |
| Item 16A | Audit Committee Financial Expert | 59 |
| Item 16B | Code of Ethics | 59 |
| Item 16C | Principal Accountant Fees and Services | 59 |
| Item 16D | Exemptions from the Listing Standards for Audit Committees. | 60 |
| Item 16E | Purchases of Equity Securities by the Issuer and Affiliated Purchasers. | 60 |
| Item 16F | Changes in Registrant's Certifying Accountant | 60 |
| Item 16G | Corporate Governance | 60 |
| Item 16H | Mine Safety Disclosure | |
| | | |
| Part III |
| | | |
| Item 17. | Financial Statements | 60 |
| Item 18. | Financial Statements | 60 |
| Item 19. | Exhibits | 61 |
| | | |
| Financial Statements | 63 |
| | | |
| Signature Page | 62 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 20-F ("Annual Report") contains or incorporates by reference forward-looking statements. All statements, other than statements of historical facts, that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Such statements are characterized by terminology such as "anticipates," "believes," "expects," "future," "intends," "assuming," "projects," "plans," "will," "should" and similar expressions or the negative of those terms or other comparable terminology. These forward-looking statements, which include statements about the mineral industry; market size, share and demand; performance; our expectations, objectives, anticipations, intentions and strategies regarding the future, expected operating results, revenues and earnings and potential litigation are not guarantees of future performance and are subject to risks and uncertainties, including those risks described under the heading "Risk Factors" set forth herein, or in the documents incorporated by reference herein, that could cause actual results to differ materially from the results contemplated by the forward-looking statements.
Investors are cautioned that our forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements.
As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainty of estimates, forecasts and projections that may be better or worse than projected. Given these uncertainties, you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this filing to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events.
We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures we make in our reports on Form 20-F and Form 6-K, or their successors. We also note that we have provided a cautionary discussion of risks and uncertainties under the caption "Risk Factors" in this Annual Report. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed here could also adversely affect us.
Information regarding market and industry statistics contained in this Annual Report is included based on information available to us which we believe is accurate. We have not reviewed or included data from all sources and cannot assure stockholders of the accuracy or completeness of the data included in this Annual Report. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services.
PART I
Item 1. Identity of Directors, Senior Management and Advisers.
Not applicable.
Item 2. Offer Statistics and Expected Timetable.
Not applicable.
Item 3. Key Information.
Item 3.A. Selected Financial Data.
The following selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in these statements. The selected consolidated financial data presented below are derived from our audited consolidated financial statements as of December 31, 2017, and for the period from January 1, 2017 to December 31, 2017, which are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP").
Except as may be otherwise indicated, all dollar amounts are stated in U.S. dollars, the Registrant's reporting currency. The following table sets out the exchange rates, based on the data from the website of the Brazilian Central Bank, for the conversion of the Brazilian real (R$) into one United States dollar (US$), for the periods from July 27, 2016 (date of our inception) to December 31, 2016 and from January 1, 2017 to December 31, 2017. The average exchange rates are based on the average of the daily closing exchange rates during such periods:
| | Average | | High | | Low | | Close | |
| | | | | | | | | |
| Fiscal Year Ended 12/31/2016 | | $ | 3.2700 | | | $ | 3.4650 | | | $ | 3.1193 | | | $ | 3.2591 | |
| Fiscal Year Ended 12/31/2017 | | $ | 3.1925 | | | $ | 3.3807 | | | $ | 3.0510 | | | $ | 3.3080 | |
The exchange rate on May 10, 2018 was $3.5551 Brazilian reais per one U.S. dollar.
Item 3.B. Capitalization and Indebtedness.
As of 12/31/2017, we had issued 4,429,599 shares of its common stock and 1 share of a Series A Preferred Stock.
As of 12/31/2017, we had current liabilities of $15,366 all of which was unsecured and attributable to non-related parties. We had no long-term liabilities.
Item 3.C. Reasons for the Offer and Use of Proceeds.
Not applicable.
You should carefully consider the following risk factors and all other information contained in this Annual Report before purchasing our shares. We have assembled these risk factors based upon both publicly available information, our own analysis and our own beliefs relative to our understanding of our business. If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected, in which case, the value of our shares could decline, and you may lose some or all of your investment.
General Risks Relating to Our Business
We are a newly formed company.
We are a new venture and have the inherent risks associated with any start-up, including, but not limited to, an unproven business model, lack of depth in management, lack of branding and limited access to funding.
Our business model is unproven.
Our primary business model of building portable gold recovery plants for alluvial gold extraction and locating them in gold areas in Brazil has not been done before in the scale in which we intend to proceed. We may not find enough attractive areas in which to place our modular plants. We may not have the funds necessary to reach critical mass in the number of modular plants. Revenues from modular plants may be less than the costs to acquire and run such modular plants and may not permit us to become profitable with this line of business.
Our secondary business model, which is to take one of our several mineral rights for gold and turn it into a profitable project, faces difficult odds. Only a fraction of mineral rights in Brazil ever become a producing mine. We will most likely need to partner with a larger, better capitalized company to advance in one or more of our projects. We may not find such interested partner. If we find such partner, we may have to dilute our project ownership materially initially or over time.
We are highly dependent on certain members of our management.
We depend on the efforts of our currently small number of officers and directors. In particular, we are heavily dependent upon the expertise of Marc Fogassa, our Chairman, Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer. Mr. Fogassa speaks Portuguese and English fluently, has extensive networks in both Brazil and the United States of America, and relevant experience in management of a public entity, chairmanships and directorships on multiple Boards, and finance. We note that Mr. Fogassa is also the Chief Executive Officer and Chairman of Brazil Minerals, Inc., currently our largest shareholder. If it occurs, any loss of the services of Mr. Fogassa could have a material adverse effect upon our results of operations and financial position. Our business will also be dependent upon our ability to attract and retain qualified personnel. Acquiring these personnel could prove more difficult or cost substantially more than estimated. This could cause us to incur greater costs or prevent us from pursuing our strategy as quickly as we would otherwise wish.
We lack branding.
As with any new venture, we are unknown in the marketplace. This may prevent us access to the best opportunities for gold areas in Brazil, talent for our team, or attractive financing terms.
We may be unable to access funding on acceptable terms or at all.
We may seek additional debt or equity financing to finance our business model and for growth. Such financing may not be available on acceptable terms or at all and our failure to obtain additional financing when needed could negatively impact our growth, financial condition and results of operations. Additional equity financing may be dilutive to the holders of our shares, and debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate our business.
Risks Related to Our Industry
Our results of operations, financial position and business outlook are highly dependent on the price of gold, which is subject to significant volatility and uncertainty.
Our results are substantially dependent on gold prices. As a result of the volatility of gold prices for these items, our results may fluctuate substantially.
Risks Relating to Mining and Environmental Regulation
We are subject to extensive mining and environmental regulation in Brazil. We also require permits from Brazilian governmental authorities with control over certain aspects of our business.
We are subject to various Brazilian federal mining laws and federal, state and local environmental laws. We may also be required to obtain permits from Brazilian governmental authorities for certain aspects of our operations. We may have to make significant capital expenditures on an ongoing basis to continue to ensure our compliance with mining and environmental laws and regulations and permit requirements. In addition, due to the possibility of changes to mining and environmental laws and regulations, the amount and timing of future regulatory expenditures may vary substantially from those currently anticipated. We could be subject to civil or criminal penalties for non-compliance with mining and environmental laws and regulations under Brazilian law.
Risks Related to Brazil
Significant volatility in the value of the Brazilian real in relation to the U.S. dollar could harm our results.
We expect our financial performance to be dependent on globally-determined gold prices pegged to the U.S. dollar and thus independent of fluctuations of the currency of Brazil, the Brazilian real. There have been significant fluctuations in the exchange rates between the Brazilian real and the U.S. dollar.
The Brazilian Government has exercised, and continues to exercise, significant influence over the Brazilian economy. Brazilian economic and political conditions have a direct impact on our business.
The Brazilian economy has been characterized by frequent, and occasionally drastic, intervention by the Brazilian government, which has often changed monetary, credit and other policies to influence Brazil's economy. The Brazilian government's actions to control inflation and affect other policies have often involved wage and price controls and fluctuation of the Central Bank's base interest rates. Actions taken by the Brazilian government concerning the economy may have important effects on companies operating in Brazil, including our company, and on market conditions. For example, in the past, the Brazilian government maintained domestic price controls, and we cannot assume that price controls will not be re-imposed in the future. Our financial condition and results of operations may also be adversely affected by the following factors and the Brazilian government's actions in response to them: devaluations and other exchange rate movements; inflation; economic and social instability; energy shortages; interest rates; exchange controls and restrictions on remittances abroad; liquidity of the domestic capital and lending markets; tax policy; and other political, diplomatic, social and economic policies or developments in or affecting Brazil.
Economic and market conditions in other emerging market countries may adversely affect the Brazilian economy and, therefore, the value of our Company.
The value of securities issued by companies operating in Brazil, such as ourselves, may be influenced by economic and market conditions in Brazil, and, to varying degrees, market conditions in other Latin American and emerging market countries, independently of the results of our business. Although economic conditions are different in each country, the reaction by investors to developments in one country may cause the capital markets in other countries to fluctuate. Developments or conditions in other emerging market countries have at times significantly affected the availability of credit in the Brazilian economy and resulted in considerable outflows of funds and declines in the amount of foreign currency invested in Brazil, as well as limited access to international capital markets by Brazilian companies, which may adversely affect our ability to borrow funds at an acceptable interest rate or to raise equity capital when and if there should be a need for us to do so. Although market concerns that crises that have affected other South American countries would ensue in Brazil have not yet become a reality, the volatility in market prices for Brazilian securities has been affected from time to time. Investors' perception of increased risk due to a crisis in other emerging market countries may adversely affect our ability to borrow funds at an acceptable interest rate or raise equity capital when and if there is a need for us to do so.
Investment registration and control requirements in Brazil may have adverse effects on us.
Brazil generally requires the registration of foreign capital invested in Brazilian markets or businesses. Thereafter, any repatriation of the foreign capital, or income earned on the foreign capital investment, must be approved by the Brazilian government. In the past, the Brazilian government has also imposed temporary restrictions on foreign capital remittances abroad when Brazil's foreign currency reserves decline significantly. Although approvals on repatriation are usually granted and there are currently no restrictions on foreign capital remittances, there can be no assurance that in the future approvals on repatriation will be granted or restrictions or adverse policies will not be imposed. If the Brazilian government delays or refuses to grant approval for the repatriation of funds or imposes restrictions on the remittance of foreign capital, our ability to transfer cash out of Brazil may be limited, thus affecting our other operations. Our investments might also be subject to anti-trust or other regulatory reviews depending on our size and future possible regulations.
Brazilian contract and corporate laws may negatively affect us.
The enforcement of contracts in Brazil is a lengthy process, requiring skill and tenacity, and the application of the corporate laws through the Brazilian legal system can be uneven, haphazard and unreliable.
Brazilian tax laws are complex and this may be detrimental to us.
Brazilian taxation tends to be one of the more complex tax regimes in the world. We will make every effort, in conjunction with Brazilian tax advisors, to limit the taxes to which we are subject; however, there is no assurance that the tax laws in Brazil will not be changed, nor interpreted by Brazilian authorities in a manner that could be detrimental to us.
Risks Related to Taxation
We may be a passive foreign investment company, which could lead to additional taxes for U.S. holders of our shares.
A passive foreign investment company or PFIC is a non-U.S. corporation that meets either the income or asset PFIC tests. The income test is met if 75 per cent or more of a corporation's gross income is ''passive income'' (generally dividends, interest, rents, royalties, and gains from the disposition of passive assets) in any taxable year. The asset test is met if at least 50 per cent of the average value of a corporation's assets produce, or are held for the production of, passive income. If we are considered a PFIC, a U.S. holder of our shares could be subject to substantially increased tax liability, including an interest charge upon the sale or other disposition of the U.S. holder's shares or upon the receipt of ''excess distributions'' from us. Certain elections may sometimes be used to reduce the adverse impact of the PFIC rules. These elections may not be available to U.S. holders. If these elections are available, they may result in a current U.S. federal tax liability prior to any distribution or disposition of the shares, and without the assurance of a U.S. holder receiving an equivalent amount of income or gain from a distribution or disposition.
Risks Relating to our Common Stock
There has been no market for our common stock, and prospective investors may not be able to resell their common stock at or above the purchase price paid by such investor, or at all.
We intend to qualify our common shares for quotation on an over-the-counter market in the U.S. such as the "OTCQB." There is a greater chance for illiquidity and market volatility for securities that trade on an over-the-counter market than on a national exchange, caused by a variety of factors including:
| • | the absence of consistent administrative supervision of "bid" and "ask" quotations; |
| • | lower trading volume; and |
In addition, the value of our common stock could be affected by:
| • | changes in the market valuations of other similarly situated companies providing similar services or serving similar markets; |
| • | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
| • | adoption of new accounting standards affecting our industry; |
| • | additions or departures of key personnel; |
| • | introduction of new products or services by us or our competitors; |
| • | sales of our shares or other securities in the open market; |
| • | changes in financial estimates by securities analysts; |
| • | conditions or trends in the market in which we operate; |
| • | changes in our earnings estimates and recommendations by financial analysts; |
| • | our failure to meet financial analysts' performance expectations; and |
| • | other events or factors, many of which are beyond our control. |
In a volatile market, you may experience wide fluctuations in the market price of our securities. These fluctuations may have an extremely negative effect on the market price of our securities and may prevent you from obtaining a market price equal to your purchase price when you attempt to sell our securities in the open market. In these situations, you may be required either to sell our securities at a market price which is lower than your purchase price, or to hold our securities for a longer period of time than you planned. An inactive market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies by using shares as consideration or to recruit and retain managers with equity-based flexible stock incentive plans.
We cannot assure you that our common stock will become quoted.
We may not meet listing standards which would severely affect our liquidity and the availability of investor interest.
The Company's quarterly revenue and operating results are likely to be volatile and difficult to predict, and if we fail to meet the expectations of investors, the market price of our shares would likely decline significantly.
Our operating results are likely to fluctuate significantly from quarter to quarter, due to a number of factors. These factors include, but are not limited to:
| • | the global price for gold; |
| • | costs related to our local operations; |
| • | the Brazilian real – US dollar exchange rate; |
| • | research results related to any of our mineral rights; |
| • | new mining, environmental, and/or tax regulations in Brazil; and |
| • | fluctuations in economic, political, and market conditions. |
Many of these factors are largely outside of our control, and there are many facets of each of these factors over which we have limited control. As a result of the factors above and the evolving nature of our business and industry, we may be unable to forecast our revenue accurately. We may be unable to adjust our spending in a timely manner to compensate for any unexpected revenue shortfalls. Additionally, a failure to meet our revenue or expense projections would have an immediate and negative impact on our operating results. If this were to happen, the market price of our common stock would likely decline significantly.
Our Common Shares may be considered a "penny stock" and it may be difficult to sell.
The SEC has adopted regulations which generally define a "penny stock" to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. If, upon development of a market, the market price of the shares falls below $5.00 per share, the SEC's penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and the salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules generally require that before a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's agreement to the transaction. These rules may adversely impact the liquidity of our shares and may affect the ability of investors to sell their shares.
Under our Bylaws, stockholders that initiate certain proceedings may be obligated to reimburse us and our officers and directors for all fees, costs and expenses incurred in connection with such proceedings if the claim proves unsuccessful.
Our Bylaws include a fee-shifting provision in Article VI, Section 7 for stockholder claims (the "Fee Shifting Provision"), which reads as follows: "In the event that (a) any current or prior shareholder of the Company or anyone on their behalf ("Claiming Party") initiates or asserts any claim or counterclaim ("Claim") or joins, offers assistance to, or has a direct interest in any Claim against the Corporation and/or any of its shareholders, officers, or directors (together, the Corporation and/or any of its shareholders, officers, or directors are henceforth called "Receiving Parties"),including any Claim purportedly filed on behalf of the Corporation or any shareholder, whether direct or derivative, in any jurisdiction, and (b) the Claiming Party (or the third party that received assistance from the Claiming Party or in whose Claim the Claiming Party had a direct interest) does not obtain a favorable judgment on all of the merits of its Claim, with such determination made by the Corporation, then each Claiming Party shall be obligated jointly and severally to reimburse the Receiving Parties for all fees, costs and expenses of every kind and description (including, but not limited to, all attorneys' fees) that the Receiving Parties may incur in connection with such Claim."
The Fee Shifting Provision was adopted to eliminate or decrease nuisance and frivolous litigation. We intend to apply the Fee Shifting Provision broadly to all actions, including U.S. federal securities law claims and claims related to this offering. The level of recovery for the plaintiff to avoid any payment, quoting verbatim the language of the Fee Shifting Provision, would necessitate such plaintiff obtaining a "favorable judgment on all of the merits of its Claim." The Fee Shifting Provision is intended to apply to "any current or prior shareholder of the Company or anyone on their behalf" and the Company will make such determination based on the facts of any case it may encounter. The parties entitled to recover, quoting verbatim, are "the Corporation and/or any of its shareholders, officers, or directors."
The Fee Shifting Provision could discourage shareholder lawsuits that might otherwise benefit the Company and its Shareholders.
We do not anticipate paying dividends on our common stock for the foreseeable future.
We are a recently formed company and anticipate that in the foreseeable future, if and when we generate profits, our Board of Directors may choose to reinvest such profits or save them as reserves and not pay dividends. We cannot anticipate if and when we will be paying dividends, if ever.
Securities analysts may not initiate coverage or continue to cover our common stock and this may have a negative impact on our shares' market price.
Currently, there are no securities analysts covering our Company. The trading market for our common stock may depend significantly on the research and reports that securities analysts publish about us or our business, competitors, or markets. We will not have any control over these analysts. There is no guarantee that securities analysts will cover our shares and even if coverage does commence, we will not have any control over these analysts. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect our shares' market price and liquidity. If we are covered by securities analysts, and our stock is downgraded, our stock price would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, beginning with this annual report on Form 20-F, we are required to furnish a report by our management on our internal controls over financial reporting. Such report contains, among other matters, an assessment of the effectiveness of our internal controls over financial reporting as of the end of 2016. Such implementation is likely to result in increased general and administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities. We cannot assure that we will be able to achieve our objective on a timely basis. Failure to achieve and maintain an effective internal control environment or to complete our Section 404 certifications could have a material adverse effect on our stock price.
In addition, in connection with our on-going assessment of the effectiveness of our internal controls over financial reporting, we may discover "material weaknesses" in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines "significant deficiency" as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.
In the event that a material weakness is identified, we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future.
Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure also could adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act of 2002. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our shares.
Our Series A Preferred Stock has the effect of concentrating voting control over us in Marc Fogassa, our Chairman and Chief Executive Officer.
One share of our Series A Preferred Stock is issued, outstanding and held by Marc Fogassa, our Chairman and Chief Executive Officer. Mr. Fogassa holds the only outstanding share of Series A Preferred Stock. The Certificate of Designations, Preferences and Rights of our Series A Convertible Preferred provides that for so long as Series A Preferred Stock is issued and outstanding, the holders of Series A Preferred Stock shall vote together as a single class with the holders of our Common Stock, with the holders of Series A Preferred Stock being entitled to 51% of the total votes on all matters regardless of the actual number of shares of Series A Preferred Stock then outstanding, and the holders of Common Stock being entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power. Therefore, so long as he holds the only outstanding shares of Series A Preferred Stock, Mr. Fogassa will have effective voting control on all matters requiring a stockholder vote.
Our Chairman and Chief Executive Officer is also Chairman and Chief Executive Officer of Brazil Minerals, Inc. and may be Subject to Potential Conflicts of Interest in Matters Involving Both Companies.
As discussed in the immediately preceding risk factor, Marc Fogassa, is our Chairman and Chief Executive Officer and has voting control of the Company. Mr. Fogassa also is Chairman and Chief Executive Officer of, and has voting control over, Brazil Minerals, Inc. ("Brazil Minerals"), which as of 05/10/2018 owns outright and controls through a subsidiary of an aggregate 2,454,059 shares (approximately 55.40%) of the outstanding shares of our Common Stock and is a party to certain agreements with the Company. Potential conflicts of interest may present related to existing agreements between us and Brazil Minerals, which are part of our Registration Statement on Form F-1 filed with the Securities and Exchange Commission. Other conflicts of interest may involve allocation of opportunities between the two companies as far as new gold opportunities are concerned, and allocation of Mr. Fogassa's working time, among others. We believe that by maintaining independent directors on the boards of directors for each of Jupiter Gold and Brazil Minerals such conflicts will be mitigated in situations when Mr. Fogassa may need to recuse himself.
Our authorization of Preferred Stock could discourage a Change of Control.
Our Articles of Incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock. Shares of preferred stock may have multiple votes per share, a liquidation preference or other preferences. The issuance of shares of preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company.
Risks Relating to the Marshall Islands
We are incorporated in the Marshall Islands, which does not have a well-developed body of case law or bankruptcy law and, as a result, shareholders may have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States.
Our corporate affairs are governed by our articles of incorporation and bylaws and by the Marshall Islands Business Corporations Act (the "BCA"). The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain U.S. jurisdictions. Shareholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, our public shareholders may have more difficulty in protecting their interests in the face of actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction. Further, the Marshall Islands does not have a well-developed body of bankruptcy law. As such, in the case of a bankruptcy of our Company, there may be a delay of bankruptcy proceedings and the ability of shareholders and creditors to receive recovery after a bankruptcy proceeding.
Service of process and enforcement of judgments may be more difficult.
We are incorporated under the laws of the Marshall Islands. Substantially all of our assets are located in Brazil. As a result, it may not be possible to effect service of process upon us within the United States or to enforce judgments obtained in United States courts against us.
Item 4. Information on the Company.
Item 4.A. History and Development of the Company.
Date of Incorporation, Legal Form, Domicile, & Business Summary
Jupiter Gold Corporation was incorporated under the laws of the Republic of the Marshall Islands on July 27, 2016, and has been in continuous, active operations since that date.
Jupiter Gold Corporation with its Brazilian subsidiary ("Jupiter Gold" or the "Company") owns nine mineral rights for gold and two mineral rights for manganese in the Federative Republic of Brazil ("Brazil"), all of which are in exploratory phase and located in known mining districts. Separately, Jupiter Gold has begun to recover gold from material processed in its gold recovery plant which was placed under agreement in a gold and diamond mining concession in Brazil.
Jupiter Gold's Paracatu project is expected to begin exploratory drilling for gold during the first semester of 2018; its located four miles from the largest gold mine in Brazil, with a gold ore body of approximately 16 million ounces in size, which is owned and operated by Kinross Gold Corporation.
On December 16, 2016, Jupiter Gold's Registration Statement on Form F-1 was declared effective by the Securities and Exchange Commission ("SEC"). During 2017, Jupiter Gold conducted an initial public offering of its common stock in which $254,000 was raised at $1.00/share. The Company, through a sponsoring U.S. broker-dealer, has applied for a stock symbol and expects its common stock to begin trading during 2018.
Timeline of Important Events in the Development of the Company's Business
2016
Before Incorporation – Rafael Nogueira Brandão, licensed mining engineer in Brazil, was retained as consultant to evaluate numerous gold projects.
July 27, 2016 – Jupiter Gold Corporation was incorporated.
July 27, 2016 – Jupiter Gold applied for and received the exploration priority from the Brazilian government for gold area number 860.807/2016 with 3,068 acres in Crixás, state of Goiás. Crixás is a well-known gold province where AngloGold Ashanti (NYSE: AU), a global gold producer, has four producing gold mines.
August 3, 2016 – Jupiter Gold applied for and received the exploration priority from the Brazilian government for gold area 831.883/2016 with 773 acres in Paracatu, state of Minas Gerais. Paracatu is a well-known gold province where the largest gold mine in Brazil, "Morro do Ouro" (Gold Hill), is located. The Morro do Ouro mine is owned and operated by Kinross Gold Corporation (NYSE: KGC), a large global gold producer. In its public filings, Kinross Gold states that the Morro do Ouro mine had an ore body with 16,000,000 ounces of gold; its current production is approximately 500,000 ounces of gold per year (approximately US$675,000,000 per year).
August 11, 2016 – Jupiter Gold applied for and received the exploration priority from the Brazilian government for gold areas 880.133/2016, 880.134/2016, and 880.135/2016 with a total of 69,330 acres in Apui, state of Amazonas. The Amazon region has become a new frontier for gold with multiple large projects.
August 12, 2016 – Jupiter Gold purchased a custom-designed gold recovery plant
August 12, 2016 – Jupiter Gold applied for and received the exploration priority from the Brazilian government for gold area 831.942/2016 with 4,653 acres in size, located in the Itabira region, state of Minas Gerais. The Itabira region has had several gold mines.
September 8, 2016 – Jupiter Gold retained José Alencar Francescatto, a Brazilian geologist, as a consultant to conduct field research in Issuer's area 831.883/2016. Mr. Francescatto has over 30 years of experience in gold geology.
October 16, 2016 – Jupiter Gold retained Rodrigo Brito Mello, a renowned gold geologist, as an additional consultant. Mr. Mello has worked for some of the largest gold companies in the world such as Goldcorp, AngloGold, and AngloAmerican. He has written 19 geological reports on gold formations in Brazil. On a filing with the SEC, Goldcorp Inc. (NYSE: GG), a large multinational global mining company, referred to Mr. Mello as "the qualified person responsible for the Mineral Reserve and Resource estimates for the Amapari mine" (note: Amapari is a large gold mine project in Brazil). Jupiter Gold's plan is for Mr. Mello to be responsible for drill campaign specifications (e.g., the GPS locations and spacing of drill holes), whereas Mr. Francescatto works in the field in implementation.
October 24, 2016 to October 27, 2016 – Geologist J. A. Francescatto traveled to and worked in Jupiter Gold's area 831.883/2016.
November 3, 2016 to November 22, 2016 – Jupiter Gold purchased several machines and parts to enhance the operations of its gold recovery plant.
December 27, 2016 – Jupiter Gold received the "Alvará de Pesquisa" (Research Authorization) from the Brazilian government with respect to Issuer's area 860.807/2016 via publication in the "Diário Oficial da União" (the official gazette of the Brazilian federal government).
December 28, 2016 – Jupiter Gold purchased a large gold separating centrifuge for its gold recovery operations.
2017
First Quarter 2017 Highlights included:
| Ø | Jupiter Gold acquired an excavator and a bulldozer. |
| Ø | Jupiter Gold tested its recovery plant. |
Second Quarter 2017 Highlights included:
| Ø | Jupiter Gold received the "Alvará de Pesquisa" (Research Authorization) from the Brazilian government with respect to Jupiter Gold's area 831.883/2016 via publication in the "Diário Oficial da União" (the official gazette of the Brazilian federal government). |
| Ø | Jupiter Gold received the "Alvará de Pesquisa" (Research Authorization) from the Brazilian government with respect to Jupiter Gold's area 831.942/2016 via publication in the "Diário Oficial da União" (the official gazette of the Brazilian federal government). |
| Ø | Jupiter Gold received the "Alvará de Pesquisa" (Research Authorization) from the Brazilian government with respect to Jupiter Gold's area 831.665/2016 via publication in the "Diário Oficial da União" (the official gazette of the Brazilian federal government). |
| Ø | Jupiter Gold acquired a truck and a large pump and motor combination. |
| Ø | Jupiter Gold continued testing of its gold plant. |
| Ø | Jupiter Gold's CEO and its geologist Rodrigo Mello walked by foot most of its area 831.883/2016 and placed markers in the exact GPS locations where drill holes are to be excavated in an upcoming drilling campaign. |
Third Quarter 2017 Highlights included:
| Ø | Jupiter Gold received initial evaluation report on its area 831.883/2016 from geologist Rodrigo B. Mello. |
| Ø | Jupiter Gold continued the U.S. public offering of its common stock and raised most of the targeted amount. |
| Ø | Jupiter Gold continued testing of its gold plant. |
Fourth Quarter 2017 Highlights included:
| Ø | Jupiter Gold finalized the U.S. public offering of its common stock. |
| Ø | Jupiter Gold successfully secured a sponsoring investment bank and through such sponsor applied for a ticker symbol for the U.S. markets. |
First Quarter 2018 Highlights included:
| Ø | Jupiter Gold applied for and received the exploration priority from the Brazilian government for gold areas 840.118/2018, 840.119/2018, and 840.120/2018 with a total of 14,619 acres in Serrita, state of Pernambuco. The Serrita gold province has known high-grade gold veins. |
| Ø | Jupiter Gold's recovery plant is operational and producing gold. |
Second Quarter 2018 (only until May 15, 2018) Highlights included:
| Ø | Jupiter Gold's recovery plant is operational and producing gold. |
| Ø | On May 12, 2018, the Company began a drilling campaign of its Paracatu Project (mineral right 831.883/2016). Multiple drill holes have produced visual gold intersects and gold was also confirmed in pan concentrates. This planned campaign entails drilling a total of six holes spaced 100 meters, with samples being collected at each one-meter intervals, to be processed for geochemical analysis at a premier analytical laboratory. Rodrigo B. Mello, a highly experienced geologist, who has been a Qualified Person in projects and technical reports for Goldcorp Inc. and other large companies, is overseeing this study. |
Emerging Growth Company Status
We may be deemed to be an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. As long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding an annual nonbinding advisory vote on executive compensation and seeking nonbinding stockholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company."
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
We will remain an "emerging growth company" for up to five years, although we would cease to be an "emerging growth company" prior to such time if we have more than $1 billion in annual revenue, more than $700 million in market value of our common stock is held by non-affiliates, or we issue more than $1 billion of non-convertible debt over a three-year period.
Our Goal and Strategy
Jupiter Gold's ultimate goal is to become the premier gold-focused company in Brazil.
Our strategy is two-fold:
Revenue Growth
To grow our gold revenues by placement of more modular plants for gold recovery in mining concessions for gold belonging to Brazil Minerals, Inc. or others, as well as eventual placement in mineral rights areas belonging to the Company.
Monetization of Our Mineral Rights Areas
To perform focused geological research for the occurrence of gold in some or all of our mineral rights which could enhance the value of such areas. As a corollary, this could allow Jupiter Gold either to raise additional capital for further development and exploration, or, preferably, to partner with better capitalized companies for such.
There are known gold occurrences in the regions where our mineral rights areas for gold are located. In general, our initial assessment will be regional geophysics using an airborne geophysical survey with full radiometric and magnetic fields. After defining priority areas, it will be necessary to detail each of them with ground geophysics. The geophysical work will provide the definition of priority targets for exploration where geological mapping will be done, including soil geochemistry, digging trenches and pits, and drilling.
It is likely that before the completion of such exploration work, we may collect enough data to ascertain whether there are likely potential gold deposits. We believe that with some data we could estimate whether there are primary or secondary deposits, whether any gold is free or associated with some minerals (e.g., sulphide or quartz), and whether such gold is widespread in large structures or concentrated in veins.
For several, if not all, of our current mineral rights for gold, we believe that there is potential for the existence of secondary deposits that can be leveraged to gold production with low investment and low operating costs. In general, these deposits have free gold in altered rock or alluvium and can be excavated via opencast mines and processed in small portable plants, and the gold recovered by gravimetric methods (centrifuges and gutters) without using chemical reagents, in essence resembling or being equal to the GRUs we will have developed for use elsewhere as indicated above.
Why We Went Public
We have decided to become a public company for
two principal reasons:
| • | to secure permanent capital to grow; and |
| • | to permit us to use publicly traded securities to finance our growth. |
Competitive Strengths
Focus on Brazil
Brazil is a country which has rich and varied geology. Most of the Brazilian territory has not been geologically researched to any great extent, unlike Canada and Australia, other mineral producing countries. Therefore, we believe that Brazil holds promise for many more discoveries of mineral resources in the next decades.
Focus on Gold
For centuries, gold has been used in jewelry and as storage of value. With the advent of financial instruments that derive their value from gold, the interest in the metal has increased substantially. We have the expertise to create a very favorable position starting with our focus on low-cost recovery of alluvial gold and several promising mineral claims in areas known to have gold nearby.
Focus on People
We believe that our most important asset is our people. Brazil is territorially larger than the continental U.S. and has one of the largest economies among nations. For us to succeed, it is paramount to have guidance from management that understands the unique Brazilian culture and has the necessary local business networks. Our CEO and directors have such expertise and other knowledge in critical facets for our business. From this strong base, we intend to selectively add employees and consultants as we grow.
Sector Outlook
We believe that significant growth and profit opportunities exist in the mining industry over the long term. These opportunities derive from long-term trends, including globalization of the world economy, growth in investable funds and accelerating technology innovation.
In particular, we believe that gold will continue to grow in its usage as a medium of value storage, in addition to uses in jewelry and manufacturing. We also believe that Brazil, a country that is larger than the continental United States, with varied geology, will continue to yield promising areas for gold exploration. Brazil also has a detailed mining code and a long history of welcoming exploration of its resources by foreign groups. We believe the trends favoring gold mining in stable jurisdictions such as Brazil will continue for the next several decades.
Item 4A. Unresolved Staff Comments.
Not applicable.
Item 5. Operating and Financial Review and Prospects.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes and other information included elsewhere in this registration statement. This discussion contains forward-looking statements that are based on management's current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements and as a result of the factors we describe under "Risk Factors" and elsewhere in this filing. See "Special Note Regarding Forward-looking Statements" and "Risk Factors." We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
Jupiter Gold Corporation together with its subsidiary Mineração Jupiter Ltda. ("Jupiter Gold", the "Company", "we", "us", or "our") owns title to nine mineral rights for gold and two mineral rights for manganese in Brazil. These mineral rights are described in Section II. Mineral Rights below. Additionally, the Company has built an initial modular plant for recovery of alluvial gold and placed it in a mining concession in Brazil under a royalty agreement, described in Section III. Gold Plant below.
We have title to eleven minerals rights encompassing a total surface area of approximately 94,828 acres as follows:
| | DNPM Mineral Right Number (1) | Mineral Right Status (2) | Location in Brazil (municipality and state) | Area of Mineral Right (in acres) | Minerals Currently Listed in Mineral Right | Validity of Current Stage of the Mineral Right (when applicable) |
| 1) | 860.807/2016 | RP | Crixás, state of Goiás | 3,068 | gold | 12/27/2019 (3) |
| 2) | 831.883/2016 | RP | Paracatu, state of Minas Gerais | 773 | gold | 04/12/2020 (3) |
| 3) | 831.942/2016 | RP | Dionisio, state of Minas Gerais | 4,653 | gold | 04/12/2020 (3) |
| 4) | 831.665/2016 | RP | Augusto de Lima, state of Minas Gerais | 233 | manganese | 05/03/2020 (3) |
| 5) | 831.642/2016 | RP | Senador Modestino Gonçalves, state of Minas Gerais | 2,152 | manganese | 06/06/2020 (3) |
| 6) | 880.133/2016 | ARP | Apuí, state of Amazonas | 23,043 | gold | n/a (4) |
| 7) | 880.134/2016 | ARP | Apuí, state of Amazonas | 23,207 | gold | n/a (4) |
| 8) | 880.135/2016 | ARP | Apuí, state of Amazonas | 23,080 | gold | n/a (4) |
| 9) | 840.118/2018 | ARP | Serrita, state of Pernambuco | 4,902 | gold | n/a (4) |
| 10) | 840.119/2018 | ARP | Serrita, state of Pernambuco | 4,790 | gold | n/a (4) |
| 11) | 840.120/2018 | ARP | Serita, state of Pernambuco | 4,927 | gold | n/a (4) |
Observations:
| (1) | DNPM stands for "Departamento Nacional de Produção Mineral", the Brazilian national mining department, a federal entity with offices in each state |
| (2) | The currently applicable statuses for our mineral rights are: "RP" for Research Permit (active), and "ARP" for Application for Research Permit. |
| (3) | By this date we must submit a research report to DNPM which, if approved, would allow us to apply for a mining concession. If by this date the research is not concluded, we can request an extension upon submission of preliminary findings. DNPM usually grants such extensions for one to three additional years although there are no guarantees. |
| (4) | A deadline for submission of a research report has not started as the application for research permit is being reviewed. |
Details on Each Mineral Right
| 1) | Mineral Right 860.807/2016 |
We own title to mineral right 860.807/2016 for gold and have been granted a research permit ("Alvará de Resquisa") by the mining department.
Location
Mineral right 860.807/2016 is in the municipalities of Crixás and Uirapuru in the state of Goiás in Brazil.
Crixás was founded in the 18th century by pioneers searching for gold, and today has 15,000 people. It is home to the some of the largest gold operations in Brazil, with multiple gold mines and projects from AngloGold Ashanti and Cleveland Mining. AngloGold Ashanti operates three underground and two open-sky mines; its gold ore body has over 7 million ounces and annual production of 132,000 ounces, according to publicly-available information.
Size
Mineral right 860.807/2016 has an area of approximately 3,068 acres.
Coordinates
The coordinates of mineral right 860.807/2016 are as follows (using SIRGAS2000):
| Latitude | Longitude |
| -14°17'33''849 | -49°52'32''642 |
| -14°17'49''893 | -49°52'32''642 |
| -14°17'49''893 | -49°52'32''633 |
| -14°17'49''894 | -49°52'32''633 |
| -14°17'49''894 | -49°51'50''935 |
| -14°18'54''969 | -49°51'50''935 |
| -14°18'54''969 | -49°50'44''160 |
| -14°18'33''817 | -49°50'44''160 |
| -14°18'33''817 | -49°50'19''172 |
| -14°17'58''023 | -49°50'19''172 |
| -14°17'58''023 | -49°49'54''151 |
| -14°17'36''871 | -49°49'54''151 |
| -14°17'36''871 | -49°49'37''472 |
| -14°20'08''484 | -49°49'37''472 |
| -14°20'08''484 | -49°52'32''711 |
| -14°18'49''229 | -49°52'32''711 |
| -14°18'49''229 | -49°53'09''593 |
| -14°17'33''849 | -49°53'09''593 |
| -14°17'33''849 | -49°52'32''642 |
Map
Below is map of mineral right 860.807/2016 (produced by W. Oliveira in 11/2016).
Industry Guide 7 Compliance
Our intended program for mineral right 860.807/2016 is exploratory in nature and currently this property is without reserves as such term is defined in Industry Guide 7.
| 2) | Mineral Right 831.883/2016 |
We own title to mineral right 831.883/2016 for gold and have been granted a research permit ("Alvará de Resquisa") by the mining department.
Location
Mineral right 831.883/2016 is in the municipality of Paracatu in the state of Minas Gerais in Brazil.
Paracatu was founded in the early 17th century by pioneers searching for gold and silver, and today it has 100,000 people. Paracatu boasts the largest gold mine in Brazil, "Morro do Ouro" (Gold Hilll), owned and operated by Kinross Gold, one of the world's largest gold producers. The gold ore body of this mine has over 16 million ounces and annual production of 480,000 ounces, according to publicly-available information.
Size
Mineral right 831.883/2016 has an area of approximately 773 acres.
Coordinates
The coordinates of mineral right 831.883/2016 are as follows (using SIRGAS2000):
| Latitude | Longitude |
| -17°15'01''463 | -46°50'53''207 |
| -17°15'56''063 | -46°50'53''207 |
| -17°15'56''063 | -46°51'13''542 |
| -17°15'56''560 | -46°51'13''542 |
| -17°15'56''560 | -46°51'47''557 |
| -17°15'56''065 | -46°51'47''557 |
| -17°15'56''034 | -46°51'47''557 |
| -17°15'56''034 | -46°51'50''753 |
| -17°14'56''524 | -46°51'50''753 |
| -17°14'56''524 | -46°50'53''207 |
| -17°15'01''463 | -46°50'53''207 |
Below is a map of mineral right 831.883/2016 produced by W. Oliveira in 11/2016).
Industry Guide 7 Compliance
Our intended program for mineral right 831.883/2016 is exploratory in nature and currently this property is without reserves as such term is defined in Industry Guide 7.
| 3) | Mineral Right 831.942/2016 |
We have title to mineral right 831.942/2016 for gold and have been granted a research permit ("Alvará de Resquisa") by the mining department.
Location
Mineral right 831.942/2016 is in the municipalities of Dionisio, Marliéria, and São Domingos do Prata in the state of Minas Gerais in Brazil. This mineral right is within the mining district known as "Quadrilátero Ferrífero" (Iron Quadrangle), roughly a geographical quadrangle, known for large iron mines and gold mines.
Mineral right 831.942/2016 is within the mining district known as "Quadrilátero Ferrífero" (Iron Quadrangle), roughly a geographical quadrangle, known for large iron mines and gold mines.
Size
Mineral right 831.942/2016 has an area of approximately 4,653 acres.
Coordinates
The coordinates of mineral right 831.942/2016 are as follows (using SIRGAS2000):
| Latitude | Longitude |
| -19°46'15''600 | -42°49'22''800 |
| -19°46'55''200 | -42°49'22''800 |
| -19°46'55''200 | -42°48'21''600 |
| -19°49'19''200 | -42°48'21''600 |
| -19°49'19''200 | -42°49'22''800 |
| -19°49'40''800 | -42°49'22''800 |
| -19°49'40''800 | -42°50'02''400 |
| -19°49'01''200 | -42°50'02''400 |
| -19°49'01''200 | -42°50'27''600 |
| -19°46'15''600 | -42°50'27''600 |
| -19°46'15''600 | -42°49'22''800 |
Map
Below is a map of mineral right 831.942/2016 (produced by W. Oliveira in 11/2016).
Industry Guide 7 Compliance
Our intended program for mineral right 831.942/2016 is exploratory in nature and currently this property is without reserves as such term is defined in Industry Guide 7.
| 4) | Mineral Right 831.665/2016 |
We have title to mineral right 831.665/2016 for manganese and have been granted a research permit ("Alvará de Resquisa") by the mining department.
Location
Mineral right 831.665/2016 is in the municipalities of Augusto de Lima, Buenopolis, and Diamantina in the state of Minas Gerais in Brazil.
Size
Mineral right 831.665/2016 has an area of approximately 233 acres.
Coordinates
The coordinates of mineral right 831.665/2016 are as follows (using SIRGAS2000):
| Latitude | Longitude |
| -18°09'06''501 | -43°56'54''794 |
| -18°09'06''501 | -43°57'42''551 |
| -18°08'44''619 | -43°57'42''549 |
| -18°08'44''619 | -43°56'54''794 |
| -18°09'06''501 | -43°56'54''794 |
Below is a map of mineral right 831.665/2016 (produced by R. Mello in 12/2017).
Industry Guide 7 Compliance
Our intended program for mineral right 831.665/2016 is exploratory in nature and currently this property is without reserves as such term is defined in Industry Guide 7.
| 5) | Mineral Right 831.642/2016 |
We have title to mineral right 831.642/2016 for manganese and have been granted a research permit ("Alvará de Resquisa") by the mining department.
Location
Mineral right 831.642/2016 is in the municipality of Senador Modestino Gonçalves in the state of Minas Gerais in Brazil.
Size
Mineral right 831.642/2016 has an area of approximately 2,152 acres.
Coordinates
The coordinates of mineral right 831.642/2016 are as follows (using SIRGAS2000):
| Latitude | Longitude |
| -17°50'10''467 | -43°10'29''389 |
| -17°50'51''224 | -43°10'29''389 |
| -17°50'51''224 | -43°10'12''738 |
| -17°51'33''352 | -43°10'12''738 |
| -17°51'33''352 | -43°11'35''771 |
| -17°51'06''561 | -43°11'35''771 |
| -17°51'06''561 | -43°11'39''684 |
| -17°49'30''978 | -43°11'39''684 |
| -17°49'30''978 | -43°10'18''699 |
| -17°50'10''467 | -43°10'18''699 |
| -17°50'10''467 | -43°10'29''389 |
Map
Below is a map of mineral right 880.133/2016 (produced by R. Mello in 12/2017).
Industry Guide 7 Compliance
Our intended program for mineral right 880.133/2016 is exploratory in nature and currently this property is without reserves as such term is defined in Industry Guide 7.
| 6) | Mineral Right 880.133/2016 |
We have title to mineral right 880.133/2016 for gold and have applied for a research permit with the mining department.
Location
Mineral right 880.133/2016 is in the municipality of Apuí in the state of Amazonas in Brazil.
Size
Mineral right 880.133/2016 has an area of approximately 23,043 acres.
Coordinates
The coordinates of mineral right 880.133/2016 are as follows (using SIRGAS2000):
| Latitude | Longitude |
| -07°03'21''278 | -60°05'58''879 |
| -07°08'14''679 | -60°05'58''879 |
| -07°08'14''679 | -60°11'36''022 |
| -07°03'18''797 | -60°11'36''022 |
| -07°03'18''797 | -60°11'34''391 |
| -07°03'21''278 | -60°11'34''391 |
| -07°03'21''278 | -60°05'58''879 |
Map
Below is a map of mineral right 880.133/2016 (produced by W. Oliveira in 11/2016).
Industry Guide 7 Compliance
Our intended program for mineral right 880.133/2016 is exploratory in nature and currently this property is without reserves as such term is defined in Industry Guide 7.
| 7) | Mineral Right 880.134/2016 |
We have title to mineral right 880.134/2016 for gold and have applied for a research permit with the mining department.
Location
Mineral right 880.134/2016 is in the municipality of Apuí in the state of Amazonas in Brazil.
Size
Mineral right 880.134/2016 has an area of approximately 23,207 acres.
Coordinates
The coordinates of mineral right 880.134/2016 are as follows (using SIRGAS2000):
| Latitude | Longitude |
| -07°03'21''278 | -60°05'58''879 |
| -07°03'21''278 | -60°11'34''391 |
| -07°03'18''797 | -60°11'34''391 |
| -07°03'10''357 | -60°11'34''391 |
| -07°03'10''357 | -60°11'33''931 |
| -06°58'25''526 | -60°11'33''931 |
| -06°58'25''526 | -60°05'57''149 |
| -07°03'21''278 | -60°05'57''149 |
| -07°03'21''278 | -60°05'58''879 |
Map
Below is a map of mineral right 880.134/2016 (produced by W. Oliveira in 11/2016).
Industry Guide 7 Compliance
Our intended program for mineral right 880.134/2016 is exploratory in nature and currently this property is without reserves as such term is defined in Industry Guide 7.
| 8) | Mineral Right 880.135/2016 |
We have title to mineral right 880.135/2016 for gold and have applied for a research permit with the mining department.
Mineral right 880.135/2015 is in the municipality of Apuí in the state of Amazonas in Brazil.
Mineral right 880.135/2016 has a surface area of approximately 23,080 acres.
The coordinates of mineral right 880.135/2016 are as follows (using SIRGAS2000):
| Latitude | Longitude |
| -07°03'07''637 | -60°16'56''443 |
| -07°03'10''357 | -60°16'56''443 |
| -07°03'10''357 | -60°11'36''021 |
| -07°03'18''797 | -60°11'36''021 |
| -07°08'14''679 | -60°11'36''021 |
| -07°08'17''489 | -60°11'36''021 |
| -07°08'17''489 | -60°16'58''594 |
| -07°03'07''637 | -60°16'58''594 |
| -07°03'07''637 | -60°16'56''443 |
Map
Below is a map of mineral right 880.135/2016 (produced by W. Oliveira in 11/2016).
Industry Guide 7 Compliance
Our intended program for mineral right 880.135/2016 is exploratory in nature and currently this property is without reserves as such term is defined in Industry Guide 7.
| 9) | Mineral Right 840.118/2018 |
We have title to mineral right 840.118/2018 for gold and have applied for a research permit with the mining department.
Location
Mineral right 840.118/2018 is in the municipalities of Serrita e Parnamirim in the state of Pernambuco in Brazil.
Size
Mineral right 840.118/2018 has an area of approximately 4,902 acres.
Coordinates
The coordinates of mineral 840.118/2018 are as follows (using SIRGAS2000):
| Latitude | Longitude |
| -08°00'59''814 | -39°29'20''839 |
| -08°00'59''814 | -39°25'10''488 |
| -08°02'24''055 | -39°25'10''488 |
| -08°02'24''055 | -39°29'20''839 |
| -08°00'59''814 | -39°29'20''839 |
Below is a map of mineral right 840.118/2018 (produced by L. Diniz in 05/2018)
Industry Guide 7 Compliance
Our intended program for mineral right 840.118/2018 is exploratory in nature and currently this property is without reserves as such term is defined in Industry Guide 7.
| 10) | Mineral Right 840.119/2018 |
We have title to mineral right 840.119/2018 for gold and have applied for a research permit with the mining department.
Location
Mineral right 840.119/2018 is in the municipality of Serrita in the state of Pernambuco in Brazil.
Size
Mineral right 840.119/2018 has an area of approximately 4,790 acres.
Coordinates
The coordinates of mineral 840.119/2018 are as follows (using SIRGAS2000):
| Latitude | Longitude |
| -07°59'53''624 | -39°24'08''608 |
| -07°59'53''624 | -39°28'01''200 |
| -08°00'59''811 | -39°28'01''200 |
| -08°00'59''811 | -39°25'10''488 |
| -08°02'24''055 | -39°25'10''488 |
| -08°02'24''055 | -39°24'08''608 |
Below is a map of mineral right 840.119/2018 (produced by L. Diniz in 05/2018)
Industry Guide 7 Compliance
Our intended program for mineral right 840.119/2018 is exploratory in nature and currently this property is without reserves as such term is defined in Industry Guide 7.
| 11) | Mineral Right 840.120/2018 |
We have title to mineral right 840.120/2018 for gold and have applied for a research permit with the mining department.
Location
Mineral right 840.120/2018 is in the municipality of Serrita in the state of Pernambuco in Brazil.
Size
Mineral right 840.120/2018 has an area of approximately 4,927 acres.
Coordinates
The coordinates of mineral 840.120/2018 are as follows (using SIRGAS2000):
| Latitude | Longitude |
| 08°00'59''811 | -39°28'11''632 |
| -08°00'59''811 | -39°28'01''200 |
| -07°59'53''624 | -39°28'01''200 |
| -07°59'53''624 | -39°25'32''069 |
| -07°57'23''400 | -39°25'32''069 |
| -07°57'23''400 | -39°27'06''864 |
| -07°58'16''967 | -39°27'06''864 |
| -07°58'16''967 | -39°28'11''632 |
| -08°00'59''811 | -39°28'11''632 |
Map
Below is a map of mineral right 840.120/2018 (produced by L. Diniz in 05/2018)
Industry Guide 7 Compliance
Our intended program for mineral right 840.120/2018 is exploratory in nature and currently this property is without reserves as such term is defined in Industry Guide 7.
We built an initial modular plant for recovery of alluvial gold and placed it in a mining concession in Brazil under a royalty agreement. The plant uses high speed centrifugation as the primary method of gold separation.
This modular plant is owned by us and solely operated by Brazil Minerals, which retains 100% of the diamonds and 50% of the gold recovered. The other 50% of the gold recovered belongs to us. Brazil Minerals is an affiliate and currently our largest shareholder.
Details of the Modular Plant
The use of centrifugal concentrators for free gold recovery from alluvial ore has been a common practice in the mining industry for over two decades. This method uses the difference in intrinsic densities between gold and the "waste" for separation – whereas the native gold density is equal to 19.0 g/cm³, the density of silica, the main component of the waste, is equal to 2.6 g/cm³.
This equipment was originally developed by the Canadian mining industry and has several advantages over other processes, such as:
| · | No use of chemicals (such as cyanide and mercury) |
| · | Low maintenance and low energy consumption |
| · | Recovery of gold in a wide particle size range |
| · | Simple installation and operation, with excellent mobility |
In our first modular plant, the desired alluvial material with gold content is added by loader into the feeder. In the feeder this material will be mixed on a 50% basis with clean water to form a pulp. The pulp then passes through vibrating size separators and a rotating trommel before being fed to a large centrifuge. The recovered gold from the centrifuge is further separated using a vibrating table. Any waste from the centrifuge is deposited in special pits for reprocessing to guarantee minimal loss of gold in the process.
Location of the Modular Plant
Our initial modular plant has been placed in a mining concession area that belongs to Brazil Minerals, through its subsidiary, Mineração Duas Barras Ltda ("MDB"), a Brazilian company. Brazil Minerals owns 100% of MDB.
Vaaldiam, the previous owner of this mining concession, and at that time a publicly-traded Canadian company, performed detailed geological studies leading to the publication of an NI 43-101 technical report in 2007, with an update in 2008, as required by the rules of the Canadian securities administrator and filed in SEDAR. The NI 43-101 report describes the existence of mineralized materials amounting to 1,639,200 cubic meters with the following concentrations: 0.16 carats of diamonds per cubic meter and 182 milligrams of gold per cubic meter. Vaaldiam also submitted a bankable feasibility study to the Brazilian mining department in accordance with local regulations. The NI 43-101 technical report and the bankable feasibility study were not prepared in accordance with the SEC-sanctioned Industry Guide 7 for mining companies. Under such regulation, no assertion can be made about reserves and the term "resources" is not recognized.
Map Showing Location of MDB
Below is a map with the location of MDB.
Logistics
MDB's facilities are located an approximately one and one-half hour drive from Montes Claros, a city of approximately 500,000 people which has the necessary infrastructure to support mining operations in a broad area.
Source of Water and Power
Water supplies are abundant at MDB, being sourced from a large lake that is physically separate from the Jequitinhonha River by over 100 meters.
MDB does not have electricity from the national grid and instead relies on several diesel generators for power. Our modular plant utilizes a portable diesel-powered generator. There are several local suppliers of diesel.
Map Showing Jupiter Gold's Modular Plant inside MDB's Mining Concession
Below is a map of the location of Jupiter Gold's plant inside MDB's mining concession (produced by W. Oliveira in 11/2016).
Results of Operations
Fiscal Year Ended December 31, 2017 Compared to Fiscal Year Ended December 31, 2016
Our operating expenses in 2017 were $436,141, comprised primarily of stock-based compensation, and to lesser extent by general and administrative expenses, professional fees, and other compensation and related costs. Our operating expenses for the period from July 27, 2016 (inception) to December 31, 2016 were $340,714. The increase of 28.00% between 2017 and 2016 for the operating expenses is explained primarily by the longer period of operations in 2017 as compared to operations for a shorter period in 2016, and secondarily by both higher stock-based compensation and general and administrative expenses, which more than offset lower professional fees.
In 2017, we experienced a net loss of $437,635, as compared to a net loss attributable of $340,728 in 2016, an increase of $96,907 or 28.44%. This result is explained by the higher operating expenses in 2017 in comparison to 2016, as detailed above.
Net cash used in operating activities was $166,230 in 2017, as compared to net cash provided by operating activities of $12,225 in 2016. Net cash used in investing activities was $6,552 in 2017, as compared to $9,153 in 2016. Net cash provided by financing activities was $250,100 in 2017, as compared to zero in 2016.
Liquidity and Capital Resources
As of December 31, 2017, we had total current assets of $204,242 and total current liabilities of $15,366 for a current ratio of 13.29 to 1 and working capital of $188,876. By comparison, on December 31, 2016, we had total current assets of $7,072 and total current liabilities of $50,336 for a current ratio of 0.14 to 1 and working capital of ($43,264). This improvement in both current ratio and working capital in 2017 versus 2016 is due to an increase in assets with the funds raised in our initial public offering, as well as a decrease in debt.
In 2017, our sources of liquidity were cash from the initial public offering of our common stock and loans from Brazil Minerals. In 2018, we expect that our sources of liquidity will be our existing cash and revenues from sales of gold produced in our plant.
Item 5.C. R&D, Patents and Licenses
None, except mineral rights described above.
Item 5.E. Off-Balance Sheet Arrangements
None.
Item 5F. Tabular Disclosure of Contractual Obligations.
The following table sets forth our contractual obligations and commercial commitments as of December 31, 2017, due on demand:
| Payable To | | Description | | Amount | |
| | | | | | |
| Brazil Minerals, Inc. | | Service agreement dues, and loans in Brazil and outside for operational expenses | | $ | 6,249 | |
| | | | | | | |
| Various third-parties | | Professional fees | | $ | 4,576 | |
Item 6. Directors, Senior Management and Employees.
Item 6.A. Directors and Senior Management.
Our officers and directors as of December 31, 2017 were as follows:
| Name | | Age | | Position |
| | | | | |
| Marc Fogassa | | 51 | | Director, Chairman, Chief Executive Officer, and Chief Financial Officer |
| | | | | |
| Christopher Westdal | | 71 | | Director and Vice-President |
| | | | | |
| Geraldo Leciano Silva | | 33 | | Director and Secretary |
Executive officers are appointed by and serve at the pleasure of our Board of Directors. A biography of each director and officer follows.
Marc Fogassa, age 51, a resident of the U.S., has been a director and our Chairman and Chief Executive Officer since July 2016. He has over 18 years of investment experience in venture capital, and private and public equity investing, and has served on boards of directors of multiple private companies. Mr. Fogassa has worked at Goldman Sachs & Co. (1997), Atlas Venture (1998-2000), and Axiom Ventures (2000-2005). He also worked as investment manager with Hedgefort Capital Management LLC from May 2005 to June 2012, and as an investment banker from November 2011 to January 2014 with Hunter Wise Financial Group, LLC. He has been Chairman and CEO of Brazil Minerals, Inc. since December 2012 and Brazil Mining, Inc. since March 2012. Mr. Fogassa has been invited numerous times to speak about investment issues, particularly as related to Brazil. Mr. Fogassa double majored at the Massachusetts Institute of Technology (M.I.T.), graduating with two Bachelor of Science degrees in 1990. He later graduated from the Harvard Medical School with a Doctor of Medicine degree in 1995, and also from the Harvard Business School with a Master in Business Administration degree in 1999. Mr. Fogassa was born in Brazil and is fluent in Portuguese and English.
Ambassador Christopher Westdal, age 71, a resident of Canada, began his service as director in September 2016. He has been a director for Silver Bear Resources, Inc., a Canadian mining company, since October of 2007, and was appointed its non-executive Chairman in January of 2016. Ambassador Westdal is a former diplomat for Canada's Foreign Service with 40 years of international experience. He served as Canada's Ambassador to Russia (2003 to 2006), the United Nations in Geneva (1999 to 2003), Ukraine (1996 to 1998), South Africa (1991 to 1993) and Bangladesh and Burma (1982 to 1985). Prior assignments abroad included India and Nepal (from 1973 to 1975, responsible for Canadian International Development Agency programming) and Tanzania (from 1970 to 1973, as a member of a University of Toronto economic advisory team). In Ottawa, he was Director General of the Foreign Ministry's International Organizations Bureau from 1987 to 1991, and Assistant Secretary at the Privy Council Office to the Cabinet Committee on Foreign Policy and Defense (1976 to 1978 and 1985 to 1987). Ambassador Westdal holds a Bachelor of Arts degree from St. Johns College and a Master of Business Administration degree from the University of Manitoba. On February 26, 2018, following the death of his fellow director and friend Ambassador Durand (see below), Ambassador Westdal resigned as director for personal reasons; there has been no disagreements and his resignation was in amicable circumstances. On February 26, 2018, Manuel Henrique Costa Andrade, age 34, a Brazilian lawyer, was elected to our Board of Directors.
Geraldo Leciano Silva, age 33, a resident of Brazil, has been a director since December 2017 following the death of our director Ambassador Paul Durand on December 18, 2017. Mr. Silva has a technical degree in communications. Ambassador Paul Durand was a resident of Canada and had been a director since July 2016. He was also a director of Brazil Minerals, Inc. since 2012. He had extensive other experience in Latin America. From August 2001 to August 2006, Ambassador Durand was Canada's Ambassador to the OAS. From August 2000 to July 2001 he was Canada's Ambassador to Chile, and from August 1992 to August 1995 he was Canada's Ambassador to Costa Rica, with concurrent accreditation to Honduras, Nicaragua, and Panama. For the past five years, Ambassador Durand had also personally provided consulting services to several businesses and organizations, including the University of Ottawa advising the executive student class on political and economic conditions in Brazil and Chile; the OAS on elections and a referendum in Chile; and Infinito Gold Inc. on negotiations with the government of Costa Rica regarding the development of a gold mine. He had a Bachelor of Arts degree in Political Economy from the University of Toronto and has pursued further studies in International Relations and Economics at Northwestern University in Chicago and Carleton University in Ottawa. Ambassador Durand joined the Canadian government after working in international banking in Latin America (Colombia, El Salvador), the Caribbean (Bahamas) and the U.S.
There are no family relationships between or among any of the persons listed above.
Item 6.B. Compensation.
Neither the Chief Executive Officer nor the Board members are paid any cash compensation for their service as chief executive officer and directors, respectively.
In 2016 we adopted an incentive plan (the "2016 Incentive Plan") to compensate employees, directors, and consultants, and to allow us to acquire and retain human talent. The 2016 Incentive Plan has been filed herewith as Exhibit 10.7.
Marc Fogassa, our Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer entered into an employment agreement with us which commenced on September 1, 2016. Under the agreement, Mr. Fogassa shall receive no cash compensation, and is remunerated monthly with five-year options to purchase 25,000 shares of our common stock at $1.00 per share. Under the agreement, Mr. Fogassa received five-year options to purchase 100,000 shares of our common stock at $1.25 per share when a draft of the Registration Statement on F-1 was filed with the SEC on September 30, 2016. Additionally, he received options to purchase 250,000 shares of our common stock at $1.25 per share when the Registration Statement on Form F-1 became effective. On October 30, 2017, our Board of Directors, with Mr. Fogassa abstaining, voted to award Mr. Fogassa five-year options to purchase 250,000 shares of our common stock at $1.00 per share for his work on our initial public offering. Mr. Fogassa also entered into a director and chairmanship agreement with us which commenced on September 1, 2016. Under the agreement, he receives no cash compensation and is remunerated monthly with options to purchase 5,000 shares of our common stock at the fair market value per share. The employment and director and chairmanship agreements have been filed herewith as Exhibit 10.8 and 10.11 respectively.
Ambassador Christopher Westdal entered into a director agreement which commenced on September 1, 2016. Under such agreement, Ambassador Westdal received no cash compensation, and was remunerated monthly with options to purchase 2,500 shares of our common stock at the fair market value per share. Under such agreement, he also received options to purchase 50,000 shares of our common stock at $1.25 per share when the Registration Statement on Form F-1 became effective. Ambassador Westdal's agreement has been filed herewith as Exhibit 10.10.
Ambassador Paul Durand had entered into a similar director agreement with us which commenced on September 1, 2016; his agreement has been filed herewith as Exhibit 10.9. Ambassador Durand had an untimely death on December 18, 2017, and the agreement therefore terminated on such date.
Board members will be reimbursed for reasonable travel expenses associated with attending any meetings of the Board of Directors or committees of the Board of Directors.
Item 6.C. Board Practices.
Our business is managed by the directors who exercise all the powers of the Company, subject to the Business Corporations Act of the Republic of the Marshall Islands 1990, our Articles of Incorporation and our Bylaws, and any special resolution of the Board of Directors. Our Bylaws specify the procedures for the election and removal of directors. Our Bylaws have been filed herewith as Exhibit 1.3.
Item 6.D. Employees.
As of December 31, 2017, we had two full time equivalent employees. We also had two part-time employees and various consultants with specific expertise being utilized.
We have no labor-related litigation.
Item 6.E. Share Ownership.
The following table sets forth certain information as of December 31, 2017 regarding the beneficial ownership of our Common Stock by: each of our executive officers, each member of our board of directors and all officers and directors as a group. The number and percentage of our Common Stock beneficially owned by each person is based on 4,429,599 shares of our Common Stock outstanding as of December 31, 2017 and the Common Stock owned by such person determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 (the "Exchange Act"). The information contained in the table below is not necessarily indicative of beneficial ownership for any other purpose.
Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares issuable upon the exercise of stock options or warrants or the conversion of other securities held by that person that are exercisable or convertible within 60 days are deemed to be issued and outstanding. These shares, however, are not deemed outstanding for the purposes of computing percentage ownership of each other shareholder.
| Name and Address of Shareholder (1) | | | Number of Shares | | | | | Percentage of Shares Beneficially Owned (2) | | | |
| | | | | | | | | | | | |
| Marc Fogassa | | | 1,539,796 (3)(4) | | | | | 27.95% | | | |
| Marc Fogassa | | | 3,993,855 (5) | | | | | 72.49% | | | |
| Christopher Westdal | | | 90,000 (6) | | | | | 1.99% | | | |
| Geraldo Silva | | | 0 | | | | | 0% | | | |
| All Officers and Directors as a Group (3 persons) | | | 4,083,855 (3)(4)(5)(6) | | | | | 72.93% | | | |
| (1) | The address for each director and officer is: c/o Jupiter Gold Corporation, Rua Vereador João Alves Praes nº 95-A, Olhos D'Água, MG 39398-000, Brazil. |
| (2) | Based on 4,429,599 shares of common stock outstanding as of 12/31/2017. |
| (3) | Includes 459,796 shares of common stock. Also includes 350,000 shares of common stock issuable upon exercise of options with an exercise price of $1.25 per share with expiration dates from 09/30/2021 to 12/16/2021. Also includes 250,000 shares of common stock issuable upon exercise of options with an exercise price of $1.00 per share with expiration date 10/30/2022. Also includes 480,000 shares of common stock issuable upon exercise of options with an exercise price of $1.00 per share with expiration dates from 09/01/2021 to 12/31/2022. |
| (4) | Mr. Fogassa owns the only outstanding share of our Series A Convertible Preferred Stock ("Preferred A Stock"). The Certificate of Designations, Preferences and Rights of our Preferred A Stock provides that for so long as Preferred A Stock is issued and outstanding, the holders of Preferred A Stock shall vote together as a single class with the holders of our common stock, with the holders of Preferred A Stock being entitled to 51% of the total votes on all matters regardless of the actual number of shares of Preferred A Stock then outstanding, and the holders of our common stock being entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power. Mr. Fogassa is thus deemed to have voting control on all matters requiring a stockholder vote. |
| (5) | Includes 2,454,059 shares of common stock controlled by Brazil Minerals, of which company Mr. Fogassa is the Chief Executive Officer and Chairman. |
| (6) | Includes 50,000 shares of common stock issuable upon exercise of options with an exercise price of $1.25 per share with an expiration date of 12/16/2021. Also includes 40,000 shares of common stock issuable upon exercise of options with an exercise price of $1.00 per share with expiration dates from 09/01/2021 to 12/31/2022. |
Item 7. Major Shareholders and Related Party Transactions.
The following is a list of our major shareholders who beneficially own more than 5% of our voting securities as of December 31, 2017:
Name and Address of Shareholder (1) | | Number of Shares | | Percentage of Shares Beneficially Owned (2) |
| | | | | |
| Brazil Minerals, Inc. | | 2,454,059 (3) | | 55.40% |
| Marc Fogassa | | 1,539,796 (4)(5) | | 27.95% |
| Marc Fogassa | | 3,993,855 (6) | | 72.49% |
| Benjamin B. Khowong | | 302,500 | | 7.53% |
| Michael S. Nazari | | 278,916 (7) | | 6.95% |
| (1) | The mailing address for each listed shareholder is c/o Jupiter Gold Corporation, Rua Vereador João Alves Praes nº 95-A, Olhos D'Água, MG 39398-000, Brazil. |
| (2) | Based on 4,429,599 shares of our common stock outstanding as of 12/31/2017. |
| (3) | Includes 176,332 shares owned by BMIX Participações Ltda, a Brazilian subsidiary of Brazil Minerals. |
| (4) | Includes 459,796 shares of common stock. Also includes 350,000 shares of common stock issuable upon exercise of options with an exercise price of $1.25 per share with expiration dates from 09/30/2021 to 12/16/2021. Also includes 250,000 shares of common stock issuable upon exercise of options with an exercise price of $1.00 per share with expiration date 10/30/2022. Also includes 480,000 shares of common stock issuable upon exercise of options with an exercise price of $1.00 per share with expiration dates from 09/01/2021 to 12/31/2022. |
| (5) | Mr, Fogassa owns the only outstanding share of our Series A Convertible Preferred Stock ("Preferred A Stock"). The Certificate of Designations, Preferences and Rights of our Preferred A Stock provides that for so long as Preferred A Stock is issued and outstanding, the holders of Preferred A Stock shall vote together as a single class with the holders of our common stock, with the holders of Preferred A Stock being entitled to 51% of the total votes on all matters regardless of the actual number of shares of Preferred A Stock then outstanding, and the holders of common stock being entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power. Mr. Fogassa is thus deemed to have voting control on all matters requiring a stockholder vote. |
| (6) | Includes 2,454,059 shares of common stock controlled by Brazil Minerals, of which company Mr. Fogassa is the Chief Executive Officer and Chairman. |
| (7) | Mr. Nazari is the trustee of both The Nazari/Singley Family Trust U/T/A Dated May 23, 1995 (which owns of record 172,583 shares) and The Nazari & Associates International Group, Inc. Defined Benefit Plan (which owns of record 106,333 shares). |
To our knowledge, as of May 10, 2018, a total of 4,251,467 or 95.98% of the outstanding shares of our common stock were beneficially owned by U.S. residents, and there were 50 record holders of our common stock who are U.S. residents.
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
Item 7.B. Related Party Transactions.
As of December 31, 2017, Jupiter Gold was owed $119,599
by Brazil Minerals, Inc. and its subsidiaries for expenses paid or loans made on behalf of the group, and for consideration paid in connection with the acquisition of fixed assets from the group, offset nominally by amounts accrued under the new service agreement.
Details are available in the footnotes to the attached financial statements.
Item 7.C. Interests of Experts and Counsel.
Not applicable.
Item 8. Financial Information.
Item 8.A. Consolidated Statements and Other Financial Information.
Our consolidated financial statements are stated in U.S. Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP").
The financial statements as required under Item 18 of Form 20-F are attached hereto and found immediately following the text of this Annual Report. The audit report of BF Borgers CPA P.C., our independent auditors, is included herein immediately preceding the financial statements.
Item 8.A.7. Legal/Arbitration Proceedings.
None that are material.
Item 8.A.8. Policy on Dividend Distributions.
No dividends are intended to be declared or paid by us in the foreseeable future.
Item 8.B. Significant Changes.
None
Item 9. The Offer and Listing.
The common stock is not currently listed or traded on any stock exchange or other market.
Item 10. Additional Information.
Item 10.A.
As of December 31, 2017, we had 4,429,599 shares of our common stock, par value $0.001 per share and 1 share of our preferred stock, par value $.001 per share issued and outstanding.
As of December 31, 2017, we had 40 million common shares and 10 million preferred shares authorized.
Item 10.B. Memorandum and Articles of Association.
Our Articles of Incorporation have been filed herewith as Exhibit 1.1.
Item 10.C. Material Contracts.
The following descriptions of the material provisions of the referenced agreements do not purport to be complete and are subject to, and qualified in their entirety by reference to the agreements which have been filed as exhibits to this Annual Report.
Stock Agreement
The Stock Agreement provided for Jupiter Gold to acquire from Brazil Minerals 99.99% of Mineração Jupiter Ltda. ("MJL"), a Brazilian company. Prior to this acquisition, MJL held title to two minerals rights for manganese. These two manganese mineral rights will be transferred out of MJL into a company to be designated by Brazil Minerals. In exchange for this 99.99% stake in MJL and the receipt of $4,000 from Brazil Minerals, Jupiter Gold transferred 4 million of its common shares to Brazil Minerals and entered into a registration rights agreement with Brazil Minerals for such shares. Additionally, Jupiter Gold agreed in the Stock Agreement that any mineral project in which MJL is involved with, and that accrues any revenues or dividends (in cash, stock, or otherwise), shall be subject to a ten percent (10%) annual royalty stream ("Royalty Stream") due to Brazil Minerals. The Royalty Stream will be calculated on the amounts actually received by MJL and/or Jupiter Gold, and shall be paid within thirty (30) days of any such receipt.
The Stock Agreement is filed herewith as Exhibit 10.1.
GRU Agreement
The GRU Agreement provides that Jupiter Gold has the right to place its gold retrieved units (each a "GRU" and collectively "GRUs") in mineral rights areas for gold in Brazil owned by Brazil Minerals (the "Gold Rights"). Pursuant to the GRU Agreement, Brazil Minerals shall periodically present to Jupiter Gold a list of its available Gold Rights which meet the necessary Brazilian mining and environmental regulations for mining of gold, and for which Brazil Minerals has the necessary operational infrastructure (the "Permissible Gold Rights"). Jupiter Gold shall periodically choose from the Permissible Gold Rights, the one or more areas in which to place one or more GRUs.
Pursuant to the GRU Agreement, Jupiter Gold may periodically request that one or more GRUs be moved from any of the Permissible Gold Rights to another. Brazil Minerals shall use its best efforts to comply with each such request within 30 days thereafter. Brazil Minerals will solely operate all of the GRUs placed with Brazil Minerals, and will use its best efforts so as to not cause any damage to such GRUs, except for normal wear and tear. All revenues derived from the sale of gold obtained by the operation of GRUs shall be promptly split 50% to Jupiter Gold and 50% to Brazil Minerals. The GRU Agreement may be terminated by either Jupiter Gold upon 30 (thirty) days' advance written notice, or by Brazil Minerals effective immediately upon written notice if and when Brazil Minerals does not control any Permissible Gold Rights.
This GRU Agreement is filed herewith as Exhibit 10.3.
Service Agreement
From July 27, 2016 to March 31, 2017, pursuant to the Service Agreement, Jupiter Gold paid a fixed monthly fee of $2,500 primarily for infrastructure support. The Service Agreement is filed herewith as Exhibit 10.4.
The Service Agreement was terminated on March 31, 2017. Starting on October 31, 2017, Jupiter Gold pays a fixed monthly fee of $1,250 to Brazil Minerals for infrastructure support.
Registration Rights Agreement
The Registration Rights Agreement provides that whenever Jupiter Gold proposes to register any of its securities under the Securities Act of 1933, as amended (the "Securities Act") and the registration form to be used may be used for the registration and contemplated disposition of Registrable Securities (a "Piggyback Registration"), Jupiter Gold will give prompt written notice to Brazil Minerals of its intention to effect such a registration so that such notice is received by Brazil Minerals at least twenty (20) days before the anticipated filing date. Jupiter Gold will include in such registration all securities covered by the Registration Agreement ("Registrable Securities") with respect to which Jupiter Gold has received a written request for inclusion therein subject to any limitations on the number of shares that may be registered for resale that may be imposed by law, including positions of the staff of the SEC. In connection with each Piggyback Registration, all of the expenses incurred in compliance with the aforesaid, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for Jupiter Gold and blue sky fees and expenses will be paid by Jupiter Gold and Brazil Minerals shall pay all of the underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all fees and disbursements of counsel for Brazil Minerals attributable to the sale of its securities pursuant to the Piggyback Registration.
The Registration Rights Agreement is filed herewith as Exhibit 10.2.
Item 10.D. Exchange Controls
Brazilian Laws n. 4.131, of September 03, 1962, and n. 11.371, of November 28, 2006, as amended, regulate foreign investments in Brazil, requiring that foreign investments in Brazil be registered with the Brazilian Central Bank to enable foreign remittance of profits and/or interest on equity, and repatriation of foreign capital invested in Brazil.
The Brazilian legislation allows the investment in the capital market by individuals or legal entities, by means of the acquisition of shares and other securities. These investments, designated "portfolio investments", when performed by non-residents, are subject to registration with the Brazilian Central Bank and Brazilian Securities Commissions ("CVM"), and according to the Resolution n. 4.373, of September 29, 2014 of the Brazil Monetary Council ("CMN") can be made through Depositary Receipts, with the investor represented by institution authorized to work by the Brazil Central Bank.
The non-resident investors must indicate one or more attorneys-in-fact in Brazil, which should be institution authorized to work by the Central Bank and will be responsible mainly for the provision of information and for the registrations with the Brazilian Central Bank and the CVM. The registration of the portfolio investments with the Brazilian Central Bank's electronic system constitutes an obligatory requirement for remittances abroad as distribution of profits and/or interest on equity, and repatriation of the capital invested. Such remittances may be made by means of a foreign exchange contract between the Brazilian company remitting the funds and a Brazilian commercial bank duly authorized to operate in the foreign exchange market (Depositary Receipts). Such foreign exchange contract reflects the exchange of Brazilian currency into foreign currency, at the rate agreed with the Brazilian commercial bank.
Under current Brazilian legislation, the federal government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil's balance of payments. For approximately six months in 1989 and early 1990, the federal government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors, in order to conserve Brazil's foreign currency reserves. These amounts were subsequently released in accordance with federal government directives. There can be no assurance that the federal government will not impose similar restrictions on foreign repatriations in the future.
The likelihood of the imposition of such restrictions by the Brazilian government may be affected by, among other factors, the extent of Brazil's foreign currency reserves, the availability of sufficient foreign currency on the date a payment is due, the size of Brazil's debt service burden relative to the economy as a whole, Brazil's policy towards the International Monetary Fund and political constraints to which Brazil may be subject.
See "Risk Factors—Risks of the Brazilian Economy."
Item 10.E. Taxation
Investors should consult their own tax advisor regarding the specific tax consequences of owning and disposing of our common stock, including eligibility for the benefits of any treaty for the avoidance of double taxation, the applicability or effect of any special rules to which they may be subject, and the effect of any state, local, or other tax laws.
Brazilian Tax Considerations
The following is a summary of tax issues that affect foreign investment in Brazil businesses and is based on the Brazilian tax regulations as presently in effect and does not take into account possible future changes in such tax laws.
General Comments
Brazilian companies are taxed in Brazil on the basis of their worldwide income (which includes earnings of Brazilian companies' foreign subsidiaries, branches and affiliates). In general terms, branches and representative offices of foreign companies in Brazil are taxed as Brazilian legal entities with respect to the business carried out in Brazil.
The earnings of non-Brazilian residents in general are taxed in Brazil only when derived from Brazilian sources. Exception is made to capital gains earned by foreign residents with respect to assets located in Brazil. In such case, the legislation in force in being interpreted in the sense that the Brazilian withholding income tax -WHT shall apply regardless of whether the payment is made from a Brazilian source or not. In such case, the responsibility for collecting the WHT is assigned to buyer's attorney in fact
Payment of Dividends and Interest on Equity/ Repatriation of Investments
Dividends distributed by Brazilian companies to resident or non-resident shareholders or partners, based on profits earned as from January 1, 1996, are exempt from Brazilian withholding income tax. Profits and dividends realized prior to January 1, 1996 are still subject to income tax at the rates prevailing within the year the profits are generated. Prior to 1996, dividends and profits distributed were subject to a fifteen percent (15%) withholding income tax (IRRF), withheld by the company, except for distribution to residents of Japan, in which a Brazilian tax treaty provides for a 12.5 % rate.
Alternatively to the distribution of dividends, Brazilian companies may remunerate its equity holders through the payment of interest on equity, provided that the company has retained or current-year earnings. The total amount of interest on equity that can be paid or credited are subject to limits provided in Brazilian tax law. The Brazilian companies may deduct the interest on equity paid or credited as operational expenses for the purposes of corporate income taxes. A fifteen percent (15%) withholding income tax is levied on the amount of interest on equity paid, accrued to the equity holders, or capitalized (25% rate for low tax jurisdictions).
When the foreign investor sells shares or quotas in the Brazilian venture or when the Brazilian company reduces its capital or is liquidated, the foreign-registered investment can be repatriated in the relevant foreign currency free of taxes up to the amount of foreign currency registered with the Central Bank. If the foreign investor withdraws from its Brazilian subsidiary by assigning its quotas/shares for an amount exceeding that registered with the Central Bank, the exceeding amount is considered a capital gain and shall be subject to withholding income tax at a 15% rate (25% for low tax jurisdictions). Nevertheless, the exceeding amount may be remitted abroad in case of a local sale. Remittances of sale prices exceeding the net worth value ("valor patrimonial") of the Brazilian company sold must be supported by an appraisal report. There is also a discussion on whether the calculation of the capital gain should be made taking into consideration the basis in foreign currency without monetary correction or in the Brazilian currency acquired by the foreign investor by the time the foreign investment was made, indexed by monetary correction until 1996.
Tax Treaties
There is currently no tax treaty in place between Brazil and the United States nor with the Marshall Islands.
Brazil has entered into numerous tax treaties with other countries, to provide relief from double taxation on international transactions. To date, Brazil has executed treaties with South Africa, Argentina, Austria, Belgium, Canada, Chile, China, South Korea, Denmark, Ecuador, Spain, Philippines, Finland, Netherlands, Hungary, India, Israel, Italy, Japan, Luxemburg, Mexico, Norway, Peru, Portugal, Czech Republic and Slovakia Republic, Sweden, Trinidad and Tobago, Turkey, Ukraine, Venezuela, Paraguay* and Russia* (*Pending publication of the Executive Decree).
Low-Tax Jurisdictions
The Brazilian Federal Revenue Department has listed some locations considered to be low-tax jurisdictions for Brazilian tax purposes. Current regulations list the Cayman Islands. Low-tax jurisdictions are defined for Brazilian tax purposes as jurisdictions that do not tax income or tax it at a maximum rate lower than 20%. Payments of certain types of income to entities in low-tax jurisdictions are subject to a higher withholding tax rate of 25% (15% usually applies), with few exceptions (such as payment of operational lease fees abroad-15% and payment of interest fees related to the financing of Brazilian exports – 0%). Transactions between a Brazilian resident and a company resident in a low-tax jurisdiction are subject to Brazilian transfer pricing rules, irrespective of whether the two parties qualify as associated companies.
Law n. 11.727/2008, and Normative Ruling (RFB) n. 1.037/2010, issued by the Brazilian tax authorities, expressly lists jurisdictions that are deemed to be low-tax jurisdictions, to wit: Andorra; Anguilla; Antigua and Barbuda; Netherlands Antilles; Aruba; Ascension Islands; Commonwealth of the Bahamas; Bahrain; Barbados; Belize; Bermuda; Brunei; Campione D'Italia; Channel Islands (Alderney, Guernsey, Jersey and Sark); Cayman Islands; Cyprus; Singapore; Cook Islands; Republic of Costa Rica; Djibouti; Dominica; United Arab Emirates; Gibraltar; Granada; Hong Kong; Kiribati; Lebuan; Lebanon; Liberia; Liechtenstein; Macau; Madeira Island; Maldives; Isle of Man; Marshall Islands; Mauritius; Monaco; Montserrat Islands; Nauru; Niue Island; Norfolk Island; Panama; Pitcairn Island; French Polynesia; Queshm Island; American Samoa; Western Samoa; San Marino; St. Helena Islands; Saint Lucia; Federation of Saint Kitts and Nevis; Saint Peter's Island; Saint Vincent and the Grenadines; Seychelles; Solomon Islands; St. Kitts and Nevis; Swaziland; Sultanate of Oman; Tonga; Tristan da Cunha; Turks and Caicos Islands; Vanuatu; US Virgin Islands; British Virgin Islands; Luxembourg (with respect to holding companies existed under Luxembourg Law of July 31,1929); Switzerland (with respect to holding company, domiciliary company, auxiliary company, mixed company e administrative company with taxation inferior to 20%); Uruguay (with respect to companies organized as "Sociedades Financeiras de Inversão (Safis)" up to December 31, 2010); Denmark, and Netherlands (with respect to holding companies that do not realize substantive economic activity); Iceland (with respect to companies organized as International Trading Company (ITC)); United States of America (with respect to companies organized as Limited Liability Company (LLC) with shareholders not resident and exempt of Federal Corporate Income Tax); Spain (with respect to companies organized as Entidad de Tenencia de Valores Extranjeros (E.T.V.Es.); Malta (with respect to companies organized as International Trading Company (ITC) or International Holding Company (IHC)).
Withholding Income Tax on Payments Abroad
In general, payments made to non-residents are subject to withholding income tax in Brazil. As a general rule, interest, fees, commissions and any other income payable by a Brazilian obligor to an individual, company, entity, trust or organization domiciled outside Brazil is considered derived from Brazilian sources and is therefore subject to income tax withheld at the source. Brazilian tax laws expressly authorize the paying source to pay the income or earnings net of taxes and, therefore, to assume the cost of the applicable tax. The WHT should be withheld when the income is paid, credited, used on behalf of or effectively remitted to a non-resident, whichever first occurs. The tax is generally based on gross payments (i.e., without any deductions). The general WHT rate is 15% (25% rate may apply to certain activities such as non-technical services).
Corporate Income Taxes Applicable to Brazilian Companies
Most business entities are required to pay corporate income tax (IRPJ). The IRPJ is computed at fifteen percent (15%) rate on adjusted net income. Annual net income in excess of 240,000 Brazilian Real is also subject to a surtax of ten percent (10%). According to Law No. 9,430, of December 30, 1996, taxpayers may opt to calculate the IRPJ on a quarter or annual basis. If the IRPJ is calculated quarterly, it is also payable on a quarterly basis. Over the quarter net income, a fifteen percent (15%) rate is applied, plus a ten percent (10%) surtax on net income exceeding 60,000 Brazilian Real per quarter. If the IRPJ is calculated annually, taxpayers are required to anticipate monthly payments of IRPJ, calculated over estimated income. For most companies, such monthly estimated income corresponds to eight percent (8%) of the total monthly gross revenues plus capital gains and other revenues and positive results incurred by the company. Such percentage ranges from 8% to 32%, depending on the activity performed by the taxpayer. Over this tax basis, the fifteen percent (15%) rate applies, plus the ten percent (10%) surtax on estimated income exceeding approximately 20,000 Brazilian Real per month. When the annual method of calculation is adopted, with payment of monthly anticipations, at the end of the year, the entities must either pay or request reimbursement for the difference between the amount paid monthly and that calculated on annual income.
Net operating losses ("NOLs") generated in a given period can offset taxable income of the subsequent period, limited to thirty percent (30%) of taxable income (i.e., for each R$ 1.00 of income, R$0.70 must be subject to taxation, regardless of the existing amount of NOL). Tax losses may be carried forward, without statute of limitation.
Another used method of calculating income tax is the presumed method ("apuração de imposto de renda por lucro presumido"). In this case, the income tax is calculated on a quarterly basis and for most activities, the tax basis corresponds to eight percent (8%) of gross revenues. There are other applicable rates to calculate presumed income related to certain specific activities (e.g., thirty-two percent [32%] for most service activities). Over the presumed income, income tax rates of fifteen percent (15%) and ten percent (10%) surtax levied on presumed income exceeding 60,000 Brazilian Real per quarter are applied. If the presumed method of taxation is adopted, the taxpayer is not subject to any adjustment according to annual actual income. Among other requirements for eligibility the Brazilian company's revenues earned in the previous taxable year must not exceed 48,000 Brazilian Real.
In addition to the Corporate Income Tax, Brazilian companies are subject to the Social Contribution on Net Profits ("CSLL"), which is in fact a true corporate income tax surcharge. The CSLL applies at a rate of nine percent (9%). The reason why it is levied separately is that it is specifically allocated to the social security system. Most rules concerning book and presumed profit methods also apply to CSLL (the CSLL basis in the presumed profit method may be different from the one applicable to the Corporate Income Tax).
Other Taxes that Brazilian Companies Are Subject To That May Be Relevant To Foreign Investors
| • | Tax on Credit, Exchange, Insurance and Securities Transactions (IOF): the IOF is imposed on foreign currency exchange transactions, among other transactions. Currently, however, a zero rate applies to most cases. |
| • | Other Brazilian taxes: Brazil charge taxes over company's gross turn-over, sale of goods, manufacturing of goods, services, property, transfer of property, transportation, importation, exportation, among other activities. |
Marshall Islands Tax Considerations
The Republic of the Marshall Islands will not, under existing legislation, impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon our Common Stock. The Republic of the Marshall Islands are not party to any double taxation treaties.
Item 10.F. Dividends and Paying Agents.
Not required.
Item 10.G. Statement by Experts.
Not required
Item 10.H. Documents on Display.
We are subject to the informational requirements of the Exchange Act applicable to foreign private issuers and, in accordance with these requirements, we file reports with the SEC. As a foreign private issuer, we are exempt from the rules under the Exchange Act relating to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the Securities and Exchange Commission as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
You may read and copy any documents that we file with the SEC, including this Annual Report and the related exhibits, without charge at the Securities and Exchange Commission's public reference room at 100 F Street, N.W., Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing to the public reference room of the Commission at 100 F Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference room. In addition, the documents incorporated by reference into this Annual Report are publicly available through the web site maintained by the Securities and Exchange Commission at www.sec.gov.
Item 10.I. Subsidiary Information.
Not applicable.
Item 11. Quantitative and Qualitative Disclosure about Market Risk.
Foreign Exchange Risk
We are subject to risk brought about by the possibility of a significant change in the rate of exchange of the U.S. Dollar for the Brazilian Real.
Interest Rate Risk
None; as of December 31, 2017, we had no fixed or floating rate indebtedness.
Item 12. Description of Securities Other than Equity Securities.
Not applicable.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None material
Item 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds.
Not applicable.
Item 15. Controls and Procedures.
Disclosure Controls And Procedures
Our management 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 Exchange Act as of December 31, 2017. On the basis of that evaluation, management concluded that our disclosure controls and procedures are designed, and are effective, to provide reasonable assurance that the information required to be disclosed in reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure.
Management's Report On Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.
Our internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and financial officer and effected by our Board of Directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. Therefore even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management performed an assessment of the effectiveness of our internal control over financial reporting at December 31, 2017, utilizing the criteria described in the "Internal Control — Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. The objective of this assessment was to determine whether our internal control over financial reporting was effective at December 31, 2017.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting at December 31, 2017, we did not identify material weaknesses.
Based on our assessment, and because of the lack of any material weakness as described above, we have concluded that our internal control over financial reporting was effective at December 31, 2017.
Management's Remediation Plan In Internal Controls
We will continue to monitor the effectiveness of our internal controls over financial reporting and to make any changes that our management deems appropriate.
Changes In Internal Control Over Financial Reporting
Management does not believe that there have been any other changes in our internal control over financial reporting during the year ended December 31, 2017, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16. Reserved
Item 16A. Audit Committee Financial Expert
Our Board of Directors currently acts as our audit committee. We do not currently have an independent member of our Board of Directors who qualifies as an "audit committee financial expert" as such term is usually defined.
Item 16B. Code of Ethics.
Our Board of Directors plans to adopt in 2018 a code of ethics to apply to all of our directors, officers, and employees.
Item 16C. Principal Accountant Fees and Services.
BF Borgers CPA PC has served as our independent auditors for our financial statements as of December 31, 2017 and for the period from January 1, 2017 to December 31, 2017. BF Borgers CPA PC was also as our independent auditors for our financial statements as of December 31, 2016 and for the period from July 27, 2016 (inception) to December 31, 2016. This firm billed the following fees to us for professional services related to such dates and periods:
| | | 2017 | | | 2016 | |
| Audit Fees | | $ | 6,000 | | | $ | 4,000 | |
| Audit-Related Fees | | $ | 480 | | | $ | 320 | |
| Tax Fees | | | - | | | | - | |
| All Other Fees | | | - | | | | - | |
| Total | | $ | 6,480 | | | $ | 4,320 | |
"Audit Fees" are the aggregate fees billed for the audit of our annual financial statements. This category also includes services that generally the independent accountant provides, such as consents and assistance with and review of documents filed with the SEC.
"Audit-Related Fees" are the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit and are not reported under Audit Fees. These fees include mainly accounting consultations regarding the accounting treatment of matters that occur in the regular course of business, implications of new accounting pronouncements and other accounting issues that occur from time to time.
"Tax Fees" are the aggregate fees billed for professional services rendered for tax compliance, tax advice, other than in connection with the audit. Tax compliance involves preparation of original and amended tax returns, tax planning and tax advice.
"All Other Fees" are the aggregate fees billed for products and services, other than the services reported on the preceding lines.
All of the audit and non-audit services to us were pre-approved by our Board of Directors.
Item 16D. Exemptions from the Listing Standards for Audit Committees.
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
None.
Item 16F. Change in Registrant's Certifying Accountant.
Not applicable.
Item 16G. Corporate Governance.
Not applicable.
Item 16H. Mine Safety Disclosure.
Not applicable.
PART III
Item 17. Financial Statements.
We have responded to Item 18 in lieu of this item.
Item 18. Financial Statements.
The financial statements required by this item are found at the end of this Annual Report, beginning on page F-1.
Item 19. Exhibits.
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*Filed herewith.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
| | JUPITER GOLD CORPORATION |
| | (Registrant) |
| | |
| | /s/ Marc Fogassa |
| | By: Marc Fogassa |
| | Title: Chief Executive Officer |
| | |
| Date: May 15, 2018 | |
| | |
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Jupiter Gold Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Jupiter Gold Corporation (the "Company") as of December 31, 2017 and 2016, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2016.
Lakewood, CO
May 15, 2018
| JUPITER GOLD CORPORATION | |
| CONSOLIDATED BALANCE SHEETS | |
| | | | | | | |
| | | December 31, | | | December 31, | |
| | | 2017 | | | 2016 | |
| | | | | | | |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 80,353 | | | $ | 3,072 | |
| Deposits and advances | | | 4,290 | | | | - | |
| Related party receivables | | | 119,599 | | | | 4,000 | |
| Total current assets | | | 204,242 | | | | 7,072 | |
| Capital assets: | | | | | | | | |
| Property and equipment, net | | | 134,315 | | | | 9,562 | |
| Other assets: | | | | | | | | |
| Intangible assets, net | | | 2,044 | | | | 2,044 | |
| Total assets | | $ | 340,601 | | | $ | 18,678 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 15,366 | | | $ | 12,510 | |
| Related party payable | | | - | | | | 37,826 | |
| Total current liabilities | | | 15,366 | | | | 50,336 | |
| Total liabilities | | | 15,366 | | | | 50,336 | |
| | | | | | | | | |
| Stockholders' equity (deficit): | | | | | | | | |
| Series A preferred stock, $0.001 par value. 1 share issued and outstanding | | | - | | | | - | |
| Common stock, $0.001 par value. 4,429,599 and 4,000,000 shares issued and outstanding as | | | | | |
| of October 31, 2017 and December 31, 2016, respectively | | | 4,430 | | | | 4,000 | |
| Additional paid-in capital | | | 1,097,682 | | | | 305,070 | |
| Accumulated other comprehensive loss | | | 1,227 | | | | (259 | ) |
| Accumulated deficit | | | (778,104 | ) | | | (340,469 | ) |
| Total stockholders' equity (deficit) | | | 325,235 | | | | (31,658 | ) |
| Total liabilities and stockholders' equity (deficit) | | $ | 340,601 | | | $ | 18,678 | |
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The accompanying notes are an integral part of the consolidated financial statements.
| JUPITER GOLD CORPORATION | |
| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | |
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| | | Year Ended December 31, | | | From July 27 (inception) through December 31, | |
| | | 2017 | | | 2016 | |
| | | | | | | |
| Revenue | | $ | - | | | $ | - | |
| Cost of revenue | | | - | | | | - | |
| Gross margin | | | - | | | | - | |
| Operating expenses: | | | | | | | | |
| Professional fees | | | 8,053 | | | | 21,794 | |
| General and administrative | | | 63,144 | | | | 16,918 | |
| Compensation and related costs | | | 1,501 | | | | - | |
| Stock based compensation | | | 363,443 | | | | 302,002 | |
| Total operating expenses | | | 436,141 | | | | 340,714 | |
| Loss from operations | | | (436,141 | ) | | | (340,714 | ) |
| Other expense (income): | | | | | | | | |
| Other expense (income) | | | 1,494 | | | | 14 | |
| Total other expense (income) | | | 1,494 | | | | 14 | |
| Loss before provision for income taxes | | | (437,635 | ) | | | (340,728 | ) |
| Provision for income taxes | | | - | | | | - | |
| Net loss | | $ | (437,635 | ) | | $ | (340,728 | ) |
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| Basic and diluted loss per share | | | | | | | | |
| Net loss per share | | $ | (0.11 | ) | | $ | (0.20 | ) |
| | | | | | | | | |
| Weighted-average number of common shares outstanding: | | | | | | | | |
| Basic and diluted | | | 4,091,266 | | | | 1,715,847 | |
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The accompanying notes are an integral part of the consolidated financial statements.
| JUPITER GOLD CORPORATION | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |
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| | | Year Ended December 31, | | | From July 27 (inception) through December 31, | |
| | | 2017 | | | 2016 | |
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| Cash flows from operating activities of continuing operations: | | | | | | |
| Net loss | | $ | (437,635 | ) | | $ | (340,728 | ) |
| Adjustments to reconcile net loss to cash used in operating activities: | | | | | |
| Stock based compensation and services | | | 365,243 | | | | 302,002 | |
| Depreciation and amortization | | | 7,736 | | | | 616 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Deposits and advances | | | (4,445 | ) | | | - | |
| Accounts payable and accrued expenses | | | 4,304 | | | | 12,509 | |
| Related party payables | | | (101,433 | ) | | | 37,826 | |
| Net cash provided by (used in) operating activities | | | (166,230 | ) | | | 12,225 | |
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| Cash flows from investing activities: | | | | | | | | |
| Acquisition of capital assets | | | (6,552 | ) | | | (7,109 | ) |
| Increase in intangible assets | | | - | | | | (2,044 | ) |
| Net cash provided by (used in) investing activities | | | (6,552 | ) | | | (9,153 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Net proceeds from sale of common stock | | | 250,100 | | | | - | |
| Net cash provided by (used in) financing activities | | | 250,100 | | | | - | |
| | | | | | | | | |
| Effect of exchange rates on cash and cash equivalents | | | 507 | | | | - | |
| Net increase (decrease) in cash and cash equivalents | | | 77,825 | | | | 3,072 | |
| Cash and cash equivalents at beginning of period | | | 2,528 | | | | - | |
| Cash and cash equivalents at end of period | | $ | 80,353 | | | $ | 3,072 | |
| | | | | | | | | |
| Supplemental disclosure of cash flow information: | | | | | | | | |
| Cash paid for interest | | $ | - | | | $ | - | |
| Cash paid for income taxes | | $ | - | | | $ | - | |
| | | | | | | | | |
| Supplemental disclosure of non-cash investing and financing activities: | | | | | |
| Acquisition of capital assets in exchange for common stock | | $ | 130,594 | | | $ | - | |
| Shares issued in lieu of cash for accounts payable | | $ | 1,367 | | | $ | - | |
| | | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements.
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
Jupiter Gold Corporation with its Brazilian subsidiary ("Jupiter Gold" or the "Company") has been in continuous operations since July 27, 2016. As of April 23, 2018, the Company is a producer of gold from the modular gold recovery plant that it owns and which is located in a mining concession in Brazil. Additionally, Jupiter Gold owns nine mineral rights for gold and two mineral rights for manganese, all in exploratory phase and located in known mining districts in Brazil. On December 16, 2016, Jupiter Gold's Registration Statement on Form F-1 was declared effective by the Securities and Exchange Commission ("SEC"). During 2017, Jupiter Gold conducted an initial public offering of its common stock in which $254,000 was raised at $1.00/share. The Company, through a sponsoring U.S. broker-dealer, has applied for a stock symbol and expects its common stock to begin trading during 2018.
Principles of Consolidation
On July 27, 2016, Jupiter Gold Corporation was incorporated under the laws of the Republic of the Marshall Islands. On the same day, Brazil Minerals, Inc. ("Brazil Minerals"), a U.S. corporation, exchanged its 99.99% ownership in Mineração Jupiter ("MJL"), a Brazilian company, for 4,000,000 shares of Jupiter Gold's common stock. The remaining 0.01% in MJL is to accommodate the regulatory requirement in Brazil for a minimum of two owners in a company; this 0.01% ownership is held by a director of Jupiter Gold. For accounting and reporting purposes, the 0.01% minority ownership interest is deemed immaterial and, therefore, as of December 31, 2017 and 2016, MJL has been consolidated as a wholly-owned subsidiary of Jupiter Gold Corporation.
Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared by Jupiter Gold pursuant to the rules and regulations of the SEC. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted ("GAAP") in the U.S. have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these consolidated financial statements have been included. Such adjustments consist of normal recurring adjustments. All material intercompany accounts and transactions have been eliminated in consolidation.
Basis of Presentation
The consolidated financial statements of Jupiter Gold have been prepared on the accrual basis of accounting in accordance with U.S. GAAP and are presented in U.S. dollars.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results may differ from those estimates.
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Financial Instruments
Jupiter Gold follows the guidance of Accounting Standards Codification ("ASC") Topic 820 – Fair Value Measurement and Disclosure. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of Jupiter Gold. Unobservable inputs are inputs that reflect Jupiter Gold's assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
As of December 31, 2017, Jupiter Gold did not have any level 2 or 3 assets or liabilities.
Jupiter Gold's financial instruments consist of cash and cash equivalents, accounts payable, and accrued expenses. The carrying amount of these financial instruments approximates fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent that the funds are not being held for investment purposes. Funds held in Brazilian banks are insured up to 250,000 Brazilian Real (approximately $75,574 based on the December 31, 2017 exchange rate).
Property and Equipment
Property and equipment are stated at cost. Major improvements and betterments are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful life. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the statements of operations as other gain or loss, net.
Costs of exploration, carrying and retaining unproven mineral lease properties are expensed as incurred. Mineral property acquisition costs, including licenses and lease payments, are capitalized. Impairment losses are recorded on mineral properties used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. As of December 31, 2017 and 2016, Jupiter Gold did not recognize any impairment losses related to mineral properties held.
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Intangible Assets
For intangible assets purchased in a business combination, the estimated fair values of the assets received are used to establish their recorded values. For intangible assets acquired in a non-monetary exchange, the estimated fair values of the assets transferred (or the estimated fair values of the assets received, if more clearly evident) are used to establish their recorded values, unless the values of neither the assets received nor the assets transferred are determinable within reasonable limits, in which case the assets received are measured based on the carrying values of the assets transferred. Valuation techniques consistent with the market approach, income approach and/or cost approach are used to measure fair value. Intangible assets consist of mineral rights held by MJL and hold a recorded value of $2,044, the cost of fees paid to the Brazilian national mining department.
Impairment of Long-Lived Assets
For long-lived assets, such as property and equipment and intangible assets subject to amortization, Jupiter Gold continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, Jupiter Gold recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
Foreign Currency
Jupiter Gold's subsidiary, MJL, uses its local currency as its functional currency. Resulting translation gains or losses are recognized as a component of accumulated other comprehensive income. Transaction gains or losses related to balances denominated in a currency other than the functional currency are recognized in the consolidated statements of operations.
Recent Accounting Pronouncements
We have reviewed other recent accounting pronouncements issued to the date of the issuance of these consolidated financial statements, and we do not believe any of these pronouncements will have a material impact on Jupiter Gold.
NOTE 2 –ACQUISITIONS
Mineração Jupiter Ltda. ("MJL")
On July 27, 2016, Jupiter Gold acquired from Brazil Minerals a 99.99% ownership in MJL in exchange for 4,000,000 shares of Jupiter Gold's common stock, plus Brazil Minerals' agreement to pay the par value cost of such shares amounting to $4,000. Since this acquisition was made from a related party, all assets and liabilities were reflected at cost, and no goodwill was recognized on the transaction.
Property, Plant and Equipment
As of December 31, 2017, property, plant and equipment was comprised of a completed gold recovery plant, vehicles and excavation equipment in Brazil with an original cost of $183,784. Accumulated depreciation on these assets totaled $49,469.
As of December 31, 2016, property, plant and equipment was comprised of a completed gold recovery plant in Brazil with an original cost of $10,181. Accumulated depreciation on these assets totaled $618.
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Related Party Receivables
As of December 31, 2017, related party receivables totaled $119,599. This amount was comprised of the following components, (i) $74,030 is owed from a Brazil Minerals subsidiary to MJL for expenses paid on behalf of such subsidiary and (ii) $45,569 is owed from Brazil Minerals for short term loans made and expenses paid by Jupiter Gold and MJL.
No related party receivables existed as of December 31, 2016.
Related Party Payables
No related party payables existed as of December 31, 2017.
As of December 31, 2016, related party payables totaled $37,826. This amount was comprised of the following components, (i) $25,717 is owed to Brazil Minerals, Inc. consisting of $12,903 per a monthly service contract and $12,813 for expenses paid on behalf of Jupiter Gold; (ii) $8,922 is owed to a subsidiary of Brazil Minerals, Inc. for expenses paid on behalf of MJL; and (iii) $3,188 is owed to the Company's chief executive officer for required monthly honorariums of 880 Brazilian Reais (or approximately $270 based on the December 31, 2016 exchange rate). See Note 6.
NOTE 4 – STOCKHOLDERS' DEFICIT
Issued and Authorized
As of December 31, 2017, Jupiter Gold had 4,429,599 shares of its common stock and 1 share of its preferred stock issued and outstanding. As of December 31, 2017, Jupiter Gold had 40 million common shares and 10 million preferred shares authorized.
Common Stock
During the year ended December 31, 2017, Jupiter Gold issued and sold 250,100 shares of common stock for cash proceeds of $250,100.
On September 29, 2017, Jupiter Gold agreed to issue 176,332 shares of common stock on behalf of MJL to purchase various capital assets valued at approximately 554,000 Brazilian Reais (or $175,000) from a related party.
On July 27, 2016, Jupiter Gold issued 4,000,000 shares of its common stock to Brazil Minerals, a related party, with respect to the transaction detailed in Note 1.
Preferred A Stock
Jupiter Gold has issued to one of its directors one share of a Series A Convertible Preferred Stock ("Preferred A Stock"). The Certificate of Designations, Preferences and Rights of Preferred A Stock provides that for so long as it is issued and outstanding, its holders shall vote together as a single class with the holders of the Company's common stock, with the holders of Preferred A Stock being entitled to 51% of the total votes on all such matters regardless of the actual number of shares of Preferred 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.
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Options
During the year ended December 31, 2017, the Company granted to directors as contractual compensation options to purchase an aggregate of 670,000 shares of its common stock. The options were valued at $363,443 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 ($1.00), the strike price ($1.25 or $1.00 according to the specific issuance), expected dividend yield of 0%, historical volatility of 63.08%, risk-free interest rate of 1.93%, and an expected term of five years.
During the year ended December 31, 2016, the Company granted to directors as contractual compensation options to purchase an aggregate of 610,000 shares of its common stock. The options were valued at $302,002 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 ($1.00), the strike price ($1.25 or $1.00 according to the specific issuance), expected dividend yield of 0%, historical volatility of 63.08%, risk-free interest rate of 1.93%, and an expected term of five years.
With the untimely death of director Paul Durand on December 18, 2017, the options awarded to him expired as of December 31, 2017.
NOTE 6 – COMMITMENTS AND CONTINGENCIES
Service Agreement
Jupiter Gold had a contractual agreement with Brazil Minerals by which it used that company's infrastructure in Brazil, including office and some personnel time, for $2,500 monthly. As of December 31, 2016, the amount due under this arrangement totaled $12,903 and was recorded within "Related Party Payables" on the Company's balance sheet. This agreement was terminated effective April 1, 2017. All amounts under this agreement were paid as of December 31, 2017.
Commencing November 1, 2017, Jupiter Gold established a similar cost sharing arrangement with Brazil Minerals whereby it agreed to pay $1,250 per month for support services including facilities and personnel.
Loans
Jupiter Gold and MJL have, from time to time, received loans from Brazil Minerals and its subsidiaries. These loans, when made, bear no interest and are payable on demand.
Monthly Honorarium
MJL pays as honorarium to its administrator, Jupiter Gold's Chief Executive Officer, the minimum monthly salary as set annually by the Brazilian government. The minimum monthly salary was 880 Brazilian Reais during 2016 (approximately $270 based on the December 31, 2016 exchange rate) and 937 Brazilian Reais during 2017 (approximately $283 based on the December 31, 2017 exchange rate).
As of December 31, 2016, the amount due under this arrangement totaled $3,168 and was recorded within "Related Party Payables" on the Company's balance sheet.
JUPITER GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to December 31, 2017 to the date these consolidated financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these consolidated financial statements, except as noted below.
On February 26, 2018, Christopher Westdal resigned as director of the Company. There has been no disagreement with Mr. Westdal, and his resignation was in amicable circumstances. On February 26, 2018, Manuel Henrique Costa Andrade was elected to the Board of Directors of the Company.
On March 2, 2018, the Company licensed three additional mineral rights for gold from the Brazilian mining department.
On May 12, 2018, the Company began a drilling campaign of its Paracatu Project (mineral right 831.883/2016). Multiple drill holes have produced visual gold intersects and gold was also confirmed in pan concentrates. This planned campaign entails drilling a total of six holes spaced 100 meters, with samples being collected at each one-meter intervals, to be processed for geochemical analysis at a premier analytical laboratory. Rodrigo B. Mello, a highly experienced geologist, who has been a Qualified Person in projects and technical reports for Goldcorp Inc. and other large companies, is overseeing this study.
