0001079974-16-001719.txt : 20161121 0001079974-16-001719.hdr.sgml : 20161121 20161121140748 ACCESSION NUMBER: 0001079974-16-001719 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 42 CONFORMED PERIOD OF REPORT: 20160930 FILED AS OF DATE: 20161121 DATE AS OF CHANGE: 20161121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Brazil Minerals, Inc. CENTRAL INDEX KEY: 0001540684 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 392078861 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55191 FILM NUMBER: 162009947 BUSINESS ADDRESS: STREET 1: RUA VEREADOR JOAO ALVES PRAES N* 95-A CITY: OLHOS D'AGUA STATE: D5 ZIP: 39398-000 BUSINESS PHONE: 2133216065 MAIL ADDRESS: STREET 1: 1443 EAST WASHINGTON BLVD. STREET 2: SUITE 278 CITY: PASADENA STATE: CA ZIP: 91104 FORMER COMPANY: FORMER CONFORMED NAME: Flux Technologies, Corp. DATE OF NAME CHANGE: 20120127 10-Q 1 bmix10q9302016.htm
 
 
 
 
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
  
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the quarterly period ended September 30, 2016
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the transition period from ____________ to ____________

Commission File Number 000-55191
 
 
Brazil Minerals, Inc.
 
(Exact name of registrant as specified in its charter)
 
Nevada
 
39-2078861
(State or other jurisdiction of
 
(IRS Employer
incorporation or organization)
 
Identification No.)


Rua Vereador João Alves Praes, nº 95-A
Olhos D'Água, MG 39398-000, Brazil
(Address of principal executive offices)
 
(213) 590-2500
(Registrant's telephone number)
 
 
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   No 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer 
Accelerated filer 
 
 
Non-accelerated filer
Do not check if a smaller reporting company
Smaller reporting company
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ¨    No þ
 
 
APPLICABLE ONLY TO CORPORATE ISSUERS
 
As of November 17, 2016 the registrant had 12,797,376,461shares of common stock, par value $0.001 per share, issued and outstanding.
 
 
 


 
 
 
TABLE OF CONTENTS
 
     
Page
PART I  FINANCIAL INFORMATION
   
       
Item 1.
Financial Statements
   
       
 
Consolidated Balance Sheets as of September 30, 2016 (Unaudited) and December 31, 2015
 
F-1
       
 
Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2016 and 2015 (Unaudited)
 
F-2
       
 
Consolidated Statements of Cash Flows the Nine Months Ended September 30, 2016 and 2015 (Unaudited)
 
 F-3
       
 
Notes to the Consolidated Financial Statements (Unaudited)
 
F-4
       
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
 
10
       
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
10
       
Item 4.
Controls and Procedures.
 
11
       
PART II  OTHER INFORMATION
   
       
Item 2.
Unregistered Sales of Equity Securities and Proceeds
 
11
       
Item 6.
Exhibits
 
12
       
Signatures
 
 12
       
Exhibits/Certifications
   
 
 
 
 
 
 
 
 
- 2 -

 
 
 
PART I  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

 
BRAZIL MINERALS, INC.
CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2016 AND DECEMBER 31, 2015
 
   
September 30,
   
December 31,
 
   
2016
   
2015
 
             
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
12,002
   
$
64,364
 
Accounts receivable
   
1,750
     
2,886
 
Taxes recoverable
   
28,390
     
50,100
 
Prepaid expenses
   
6,507
     
-
 
Inventory
   
156,560
     
145,079
 
Total current assets
   
205,209
     
262,429
 
Capital assets:
               
Property and equipment, net
   
435,396
     
361,563
 
Other assets:
               
Intangible assets, net
   
630,842
     
508,865
 
Total assets
 
$
1,271,447
   
$
1,132,857
 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current liabilities:
               
Accounts payable and accrued expenses
 
$
483,182
   
$
471,337
 
Convertible notes payable, net of debt discounts totaling $98,491 and $49,182, respectively
   
314,809
     
491,698
 
Derivative liabilities
   
88,175
     
281,345
 
Related party payable
   
231,344
     
160,214
 
Total current liabilities
   
1,117,510
     
1,404,594
 
Long term liabilities:
               
Convertible notes payable -- noncurrent, net of debt discounts totaling zero and $83,852, respectively
   
-
     
116,148
 
Other noncurrent liabilities
   
192,244
     
-
 
Total liabilities
   
1,309,754
     
1,520,742
 
                 
Stockholders' deficit:
               
Series A preferred stock, $0.001 par value. 10,000,000 shares authorized; 1 share issued and outstanding
   
1
     
1
 
Series B preferred stock, $0.001 par value. 10,000,000 shares authorized; 584 and 1,047 shares issued
               
and outstanding as of September 30, 2016 and December 31, 2015, respectively
   
908,972
     
1,560,433
 
Series C preferred stock, $0.001 par value. 10,000,000 shares authorized; zero and 200,000 shares issued
               
and outstanding as of September 30, 2016 and December 31, 2015, respectively
   
-
     
250,000
 
Common stock, $0.001 par value. 12,500,000,000 and 7,000,000,000 shares authorized, respectively;
               
12,421,756,892 and 6,219,391,446 shares issued and outstanding as of September 30, 2016
               
and December 31, 2015, respectively
   
12,421,757
     
6,219,392
 
Additional paid-in capital
   
30,797,476
     
36,146,689
 
Accumulated other comprehensive loss
   
(492,483
)
   
(678,830
)
Stock purchase warrants
   
218,656
     
218,656
 
Accumulated deficit
   
(45,274,735
)
   
(44,235,280
)
Total Brazil Minerals, Inc. stockholders' deficit
   
(1,420,356
)
   
(518,939
)
Non-controlling interest
   
1,382,049
     
131,054
 
Total stockholders' deficit
   
(38,307
)
   
(387,885
)
Total liabilities and stockholders' deficit
 
$
1,271,447
   
$
1,132,857
 
 

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

F-1


BRAZIL MINERALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(Unaudited)
 
   
Three Months Ended September 30,
   
Three Months Ended September 30,
   
Nine Months Ended September 30,
   
Nine Months Ended September 30,
 
   
2016
   
2015
   
2016
   
2015
 
                         
Revenue
 
$
7,752
   
$
18,326
   
$
11,821
   
$
58,512
 
Cost of revenue
   
47,461
     
8,573
     
112,293
     
145,599
 
Gross margin
   
(39,709
)
   
9,753
     
(100,472
)
   
(87,087
)
Operating expenses:
                               
Professional fees
   
51,512
     
21,035
     
147,634
     
120,076
 
General and administrative
   
92,883
     
138,300
     
287,569
     
365,836
 
Compensation and related costs
   
50,261
     
16,753
     
146,066
     
65,851
 
Stock based compensation
   
-
     
37,500
     
57,568
     
120,646
 
Total operating expenses
   
194,656
     
213,588
     
638,837
     
672,409
 
Loss from operations
   
(234,365
)
   
(203,835
)
   
(739,309
)
   
(759,496
)
Other expense (income):
                               
(Gain) loss on derivative liabilities
   
(34,760
)
   
(488,824
)
   
(193,170
)
   
(1,237,329
)
Interest on promissory notes
   
(24,555
)
   
22,120
     
91,913
     
121,523
 
Amortization of debt discounts and other fees
   
82,144
     
313,575
     
199,886
     
962,507
 
Other expense (income)
   
226,295
     
(1
)
   
226,294
     
(14
)
Total other expense (income)
   
249,124
     
(153,130
)
   
324,923
     
(153,313
)
Loss before provision for income taxes
   
(483,489
)
   
(50,705
)
   
(1,064,232
)
   
(606,183
)
Provision for income taxes
   
-
     
-
     
-
     
-
 
Net loss
   
(483,489
)
   
(50,705
)
   
(1,064,232
)
   
(606,183
)
Loss attributable to non-controlling interest
   
(38,762
)
   
-
     
(24,777
)
   
-
 
Net loss attributable to Brazil Minerals, Inc. stockholders
 
$
(444,727
)
 
$
(50,705
)
 
$
(1,039,455
)
 
$
(606,183
)
                                 
Basic and diluted loss per share
                               
Net loss per share attributable to Brazil Minerals, Inc. common stockholders
 
$
-
   
$
-
   
$
-
   
$
-
 
                                 
Weighted-average number of common shares outstanding:
                               
Basic and diluted
   
10,840,851,799
     
2,945,531,462
     
9,620,555,961
     
1,173,938,535
 
                                 
Comprehensive loss:
                               
Net loss
 
$
(483,489
)
 
$
(50,705
)
 
$
(1,064,232
)
 
$
(606,183
)
Foreign curreny translation adjustment
   
-
     
(168,965
)
   
-
     
(299,131
)
Comprehensive loss
   
(483,489
)
   
(219,670
)
   
(1,064,232
)
   
(905,314
)
Comprehensive loss attributable to noncontrolling interests
   
(24,777
)
   
-
     
(24,777
)
   
-
 
Comprehensive loss attributable to Brazil Minerals, Inc. stockholders
 
$
(458,712
)
 
$
(219,670
)
 
$
(1,039,455
)
 
$
(905,314
)
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.


F-2



 

BRAZIL MINERALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(UNAUDITED)
 
 
   
Nine Months Ended September 30,
   
Nine Months Ended September 30,
 
   
2016
   
2015
 
             
Cash flows from operating activities of continuing operations:
           
Net loss
 
$
(1,064,230
)
 
$
(606,183
)
Adjustments to reconcile net loss to cash used in operating activities:
               
Stock based compensation and services
   
57,568
     
111,508
 
Unrealized (gain) loss from change in derivative liabilities
   
(193,170
)
   
(1,237,329
)
Amortization of debt discounts
   
199,886
     
667,417
 
Amortization of deferred financing costs
   
507
     
-
 
Excess fair market value of common stock issued in satisfaction of related party liabilities
   
37,784
     
209,723
 
Gain on exchange of preferred shares for common stock to noncontrolling interests of subsidiary company
   
(2,964
)
   
-
 
Loss on extinguishment of debt
   
229,426
     
-
 
Depreciation and amortization
   
60,576
     
40,164
 
Changes in operating assets and liabilities:
               
Accounts receivable
   
1,586
     
(2,521
)
Taxes recoverable
   
(20,529
)
   
22,685
 
Prepaid expenses
   
(1,116
)
   
45,648
 
Inventory
   
16,594
     
67,566
 
Deposits and advances
   
-
     
(17,891
)
Accounts payable and accrued expenses
   
182,708
     
92,770
 
Accrued salary due to officer
   
104,130
     
-
 
Other noncurrent liabilities
   
(26,732
)
   
-
 
Customer deposits
   
-
     
(12,421
)
Net cash provided by (used in) operating activities
   
(417,976
)
   
(618,864
)
                 
Cash flows from investing activities:
               
Acquisition of capital assets
   
(18,492
)
   
(10,019
)
Advances to related parties
   
-
     
(23,777
)
Increase in intangible assets
   
(26,052
)
   
-
 
Net cash provided by (used in) financing activities
   
(44,544
)
   
(33,796
)
                 
Cash flows from financing activities:
               
Loan from officer
   
(28,960
)
   
37,089
 
Net proceeds from sale of common stock
   
188,300
     
152,500
 
Payments of notes payable
   
-
     
(88,095
)
Proceeds from sale of preferred stock
   
34,500
     
210,000
 
Proceeds from sale of subsidiary common stock to noncontrolling interests
   
31,000
     
-
 
Proceeds from convertible notes payable
   
147,500
     
620,566
 
Repayment of convertible notes payable
   
-
     
-
 
Net cash provided by (used in) financing activities
   
372,340
     
932,060
 
                 
Effect of exchange rates on cash and cash equivalents
   
37,825
     
(185,161
)
Net increase (decrease) in cash and cash equivalents
   
(52,355
)
   
94,239
 
Cash and cash equivalents at beginning of period
   
64,357
     
19,776
 
Cash and cash equivalents at end of period
 
$
12,002
   
$
114,015
 
                 
Supplemental disclosure of cash flow information:
               
Cash paid for interest
 
$
-
   
$
-
 
Cash paid for income taxes
 
$
-
   
$
-
 
                 
Supplemental disclosure of non-cash investing and financing activities:
               
Purchase of equipment with note and customer deposits
 
$
-
   
$
82,601
 
Purchase of equipment offset by related party receivable
 
$
-
   
$
44,854
 
Note issued in connection with RST acquisition
 
$
-
   
$
124,680
 
Increase in non-controlling interest of RST
 
$
-
   
$
290,517
 
Share issued in connection with conversion of debt and accrued interest
 
$
322,584
   
$
1,081,366
 
Value of stock options and beneficial conversion features recorded with notes payable
 
$
-
   
$
132,566
 
Discounts on notes payable related to fair market value of derivative liability
 
$
-
   
$
203,780
 
Conversion of notes payable into preferred stock
 
$
-
   
$
100,000
 
Conversion of notes payable and accrued interest into subsidiary common stock
 
$
156,250
   
$
-
 
Conversion of Series B preferred stock into common stock of subsidiary company
 
$
733,811
   
$
-
 
Deferred financing costs accrued in relation to the issuance of debt
 
$
5,800
   
$
-
 
Discount for beneficial conversion features on convertible notes
 
$
165,343
   
$
-
 
Dividends payable to Series B preferred shareholders
 
$
82,350
   
$
-
 
Acquisition of capital assets with taxes receivable
 
$
49,883
   
$
-
 
 

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


F-3

 
 
 
BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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

Organization and Description of Business

Brazil Minerals, Inc. ("BMIX" or the "Company") was incorporated as Flux Technologies, Corp. under the laws of the State of Nevada, U.S. on December 15, 2011.  The Company, through subsidiaries, mines and sells diamonds, gold, sand and mortar. The Company, through subsidiaries, outright or jointly owns 10 mining concessions and 28 other mineral rights in Brazil, for diamonds, gold, and sand. The Company, through subsidiaries, owns a large alluvial diamond and gold processing and recovery plant, a sand processing and mortar plant, trucks and earth-moving capital equipment used for mining.

Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its 99.99% owned subsidiary, BMIX Participações Ltda. ("BMIX Subsidiary"), which includes the accounts of its wholly-owned subsidiary, Mineração Duas Barras Ltda. ("MDB").

During the year ended December 31, 2014, the BMIX Subsidiary acquired an initial 25% interest in RST Recursos Minerais Ltda. ("RST"), and during the first quarter of 2015, it acquired an additional 25% interest in RST, thus bringing its total ownership of RST to 50%. As of March 18, 2015, RST has been consolidated within the Company's financial statements.

On April 17, 2015, the BMIX Subsidiary incorporated Hercules Resources Corporation ("HRC"). On May 27, 2015, HRC formalized title to 99.99% of Hercules Brasil Comercio e Transportes Ltda. ("Hercules Brasil"). Thus, as of December 31, 2015, Hercules Brasil is a wholly owned subsidiary and has been consolidated within the Company's consolidated financial statements.

On July 27, 2016, upon approval by its Board of Directors, the Company entered into a stock purchase and sale agreement pursuant to which HRC transferred its 99.99% equity interest in Mineração Jupiter Ltda to the Company which immediately thereafter sold such equity interest to Jupiter Gold Corporation ("JGC"), a newly created company. In addition, the Company simultaneously acquired all of the common stock of JGC. As such, the accounts and results of JGC and MJL have been included in the Company's consolidated financial statements. See Note 2 for more information.

All material intercompany accounts and transactions have been eliminated in consolidation. See subsequent events for discussion of an additional subsidiary formed subsequent to quarter end.

Going Concern
The consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has limited working capital, has incurred losses in each of the past two years, and has not yet received material revenues from sales of products or services. These factors create substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on the Company generating cash from its operations, the sale of its stock, and/or obtaining debt financing. During the nine months ended September 30, 2016, the Company funded operations through the receipt of proceeds from revenues, and the sale of equity and debt securities. Management's plan to fund its capital requirements and ongoing operations include an increase in cash received from sales primarily of gold derived from processing in a small, low operational cost gold plant its inventory of alluvial material and gravel already mined, as well as an increase in cash received from mortar and sand sales, all of which are expected to occur within the next two quarters. Management's secondary plan to cover any shortfall is selling its equity securities and obtaining debt financing. There can be no assurance the Company will be successful in these efforts.



F-4




BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Interim Consolidated Financial Statements


The accompanying unaudited interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission.  Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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.  These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2015. The results of operations for the nine months ended September 30, 2016 are not indicative of the results that may be expected for the full year.


Basis of Presentation
The consolidated financial statements of the Company have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles ("GAAP") of the United States of America and are presented in U.S. dollars.

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

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

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 September 30, 2016 and December 31, 2015, the Company's derivative liabilities were considered a level 2 liability. See Note 4 for a discussion regarding the determination of the fair market value. The Company does not have any level 3 assets or liabilities. 



F-5



BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




The Company's financial instruments consist of cash and cash equivalents, accounts receivable, taxes recoverable, prepaid expenses, inventory, deposits and other assets, accounts payable, accrued expenses, deferred revenue and convertible notes payable. The carrying amount of these financial instruments approximates fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.

Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent that the funds are not being held for investment purposes. The Company's bank accounts are deposited in FDIC insured institutions. Funds held in U.S. banks are insured up to $250,000 and funds held in Brazilian banks are insured up to 250,000 Brazilian Reais (translating into approximately $70,050 as of September 30, 2016).

Inventory
Inventory for the Company consists of rough diamonds, gold, ore stockpile, parts, supplies and related production costs and is stated at lower of cost or market. The amount of any write-down of inventories to net realizable value and all losses, are recognized in the period the write-down of loss occurs. At September 30, 2016 and December 31, 2015, all inventory consisted primarily of rough ore stockpile for gold and diamonds. No value was placed on sand.

Value-Added Taxes Receivable
The Company records a receivable for value added taxes recoverable from Brazilian authorities on goods and services purchased by its Brazilian subsidiaries. The Company intends to recover the taxes through the acquisition of capital equipment from sellers who accept tax credits as payments. On April 20, 2016, the Company's taxes receivable decreased by $50,100 with the recovery of such amount being used in the acquisition of a Mercedes Benz truck, through a state-government program.

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.

The diamond and gold processing plant and other machinery are depreciated over an estimated useful life of 10 years; and computer and other office equipment over an estimated useful life of 3 years. As of September 30, 2016 and December 31, 2015, all property and equipment related to the diamond, sand and mortar processing plants and other production machinery except for approximately $1,300 in computer equipment. Accumulated depreciation as of September 30, 2016 and December 31, 2015, was $253,995 and $157,381, respectively.


Mineral Properties


Costs of exploration, carrying and retaining unproven mineral lease properties are expensed as incurred. Mineral property acquisition costs, including licenses and lease payments, are capitalized. Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company's rights. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

Impairment losses are recorded on mineral properties used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. As of September 30, 2016 and December 31, 2015, the Company did not recognize any impairment losses related to mineral properties held.
 



F-6




BRAZIL MINERALS, INC.
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 right agreements held by MDB, RST, and MJL.



Impairment of Long-Lived Assets


For long-lived assets, such as property and equipment and intangible assets subject to amortization, the Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. 





Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.  Typically, the Company records revenues upon delivery of the products to the customer. As of September 30, 2016 and December 31, 2015, the Company had deposits of $0 and $0, respectively, related to proceeds received for future diamond and gravel sales which have been recorded as customer deposits. See Note 4 and 6 for additional information related to these agreements.





Costs of Goods Sold
Included within costs of goods sold are the costs of cutting and polishing rough diamonds, and costs of production such as diesel fuel, labor, and transportation.


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

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


F-7





BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




The Company has adopted a stock plan to attract, retain and motivate its directors, officers, employees, consultants and advisors. The Company's stock plan provides for the issuance of up to 15,000,000 common shares for employees, consultants, directors, and advisors.

Foreign Currency
The Company's foreign subsidiaries use a local currency as the functional currency. Resulting translation gains or losses are recognized as a component of accumulated other comprehensive income. Transaction gains or losses related to balances denominated in a currency other than the functional currency are recognized in the consolidated statements of operations. Net foreign currency transaction losses included in the Company's consolidated statements of operations were negligible for all periods presented.

Income Taxes
We account for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. As of September 30, 2016 and December 31, 2015, the Company's deferred tax assets had a full valuation allowance.

Under ASC 740, a tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company has identified the United States Federal tax returns as its "major" tax jurisdiction.

Basic Income (Loss) Per Share
The Company computes loss per share in accordance with ASC Topic 260, Earnings per Share, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. As of September 30, 2016, the Company's potentially dilutive securities relate to common stock issuable in connection with convertible notes payable, options and warrants. Dilutive loss per share for the three and nine months ended September 30, 2016 excludes all potential common shares if their effect is anti-dilutive. As of September 30, 2016, if all holders of preferred stock, convertible notes payable, options and warrants exercised their right to convert their securities to common stock, the common stock issuable would be in excess of the Company's authorized, but unissued shares of common stock.


Other Comprehensive Income

Other comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, other than net income and including foreign currency translation adjustments. 




F-8




BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Recent Accounting Pronouncements

In April 2015, the FASB issued Accounting Standard Update ("ASU") 2015-03, Simplifying the Presentation of Debt Issuance Costs. This update requires capitalized debt issuance costs to be classified as a reduction to the carrying value of debt rather than a deferred charge, as is currently required. This update will be effective for the Company for all annual and interim periods beginning after December 15, 2015 and is required to be adopted retroactively for all periods presented, and early adoption is permitted. The Company adopted this ASU with no impact on the accompanying consolidated financial statements as the issuance costs were already accounted for as a reduction of the carrying value of the debt.

In August 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-15, "Presentation of Financial Statements Going Concern", which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. The guidance is not expected to have a material impact on the Company's financial statements. 

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The amendments in this update simplify the presentation of deferred taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. These amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The guidance is not expected to have a material impact on the Company's financial statements.

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

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

NOTE 2 –ACQUISITIONS

RST Recursos Minerais Ltda

In June 2014, the Company entered into an agreement to purchase 25% of the equity of RST for cash payments of 250,000 Brazilian Reais and the issuance of shares of the Company's common stock valued at 100,000 Brazilian Reais. In connection with this agreement the Company issued 1,428,572 shares of common stock with a value of $43,868 and made cash payments of $107,858. At December 31, 2014, the investment was accounted for using the equity method. Effective March 18, 2015, the Company purchased an additional 25% of RST from a third party for R$400,000 or $124,680. Under the terms of the agreement, the Company is to make monthly payments ranging from R$75,000 to R$100,000 beginning March 25, 2015. As of December 31, 2015, all required payments had been made. In December 2015, the 1,428,572 shares of common stock previously issued with a value of $43,868 were returned to the Company. The Company reversed the initial amount of the investment recorded upon return.
 
 
 

F-9




BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




As a result of the additional 25% acquired, the Company owns 50% of RST and has consolidated the operations in the Company as of March 18, 2015. The remaining 50% ownership is held by Brazil Mining, Inc. ("BMI"), an entity controlled through management and stock ownership by the Company's Chief Executive Officer. On the date of consolidation, the Company determined the fair market value of RST to be $570,548. The fair market value was based upon the average price paid by the Company for the 50% ownership, including the relief of monies advanced to RST and increasing for the non-controlling interest which represents 50%. The Company allocated 100% of the fair market value to the mineral rights held by RST. Since the date of acquisition, the value of the Brazilian Reais has decreased significantly, thus, has the value of the Company's intangibles.

The purpose of the Company's acquisition of RST was due to the quality of its mineral assets, close proximity to the Company's MDB diamond and gold processing plant, and attractive acquisition price. Pro-forma financial statements have not been provided as the assets, liabilities and operations of RST are not significant. The Company expects the future expected cash flows to exceed the carrying value of the assets due to the close proximity to MDB's plant which is expected to shorten the exploration period as new plant and equipment do not need to be procured.

Jupiter Gold Corporation and Mineração Jupiter Ltda

On July 27, 2016, upon approval by its Board of Directors, the Company entered into a stock purchase and sale agreement pursuant to which HRC transferred its 99.99% equity interest in MJL to the Company which immediately thereafter sold such equity interest to JGC. In addition, the Company simultaneously agreed to pay the sum of $4,000, equal to the par value of 4,000,000 shares of JGC common stock.

Subsequent to the agreement, the Company transferred approximately 40% of its ownership in JGC to noncontrolling interests through both sales of JGC common stock at $1.00 per share to outside investors and conversions of certain of the Company's notes payable and preferred stock into JGC common stock. As a result of these transactions, a noncontrolling interest of $1,267,394 was recognized in the consolidated financial statements.
 

NOTE 3 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

Intangible Assets

Intangible assets consist of mining rights at MDB and RST and are not amortized as the mining rights are perpetual.  The carrying value was $630,842 and $508,865 at September 30, 2016 and December 31, 2015, respectively.

Accounts Payable and Accrued Liabilities

   
As of
   
As of
 
   
September 30, 2016
   
December 31, 2015
 
Accounts payable and other accruals
 
$
245,377
   
$
354,467
 
Deposits on purchases of common stock
   
150,000
     
-
 
Accrued interest
   
87,806
     
116,870
 
Total
 
$
483,183
   
$
471,337
 
 
 
 

F-10




BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4 – CONVERTIBLE PROMISSORY NOTES PAYABLE

Convertible Notes Payable - Fixed Conversion Price
 

On January 7, 2014, the Company issued to a family trust a Senior Secured Convertible promissory note in the principal amount of $244,000 (the "Note") and warrants to purchase an aggregate of 488,000 shares of the Company's common stock, par value $0.001 per share at an exercise price of $0.125 per share through December 26, 2018 (the "Warrants"). The Company received gross proceeds of $244,000 for the sale of such securities. The outstanding principal of the Note bears interest at the rate of 12% per annum. All principal on the Note was payable on September 30, 2015 (the "Maturity Date"), which as of the date of this filing is past due and in technical default. However, no demands for payment have been made. Interest was payable on September 30, 2014 and on the Maturity Date. The Note is convertible at the option of the holder into common stock of the Company at a conversion rate of one share for each $0.10 of principal and interest converted. A debt discount related to the value of the warrants in the amount of $10,252 was recorded and was being amortized over the life of the note.  During the nine months ended September 30, 2016 and 2015, $0 and $1,025 of the discount was amortized to interest expense, respectively. As of December 31, 2015, the discount was fully amortized.

In January 2015, the Company issued four convertible promissory notes totaling $200,000 in proceeds and options to purchase an aggregate of 40,000,000 shares of the Company's common stock at an exercise price of $0.005 per share for a period of three years. The convertible promissory notes incur interest at 10.0% and are due January 30, 2018. The convertible promissory notes are convertible at the option of the holder at a rate of $0.0024 per share. A debt discount related to the relative fair market value of the options in the amount of $22,423 and an implied beneficial conversion features of $22,423 were recorded, totaling $44,846 and are being amortized over the life of the notes.  During the nine months ended September 30, 2016 and 2015, $27,406 and $17,440 of the discount was amortized to interest expense, respectively. As of September 30, 2016, the discount was fully amortized to interest expense, and the notes were converted into 80,000,000 shares of the Company's common stock, 192,000 shares of JGC common stock, and 384,000 stock purchase warrants for JCG common stock. The 192,000 shares of JGC common stock were valued at $192,000, or $1.00 per share, which represents fair market value as of such date. The 384,000 warrants are exercisable at $1.50 for a two year period from issuance. The JGC warrants were valued at $37,426 using the Black-Scholes option pricing model and the following assumptions: an exercise price of $1.50, a stock price of $1.00 on the date of grant, an expected dividend yield of 0%, an expected volatility of 40.0%, a risk free interest rate of 0.71% and an expected term of 2.0 years. As a result, a noncontrolling interest of $229,426 was recorded in the consolidated financial statements.

In January 2015, the Company purchased machinery and equipment from a third party making an initial deposit of $10,910 (R$35,000), issuing notes payable totaling $38,963 (R$125,000) payable in five equal monthly installments starting March 15, 2015 and $43,638 in customer deposits (R$140,000) in which are to be satisfied through gravel produced by MDB. The note payable was convertible into common stock of the Company at the market rate on the date of issuance and thus a beneficial conversion feature was not recorded. In June 2015, the Company cancelled this agreement returning the machinery and equipment and forfeiting amounts already paid to the seller.

In June 2015, the Company issued three convertible promissory notes and received an aggregate $100,000 in proceeds. The convertible promissory notes incur interest at 10.0% per annum and are due December 31, 2016. The convertible promissory notes are convertible at the option of the holder at a 40% discount to the average of the five lowest closing prices of the Company's common stock over the previous 20 days. In addition, the notes conversion rate has a ceiling of $0.03 and a floor of $0.000033. A debt discount related to the beneficial conversion feature of $87,720 was recorded and is being amortized over the life of the notes. As of September 30, 201, the discount was fully amortized to interest expense, and the notes were converted into 100 shares of Series B Preferred Stock; see Note 5.



F-11





BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Convertible Notes Payable - Variable Conversion Price



On December 29, 2015, the Company filed with the Nevada Secretary of State a Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock ("Series C Stock") to designate 1,000,000 shares of a new series of preferred stock. The Series C Stock has an original issue price of $1,000 per share. Cumulative dividends on such shares are payable annually (or upon conversion of such stock into Common Stock) in Common Stock at the rate of $0.04 per share per annum. The holders of Series C Stock shall be entitled to vote on all matters as one class with the holders of Common Stock, with the holders of Series C Stock being entitled to such number of votes as shall equal the number of whole and fractional shares of Common Stock into which such share is then convertible. At any time until December 31, 2016 each holder of Series C Stock may elect to convert all or a portion of the preference amount into shares of Common Stock at a conversion price which is the lower of $0.00008 or the volume weighted average price of the Company's Common Stock for the 90 trading days before a notice of conversion with a floor of $0.00004. On December 31, 2016, all outstanding shares of Series C Stock shall automatically convert into Common Stock at the applicable conversion price.

On December 29, 2015, the Company issued 200,000 shares of Series C Stock in exchange for 1,000,000,000 shares of common stock in which had been previously sold for $80,000 in proceeds. In connection with the exchange, the Company recorded other expense of $170,000 due to the Series C Stock having an estimated fair market value of $250,000 on the date of the exchange. The Company estimated the fair market value of the Series C Stock based upon the number of common shares it could be converted into.

On July 30, 2016, the Company entered into an agreement with the holders of its Series C Preferred Stock whereby the holders exchanged 200,000 shares preferred stock for 125,000 shares of Jupiter Gold Corporation common stock. As a result, a noncontrolling interest of $125,000 was recorded in the consolidated financial statements.

Nine Months Ended September 30, 2016 Transactions

During the nine months ended September 30, 2016, the Company issued 350,000,000 shares of common stock for cash proceeds of $21,000. In addition, the Company received cash deposits in 150,000 for the sale of common stock. At September 30, 2016, the Company recorded the amount as a current liability.

During the nine months ended September 30, 2016, the Company issued 418,242,912 shares of common stock to its CEO in satisfaction of amounts payable. The shares were valued based upon the closing market price of the Company's common stock on the date the service was complete. In addition, the Company has agreed to issue additional shares of common stock if the effective price of a future common stock transaction decreases.

See Note 4 for discussion of additional common stock issuances.

Nine Months Ended September 30, 2015 Transactions


During the nine months ended September 30, 2015, the Company issued 7,409,184 shares of common stock with a fair market value of $24,808 to consultants in lieu of cash payments. The shares were valued based upon the closing market price of the Company's common stock on the date the service was complete.




F-12




BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Convertible Customer Deposits


In July 2015, as discussed below in Note 6, the Company has previously provided customers with the option to convert their deposits of diamonds into common stock if the diamonds are not delivered on the scheduled timeline.

Derivative Liabilities

In connection with convertible notes payable the Company records derivative liabilities for the conversion feature. The derivative liabilities are valued on the date of issuance of the convertible note payable and revalued at each reporting period. During the nine months ended September 30, 2015, the Company recorded derivative liabilities of $667,658 based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.0015 to $0.00005, our stock price on the date of grant ($0.0033 to $0.0001), expected dividend yield of 0%, expected volatility of 217.53% to 313%, risk free interest rate of 0.12% and an expected term of 0.50 years. Upon initial valuation, the derivative liability exceeded the face value of the convertible note payable of $302,111, a day one loss on derivative liability of $372,878 was recorded. No derivative liabilities were recorded during the nine months ended September 30, 2016.

On September 30, 2016, the derivative liabilities were revalued at $88,175 resulting in a gain of $193,170 related to the change in fair market value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following average assumptions: an exercise price of $0.00005, our stock price on the date of valuation ($0.0002), expected dividend yield of 0%, expected volatility of 446%, risk-free interest rate of 0.45%, and an expected term of 0.25 years.

Future Potential Dilution

Most of the Company's convertible notes payable contain adjustable conversion terms with significant discounts to market. As of September 30, 2016, the Company's convertible notes payable from holders indicating desire to convert into equity are convertible into an aggregate of approximately 3.2 billion shares of common stock. Due to the variable conversion prices on some of the Company's convertible notes, the number of common shares issuable is dependent upon the traded price of the Company's common stock. As of September 30, 2016, if all holders of convertible notes payable exercised their right to the common stock, the Company would have an obligation to issue shares of its common stock in excess of its authorized, but unissued shares of common stock. In November 2016, the Company amended its Articles of Incorporation to increase its authorized number of shares of common stock by 2.5 billion shares to fifteen (15) billion shares.
 

 
NOTE 5 – STOCKHOLDERS' DEFICIT

Authorized and Amendments

On March 21, 2016, the Company amended its Articles of Incorporation to increase the authorized number of shares of its common stock to ten (10) billion shares. On August 23, 2016, the Company further amended its Articles of Incorporation to increase the authorized number of shares of its common stock to twelve and one half (12.5) billion shares.

As of December 31, 2015, the Company had seven (7) billion common shares authorized with a par value of $0.001 per share.



F-13





BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Series A Preferred Stock


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

Series B Preferred Stock

On August 26, 2015, the Company filed with the Nevada Secretary of State a Certificate of Designations, Preferences and Rights of par value $0.001 Series B Convertible Preferred Stock ("Series B Stock") to designate 1,000,000 shares of a new series of preferred stock. The Series B Stock has an original issue price of $1,000 per share. Cumulative dividends on such shares are payable annually (or upon conversion of such stock into Common Stock) in Common Stock at the rate of 10% per stated share value per annum. The holders of Series B Stock shall be entitled to vote on all matters as one class with the holders of Common Stock, with the holders of Series B Stock being entitled to such number of votes as shall equal the number of whole and fractional shares of Common Stock into which such share is then convertible. At any time until December 31, 2016 each holder of Series B Stock may elect to convert all or a portion of the preference amount into shares of Common Stock at a conversion price which is a 40% discount to the average of the lowest 5 closing prices of the Common Stock in the 20 calendar day period before a notice of conversion is given, but the conversion price shall not be higher than $.03 nor lower than $.000033. On December 31, 2016, all outstanding shares of Series B Stock shall automatically convert into Common Stock at the applicable conversion price. During the nine months ended September 30, 2016, the Company accrued dividends of $82,350, recorded as interest expense which increased the dividends payable balance to $92,783 at September 30, 2016.

During the year ended December 31, 2015, the Company issued 273 shares of Series B Stock for $270,000 in cash proceeds. In addition, six shares of Series B Stock were issued to a placement agent.

As discussed in Note 4, during the year ended December 31, 2015, the Company issued 100 shares of Series B Stock in satisfaction of $100,000 in convertible notes payable. In connection with the exchange, the Company recorded other expense of $66,667 due to the Series B Stock having an estimated fair market value of $166,667 on the date of the exchange. The Company estimated the fair market value of the Series B Stock based upon the number of common shares it could be converted into.

See Note 6 for discussion related to the exchange of customer deposits received in connection with the delivery of diamonds for 668 shares of Series B Stock.

During the three months ended September 30, 2016, the Company entered into an agreement with the holders of its Series B Preferred Stock whereby the holders exchanged 471.3 shares preferred stock for 785,248 shares of Jupiter Gold Corporation common stock and options to purchase common stock of Jupiter Gold. The options were issued in two tranches. The first tranche of 581,548 options are exercisable at $1.50 for a one year period from issuance. The second tranche of 785,248 options are exercisable at $1.50 for a two year period from issuance. The options were valued at $97,349 using the Black-Scholes option pricing model and the following assumptions: an exercise price of $1.50, a stock price of $1.00 on the date of grant, an expected dividend yield of 0%, an expected volatility of 40.0%, a risk free interest rate of 0.56%-0.72% and an expected term of 1.0-2.0 years. As a result, a noncontrolling interest of $980,847 was recorded in the consolidated financial statements.




F-14





BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Series C Preferred Stock


On December 29, 2015, the Company filed with the Nevada Secretary of State a Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock ("Series C Stock") to designate 1,000,000 shares of a new series of preferred stock. The Series C Stock has an original issue price of $1,000 per share. Cumulative dividends on such shares are payable annually (or upon conversion of such stock into Common Stock) in Common Stock at the rate of $0.04 per share per annum. The holders of Series C Stock shall be entitled to vote on all matters as one class with the holders of Common Stock, with the holders of Series C Stock being entitled to such number of votes as shall equal the number of whole and fractional shares of Common Stock into which such share is then convertible. At any time until December 31, 2016 each holder of Series C Stock may elect to convert all or a portion of the preference amount into shares of Common Stock at a conversion price which is the lower of $0.00008 or the volume weighted average price of the Company's Common Stock for the 90 trading days before a notice of conversion with a floor of $0.00004. On December 31, 2016, all outstanding shares of Series C Stock shall automatically convert into Common Stock at the applicable conversion price.

On December 29, 2015, the Company issued 200,000 shares of Series C Stock in exchange for 1,000,000,000 shares of common stock in which had been previously sold for $80,000 in proceeds. In connection with the exchange, the Company recorded other expense of $170,000 due to the Series C Stock having an estimated fair market value of $250,000 on the date of the exchange. The Company estimated the fair market value of the Series C Stock based upon the number of common shares it could be converted into.

On July 30, 2016, the Company entered into an agreement with the holders of its Series C Preferred Stock whereby the holders exchanged 200,000 shares preferred stock for 125,000 shares of Jupiter Gold Corporation common stock. As a result, a noncontrolling interest of $125,000 was recorded in the consolidated financial statements.

Nine Months Ended September 30, 2016 Transactions

During the nine months ended September 30, 2016, the Company issued 350,000,000 shares of common stock for cash proceeds of $21,000. In addition, the Company received cash deposits in 150,000 for the sale of common stock. At September 30, 2016, the Company recorded the amount as a current liability.

During the nine months ended September 30, 2016, the Company issued 418,242,912 shares of common stock to its CEO in satisfaction of amounts payable. The shares were valued based upon the closing market price of the Company's common stock on the date the service was complete. In addition, the Company has agreed to issue additional shares of common stock if the effective price of a future common stock transaction decreases.

See Note 4 for discussion of additional common stock issuances.

Nine Months Ended September 30, 2015 Transactions


During the nine months ended September 30, 2015, the Company issued 7,409,184 shares of common stock with a fair market value of $24,808 to consultants in lieu of cash payments. The shares were valued based upon the closing market price of the Company's common stock on the date the service was complete.

 
 

 

F-15





BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



During the nine months ended September 30, 2015, the Company issued 230,043,183 shares of common stock to its CEO in satisfaction of amounts payable. The shares were valued based upon the closing market price of the Company's common stock on the date the service was complete.

During the nine months ended September 30, 2015, the Company issued 750,897,439 shares of common stock for cash proceeds of $152,500.



Common Stock Options

In January 2015, options to purchase 400,000,000 shares of common stock were issued in connection with $200,000 in convertible notes payable. See Note 4 for additional information. The options expire on January 30, 2018 and have an exercise price of $0.005 per share. The fair value of the options was $79,111, of which $22,423 was allocated to the options based upon the relative fair market value. The options were valued using the Black-Scholes option pricing model with the following assumptions: our stock price on date of grant ($0.0024), expected dividend yield of 0%, expected volatility of 176.16%, risk-free interest rate of 1.70%, and an expected term of 3.00 years.


During the nine months ended September 30, 2015, the Company granted options to purchase an aggregate of 12,922,854 shares of common stock to non-management directors. The options were valued at $39,200 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 ($0.0018), expected dividend yield of 0%, expected volatility of 176%, risk-free interest rate of 1.70%, and an expected term of 5.00 years.



During the nine months ended September 30, 2016, the Company granted options to purchase an aggregate of 313,340,000 shares of common stock to non-management directors. The options were valued at $25,000 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 ($0.0001), expected dividend yield of 0%, historical volatility of 113%, risk-free interest rate of 1.13%, and an expected term of 5.00 years.


See Note 6 discussion regarding options issued in connection with future diamond sales.

Common Stock Warrants

In June 2015, in connection with a common stock raise, the Company issued warrants to purchase an aggregate of 31,153,846 shares of the Company's common stock that expire on August 31, 2017 and have an exercise price of $0.001 per share. The value of the warrants was approximately $30,000 based upon Black-Scholes option pricing model. No entry was required as the warrants were issued in connection with raising capital and thus would have offset any proceeds received.
 

 


F-16





BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 6 – COMMITMENTS AND CONTINGENCIES

Operating Leases


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

Mine Option

On July 30, 2013, the BMIX Subsidiary acquired for zero cost an option to develop and own up 75% of a vanadium, titanium, and iron property in the state of Piauí in Brazil in exchange for the performance over a period of time of certain defined geological research steps, as well as the payment, over a period of time, of 875,000 Brazilian reais in cash ($269,675 as of September 30, 2016) and the equivalent of 125,000 Brazilian reais in common stock ($38,525 as of September 30, 2016). To date the option has not been exercised.

Diamond Delivery Agreements

On March 4, 2014, the Company received proceeds of $500,000 from a sale of polished and GIA graded diamonds pursuant to an agreement with two buyers that agreed to receive these diamonds over a period of one year. One of the buyers has expertise and a long and successful history of investments in natural resources. As part of this transaction, the Company pledged with a third party collateral agent an aggregate of 11,000,000 shares of its common stock, valued at approximately $990,000 at the time the transaction was consummated, in order to secure the delivery of the diamonds. The number of shares pledged is subject to periodic adjustment as diamonds are delivered and as the market price of our common stock may change. The Company also issued to the buyers two-year options to purchase an aggregate of 3,000,000 shares of its common stock at an exercise price (subject to adjustment upon the occurrence of certain events) of $0.12 per share, a premium of 33% above the stock price when the transaction was consummated. These options initially expired on March 4, 2016 and have an exercise price of $0.12, which was reduced to $0.08 per share in October 2014 and the expiration date extended to March 4, 2018. The fair value of the options was $93,280 was calculated using the Black-Scholes option pricing model with the following assumptions: our stock price on date of grant ($0.09), expected dividend yield of 0%, expected volatility of 77.56%, risk-free interest rate of 0.78%, and an expected term of 2 years. In July 2015, the Company extended these agreements until December 31, 2016. Under the new agreements, quarterly the Company is required to deliver diamonds with $15,000 in aggregate Rappaport value. If the diamonds are not delivered, then the customer has the option of converting the required value at 50% of market. Due to the variable conversion price, the Company is recording a derivative liability upon each tranche becoming convertible. As of September 30, 2015, total amounts convertible into common stock were $35,158. In addition, the collateral shares for this contract were increased to 465,293,570. During the year ended December 31, 2015, the Company did not deliver any of the diamonds. 
 
 
 

 

F-17





BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


 

On April 30, 2014, the Company entered into Subscription Agreements with four investors (the "Buyers"), pursuant to which the Buyers agreed to pay to the Company an aggregate of $500,000 and the Company agreed to deliver to the Buyers from time to time on or before December 31, 2015, polished and GIA-graded diamonds of at least 0.4 carats having a certain aggregate Rappaport value. The Company agreed to pledge with third party collateral agents for the Buyers an aggregate of 8,000,000 shares of its common stock, valued at approximately $800,000 at the time the transaction was consummated, in order to secure the delivery of the diamonds. The number of shares pledged is subject to periodic adjustment as diamonds are delivered and as the market price of the Company's stock may change. As of December 31, 2014, the required reserve was 123,076,923 shares of common stock. On the date of the agreement, the Company reserved for the Buyers or their designees, an aggregate of 3,750,000 shares of the Company's common stock (the "Shares") and two year options to purchase an aggregate of 1,875,000 shares of Common Stock at an exercise price of $0.12 per share, payable in cash to the Company (the "Options"). The fair value of the options was $57,662 was calculated using the Black-Scholes option pricing model with the following assumptions: our stock price on date of grant ($0.09), expected dividend yield of 0%, expected volatility of 77.56%, risk-free interest rate of 0.11%, and an expected term of 2 years.  The common stock issued was valued at $348,750 based upon the closing market price of the Company's common stock. Since the agreement contained various elements, the Company allocated the $47,544 to the options, $287,552 to the shares issued and $164,904 to deferred revenue based upon the relative fair market value.  In July 2015, the Company extended these agreements until December 31, 2016. Under the new agreements, quarterly the Company is required to deliver diamonds with aggregate Rappaport values ranging from $10,000 to $20,000. If the diamonds are not delivered, then the customer has the option of converting the required value at 50% of market. Due to the variable conversion price, the Company is recording a derivative liability upon each tranche becoming convertible. As of September 30, 2015, total amounts convertible into common stock were $40,000. A total of 200,000,000 in collateral shares were issued for this contract. There were no deliveries under this contract during the year ended December 31, 2015.

On December 30, 2015, the diamond agreements described were exchanged for 668 shares of Series B Stock. Under the terms of the agreement, all obligations under the agreement to deliver diamonds and other guarantees were removed, including the derivative liability. On the date of the exchange the Company determined that the value of the Series B Stock was $1,113,333 based upon the number of common shares the Series B Stock is convertible into. The agreement relieved $543,630 in customer deposits, $182,300 in derivative liabilities less a remaining discount of $68,057, a total relief of $657,873. The Company recorded the excess value of the Series B Stock issued of $455,460 as a loss on extinguishment.
 

NOTE 7 - RELATED PARTY TRANSACTIONS
 
Brazil Mining, Inc.

Previously the Company had amounts due from Brazil Mining, Inc. ("BMI"), a related party through common management. The loans did not incur interest and were due on demand. During the year ended December 31, 2015, BMI transferred equipment with a carrying value of $44,854 to the Company as a partial offset to the amounts due. During December 2015, in satisfaction of the remaining receivable, BMI transferred the rights to two mineral right properties. At the time of the transfer, the Company's subsidiary RST retained a 50% ownership in these rights, thus, the value of the two mineral rights transferred is included within consolidation of RST. Thus, the Company recorded other expense of $93,580 during the year ended December 31, 2015 as the assets had already been reflected at their fair market value on the Company's financial statements. The Company agreed to the transaction to ensure there were no potential violations of the Sarbanes Oxley Act as the Company's CEO also controls BMI though management and stock holdings.
 
 
 
 

F-18





BRAZIL MINERALS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Chief Executive Officer


As of September 30, 2016 and December 31, 2015, amounts payable to the Chief Executive Officer for accrued salaries, retirement contributions, and advances made included within related party payable were $231,344 and $160,214, respectively. During 2015, $25,000 of the balance was converted into shares of the Company's common stock at a 50% discount to market. In addition, the agreement included a true up provision which requires the Company to issue additional shares of common stock after conversion or true up at the lowest effective common stock transaction for a period of up to 250 trading days. See common stock issuances above for disclosure of amounts converted and shares issued.

The following is a roll forward of amounts due to the Chief Executive Officer for the nine months ended September 30, 2016:

Balance at December 31, 2015
 
$
160,214
 
Salary Accrual
   
112,500
 
401(k) Contribution Accrual
   
40,500
 
Advances to the Company
   
7,740
 
Repayments
   
(85,570
)
Issuance of Common Stock
   
(4,040
)
Balance at September 30, 2016 
 
$
231,344
 

 
NOTE 8 - SUBSEQUENT EVENTS

In accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to June 30, 2016 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.

The Company increased its authorized shares to 15 billion on November 3, 2016.

 
 
F-19

 
 
 
 

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report.

This Quarterly Report contains forward-looking statements. Forward-looking statements for Brazil Minerals, Inc. reflect current expectations, as of the date of this Quarterly Report, and involve certain risks and uncertainties. Actual results could differ materially from those anticipated in these forward- looking statements as a result of various factors. Factors that could cause future results to materially differ from the recent results or those projected in forward-looking statements include: unprofitable efforts resulting not only from the failure to discover mineral deposits but also from finding mineral deposits that, though present, are insufficient in quantity and quality to return a profit from production; market fluctuations; government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection; competition; the loss of services of key personnel; unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of infrastructure as well as general economic conditions.

General or Recent Developments

Description of Business




Brazil Minerals, Inc. ("Brazil Minerals", the "Company", "we", "us", or "our"), together with its subsidiaries, is engaged in the business of acquiring controlling positions or significant positions with oversight roles in companies in Brazil in the minerals area or in industries related to minerals. We consolidate the results of our controlled subsidiaries in this Annual Report.
 

Our progress has been steady, and can be measured in at least two quantifiable ways. First, in terms of mineral assets, in early 2013, our initial year of operations under the current business model and management team, we had 3 mineral rights. As of September 30, 2016, we had 38 mineral rights, as follows:

a)
10 mineral rights that are mining concessions, the highest level of mineral right in Brazil ("Concessão de Lavra");

b)
8 mineral rights that have status just below mining concession ("Requerimento de Lavra"), which allows us to apply for both an upgrade to mining concession and to conduct limited commercial mining;

c)
8 mineral rights in the research permit phase ("Autorização de Resquisa"); and

d)
12 mineral rights in the phase of application for research permit ("Requerimento de Pesquisa").
 
 
- 3 -

 
 
Please refer to the table below for details on each of these mineral rights.
 
 
DNPM Mineral Right Number
Mineral Right Status
Location
Subsidiary
Area of Mineral Right (in acres)
Minerals Currently Requested in Mineral Right Document
806.569/1977
Mining Concession ("MC")
Jequitinhonha River Valley, state of Minas Gerais state, Brazil ("JRV")
MDB
422
diamond, gold, sand
830.797/1982
MC
JRV
RST
102
diamond, gold
830.062/1980
MC
JRV
RST
1,177
diamond, gold
817.734/1968
MC
JRV
RST
5,202
diamond, gold
807.497/1968
MC
JRV
RST
1,178
diamond, gold
003.048/1956
MC
JRV
RST
905
diamond, gold
003.047/1956
MC
JRV
RST
1,343
diamond, gold
003.046/1956
MC
JRV
RST
1,039
diamond, gold
003.045/1956
MC
JRV
RST
1,295
diamond, gold
003.044/1956
MC
JRV
RST
678
diamond, gold
830.749/1981
Application for Mining Concession ("AMC")
JRV
RST
591
diamond, gold
830.746/1981
AMC
JRV
RST
55
diamond, gold
830.921/1980
AMC
JRV
RST
276
diamond, gold
830.919/1980
AMC
JRV
RST
318
diamond
804.492/1977
AMC
JRV
RST
986
diamond, gold
802.267/1977
AMC
JRV
RST
1,310
diamond, gold
831.742/1987
AMC
JRV
RST
294
diamond
830.998/1984
AMC
JRV
RST
730
diamond
880.239/2009
Research Permit ("RP")
Apuí, state of Amazonas state, Brazil
BMIXP
24,708
gold
831.380/2014
RP
JRV
BMIXP
1,375
diamond, gold, gravel, sand
831.398/2014
RP
JRV
BMIXP
994
diamond, gold, gravel, sand
832.052/2006
RP
JRV
MDB
982
diamond, gold
830.899/2013
RP
JRV
RST
1,443
diamond, gold
830.898/2013
RP
JRV
RST
671
diamond, gold
833.685/2006
RP
JRV
RST
130
diamond, gold
832.108/2005
RP
JRV
RST
657
diamond, gold
832.059/2014
Application for Research Permit ("ARP")
JRV
BMIXP
1,152
diamond, gold, gravel, sand
832.060/2014
ARP
JRV
BMIXP
1,052
diamond, gold, gravel, sand
832.043/2007
ARP
JRV
BMIXP
19
diamond
833.938/2006
ARP
JRV
BMIXP
1,236
diamond, gold
860.807/2016
ARP
Crixás, state of Goiás, Brazil
MJ
4,925
gold
831.883/2016
ARP
Paracatu, state of Minas Gerais, Brazil
MJ
795
gold
831.942/2016
ARP
Itabira region, state of Minas Gerais, Brazil
MJ
4,069
gold
880.133/2016
ARP
Apuí, state of Amazonas, Brazil
MJ
23,043
gold
880.134/2016
ARP
Apuí, state of Amazonas, Brazil
MJ
23,207
gold
880.135/2016
ARP
Apuí, state of Amazonas, Brazil
MJ
23,080
gold
831.665/2016*
ARP
Diamantina region, state of Minas Gerais, Brazil
MJ
358
manganese
831.642/2016*
ARP
Diamantina region, state of Minas Gerais, Brazil
MJ
4,612
manganese
 
 
 
- 4 -

 

 
Table Legend:

Ref: Mineral Right Status
MC: Mining Concession
AMC: Application for Mining Concession
RP: Research Permit
ARP: Application for Research Permit

Ref: Location
JRV: Jequitinhonha River valley, state of Minas Gerais, Brazil
Apuí: Apuí region, state of Amazonas, Brazil
Crixás: Crixás municipality, state of Goiás, Brazil
Paracatu: Paracatu municipality, state of Minas Gerais, Brazil
Diamantina: Diamantina region, state of Minas Gerais, Brazil
Itabira: Itabira region, state of Minas Gerais, Brazil

Ref: Subsidiary
MDB: Mineração Duas Barras Ltda.
RST: RST Recursos Minerais Ltda.
BMIXP: BMIX Participações Ltda.
MJ: Mineração Jupiter Ltda., 100% owned by Jupiter Gold Corporation, a subidiary of Brazil Minerals

Ref: Expiration Date of Mineral Right
n/a (1): not applicable; mining concessions are in perpetuity under current law
n/a (2): not applicable; final research report approved or submitted by the mining department
n/a (3): not applicable; in analysis at the mining department
n/a (4): not applicable; awaiting research permit to begin timeline


* These two mineral rights for manganese will be transferred out of MJ and into another subsidiary.


 
- 5 -

 
 
 





The second manner in which we expanded as a company from 2013 to now is in the product mix output from our Brazilian subsidiaries. In 2013 we produced and sold rough diamonds and gold. In 2014 we added polished diamonds. In 2015 we added sand and mortar, a product made from our sand.

From 2013 to today, we have been taking shape as a holding company owner of different subsidiaries. As of September 30, 2016, we owned the approximate following stakes:


(1)            100% of BMIX Participações Ltda ("BMIXP");
(2)            100% of Mineração Duas Barras Ltda ("MDB");
(3)            50% of RST Recursos Minerais Ltda. ("RST");
(4)            100% of Hercules Brasil Ltda. ("HBR");
(5)            60% of Jupiter Gold Corporation ("JGC").

Major Events in the Third Quarter of 2016
 
1)      Operational Focus
 
During the third quarter of 2016, Brazil Minerals focused its operational effort primarily in this area:

Development of Portable, Scalable, Higher Yield and Lower Cost Gold and Diamond Recovery Operations

During the third quarter of 2016 the Company successfully tested centrifugation as a means of recovery of gold.. Material which had been considered waste after processing in the gravity-based gold separation columns present in Brazil Minerals' original plant yielded recoverable gold after processing in centrifuges in amounts that indicated centrifugation to be significantly higher yielding. An initial small gold-recovery processing plant that uses two small centrifuges was delivered to Brazil Minerals at the end of the third quarter and placed in one of its mining concessions for gold. The operation is simple, utilizing two to three workers and a diesel-powered portable generator and produces gold from final alluvial material.

Subsequent to the end of the third quarter of 2016, this small plant is being expanded with the addition of machines and structures that will allow it to process thicker material, containing gravel and stones. It is also being outfitted to permit recovery of diamonds. Thicker material has higher gold concentration and contains diamonds.  

Brazil Minerals has mining areas spread over 60 miles along the banks of the Jequitinhonha River in Brazil, a well-known area for exploration of gold and diamonds. The Company envisions, over time, the deployment of several portable, scalable and low-cost, but highly efficacious plants to recover gold and diamonds from various locations simultaneously. 

2)      Improvements in Capital Structure

During the third quarter of 2016, Brazil Minerals continued to materially improve its capital structure as follows:

i)    Removal of Significant Variable-Rate Noteholder

The entirety of the convertible debt from St. George Investments, LLC, a short-term oriented variable-rate noteholder has been extinguished. The Company has remaining convertible debt from one short-term oriented holder; all of the notes from such investor have a fixed floor price.
 
 
- 6 -


 
 
ii)    Initial Formation of Mineral-Specific Subsidiaries
 
Mineral-specific subsidiaries allow certain investors interested in one particular mineral (gold, manganese, etc.) to be able to more directly invest and/or partner in that mineral. Brazil Minerals intends to maintain an ongoing ownership stake in each such subsidiary and also intends that each subsidiary provide ongoing royalty payments to Brazil Minerals on revenue-generation from projects. The first such subsidiary is JGC, incorporated in the third quarter of 2016. JGC, through its subsidiary MJ, has since obtained six mineral rights for gold which were not owned by Brazil Minerals previously.
 
iii)    Extinguishment of $200,000 in Principal plus Accrued Interest

The holders of certain of Brazil Minerals' convertible notes in an aggregate principal amount of $200,000 exchanged all such notes and their accrued interest into an aggregate of 80 million Brazil Minerals common shares plus securities of JGC. These notes would have matured on January 1, 2018, at which point Brazil Minerals would have to pay the $200,000 principal plus accrued interest. With the exchange described above, the entire liability comprising the $200,000 in principal and its accrued interest has been extinguished.
 
iv)  Extinguishment of 100% of Preferred C and 44% of Preferred B

Brazil Minerals eliminated a large amount of preferred stock from its balance sheet during the third quarter of 2016. In particular, the Company eliminated 100% of its Preferred C Convertible Stock and approximately 44% of its Preferred B Convertible Stock by exchange of such Brazil Minerals preferred stock for securities of JGC, with cancellation of the preferred stock. Such elimination of Brazil Minerals preferred stock prevented a substantial potential dilution of the Brazil Minerals common shareholders since the preferred stock was convertible to common stock. 
 
v) Improvement in Book Value

The Company has been involved in a concentrated effort to improve its financial condition. The Company's book value, while still a negative number, has increased since December 31, 2014 as shown below.
 
Date
Book Value
12/31/2014
($1,962,472)
12/31/2015
($387,885)
09/30/2016
($38,307)
 
Results of Operations


Quarter Ended September 30, 2016 Compared to Quarter Ended September 30, 2015





In the quarter ended September 30, 2016, we had revenues of $7,752 as compared to revenues of $18,326 in the quarter ended September 30, 2015, a decline of 57.70%. This result is due to the fact that the Company was awaiting deployment of a gold retrieval unit to restart production of gold.





Our consolidated cost of goods sold in the third quarter of 2016 was $47,461, consisting entirely of production-related expenses as compared to our consolidated cost of goods sold in the third quarter of 2015 of $8,573. These costs included labor, diesel, and machine rentals. Certain expenses were fixed or unavoidable in the third quarter of 2016 even though we had considerably less revenue than in the third quarter of 2015.





Our gross loss in the third quarter of 2016 was $39,709, as compared to our gross profit of $9,753 in the third quarter of 2015, a decline of 507.15%. This result was primarily due a decline in revenues and increase in costs of goods sold for the reasons detailed above.





We had an aggregate of $194,656 in operating expenses in the third second quarter of 2016, as compared to an aggregate of $213,588 in operating expenses in the third quarter of 2015, a decrease of 8.86%. This decrease was mostly due to lower general and administrative expenses, and no stock-based compensation, which more than compensated for higher professional fees and compensation and related costs.
 
 

- 7 -






In the third quarter of 2016, we had total other expenses of $249,124 as compared to ($153,130) in total other expenses in the third quarter of 2015. This change was mostly due to much lower gain on derivative liabilities, a gain on interest on promissory notes, and much lower amortization of debt discount and other fees, and higher other expense in the quarter ended September 30, 2016.





In the third quarter of 2016, we experienced a net loss attributable to Brazil Minerals of $444,727, as compared to a net loss attributable to Brazil Minerals of $50,705 in the third quarter of 2015. This result was mostly due to the much higher total other expense and also higher operating expenses in the third quarter of 2016. On a per share basis (both basic and diluted), in both the third quarter of 2016 and the third quarter of 2015 we had net loss attributable to Brazil Minerals of $0.00. The higher net loss attributable to Brazil Minerals in the third quarter of 2016 was due to lower revenues, higher loss from operations and higher other expenses.





Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015





In the nine months ended September 30, 2016, we had revenues of $11,821 as compared to revenues of $58,512 in the quarter ended September 30, 2015, a decline of 79.80%. This result is due to the fact that the Company was awaiting deployment of a gold retrieval unit to restart production of gold in 2016.

Our consolidated cost of goods sold in the first nine months of 2016 was $112,293, consisting entirely of production expenses as compared to our consolidated cost of goods sold in the first nine months of 2015 of $145,599, a decline of 22.88%. These costs included labor, diesel and machine rentals.





Our gross loss in the first nine months of 2016 was $100,472, as compared to our gross loss of $87,087 in the first nine months of 2015, a decline of 15.37%. This result was primarily due a decline in gross revenues which was slightly offset by a decline in cost of goods sold during the nine months ended September 20, 2016, for the reasons detailed above.





We had an aggregate of $638,837 in operating expenses in the nine months ended September 30, 2016, as compared to an aggregate of $672,409 in operating expenses in the nine months ended September 30, 2015, a decrease of 4.99%. This decrease was mostly due to lower professional fees, which more than offset increases in general and administrative expenses, compensation and related costs and stock-based compensation.





In the nine months ended September 30, 2016, we had total other expenses of $324,923 as compared to $153,313 in total other income in the nine months ended September 30, 2015. This change was mostly due to a much lower gain on derivative liabilities in the nine months ended September 30, 2016 which more than compensated for lower amortization of debt discounts and lower interest on promissory notes in the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015.
 
 

- 8 -






In the nine months ended September 30, 2016 we experienced a net loss attributable to Brazil Minerals of 1,039,455, as compared to a net loss attributable to Brazil Minerals of $606,183 in the nine months ended September 30, 2015. This result was mostly due to the higher total other expenses and lower revenues in the nine months ended September 30, 2016 which more than offset lower costs of goods sold in the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015. On a per share basis (both basic and diluted), in both the nine months ended September 30, 2016 and the nine months ended September 30, 2015 we had net loss attributable to Brazil Minerals of $0.00. 
 
Net cash used in operating activities was $368,092 in the first nine months of 2016, as compared to $618,864 in the first nine months of 2015. This was primarily due to the Company's mining a smaller surface area, as it developed its strategy of smaller, lower-cost but more efficient recovery plants in 2016. Net cash used in investing activities was $94,428 in the first nine months of 2016, as compared to $33,796 in the first nine months of 2015. This was primarily because of the acquisition of both certain capital equipment and intangible assets, such as mineral rights, in 2016. The Company acquired Net cash provided by financing activities was $372,340 in the first nine months of 2016, as compared to $932,060 in the first nine months of 2015. This was due to the fact that the Company needed to raise lesser funds from equity in debt in 2016.


Liquidity and Capital Resources


As of September 30, 2016, we had total current assets of $205,209 compared to total current liabilities of $1,117,510 for a current ratio of 0.18 to 1 and a working capital deficit of $912,301. By comparison, on September 30, 2015, we had total current assets of $262,429 compared to current liabilities of $1,404,594 for a current ratio of 0.19 to 1 and a working capital deficit of $1,142,165. This difference is explainable primarily by both a decrease in convertible debt and preferred stock outstanding.





In 2016 our principal sources of liquidity were the issuance of equity and debt securities. In 2015, our principal source of liquidity had been issuances of debt securities.


During the first quarter of 2016, we received an aggregate of $118,000 in gross proceeds from the sale of common stock in various transactions, none greater than $30,000 in size.

During the second quarter of 2016, we received $41,200 and $29,500 from sales of common stock in separate transactions or groups of transactions and $30,000 from the sale of a convertible note with a fixed-floor.
 
During the third quarter of 2016, we received a total of $25,000 from sales of Brazil Minerals' common stock, $20,000 from sales of Brazil Minerals' preferred stock, $31,000 from sales of common stock of a subsidiary of Brazil Minerals in separate transactions and a total of $110,000 from sales of convertible notes with a fixed-floor. All of these notes and all of Brazil Minerals' short-term oriented convertible debt are owned by only one relatively small entity. The Company does not expect this level of intake of debt to be the norm going forward.
 
We believe that, as the small portable plant for gold and diamond processing is finalized with the addition of the structure enabling it to process thicker material, funds generated from sales of gold, primarily, and diamonds, over time, recovered from such initial unit, plus sales of our mortar and sand, will generate enough revenues to make us cash flow positive, although no assurance of this can be given. In the meantime, we will rely on financing from the issuance of equity and/or debt, and/or sales of shares in mineral-specific subsidiaries, the availability of which on terms satisfactory to us is not assured.

 
The Company has no plans for any significant acquisitions in 2016 or in the foreseeable future that would require cash payments to be made by the Company while it is not cash flow positive.
 
 

- 9 -





Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our financial instruments consist of cash and cash equivalents, loans to a related party, accrued expenses, and an amount due to a director. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in our financial statements. If our estimate of the fair value is incorrect at September 30, 2016, it could negatively affect our financial position and liquidity and could result in our having understated our net loss.

Recent Accounting Pronouncements

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.  Our significant accounting policies are described in Note 1 of the financial statements. We have reviewed all recent accounting pronouncements issued to the date of the issuance of these financial statements, and we do not believe any of these pronouncements will have a material impact on us.
 

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

During the third quarter of 2016, we received $45,000 from sale of our common and preferred stock in separate transactions. The equity purchasers and amounts sold were as follows. We sold $20,000 in our Series B Convertible Preferred stock to Matthew Taylor in July of 2016. We sold $10,000 in our restricted common stock to Benjamin Khowong in July of 2016. We sold $8,000 in our restricted common stock to Craig Kincaid in July of 2016. We sold $7,000 in our restricted common stock to Peter Goldy in July of 2016.

All of the above shares were issued in accordance with exemptions from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act") under Section 4(a)(2) of the Securities Act by virtue of being offered without employing any means of general solicitation and issued to purchasers which represented to the Company that they are accredited investors and that they were acquiring the shares for investment and could bear the economic risk of the investment. All proceeds of the above described transactions were for use in the normal course of business of the Company.

 
Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a "smaller reporting company," as defined by Rule 229.10(f)(1).
 
 

- 10 -



Item 4.  CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

 
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the design, operation, and effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of September 30, 2016. On the basis of that evaluation, management concluded that our disclosure controls and procedures designed to provide reasonable assurance that the information required to be disclosed in reports filed or submitted pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the "Commission"), and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure were effective.

(b) Management's Report on Internal Control Over Financial Reporting


Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control system is designed to provide reasonable assurance to management and to our Board of Directors regarding the preparation and fair presentation of published financial statements. Our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on his evaluation under the framework in Internal Control—Integrated Framework, he concluded that our internal control over financial reporting was effective as of September 30, 2016.


(c) Changes in Internal Control over Financial Reporting

The Company added a full-time internal resource in Brazil to supplement and support outside accounting personnel it uses.


(d)  Limitations of the Effectiveness of Internal Controls


The effectiveness of the Company's system of disclosure controls and procedures and internal control over financial reporting is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating the control system, the assumptions used in identifying the likelihood of future events, and the inability to eliminate fraud and misconduct completely. As a result, there can be no assurance that the Company's disclosure controls and procedures and internal control over financial reporting will detect all errors or fraud. However, the Company's control systems have been designed to provide reasonable assurance of achieving their objectives, and the Company's Principal Executive Officer and Principal Financial Officer have concluded that the Company's disclosure controls and procedures and internal control over financial reporting are effective at the reasonable assurance level.

 
 

- 11 -





PART II OTHER INFORMATION

Item 6.    EXHIBITS

(a) Exhibits


31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
     
101.INS –
XBRL Instance Document
             
101.SCH –
XBRL Taxonomy Extension Schema Document
           
101.CAL –
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF –
XBRL Taxonomy Extension Definition Linkbase Document
       
101.LAB –
XBRL Taxonomy Extension Label Linkbase Document
         
101.PRE –
XBRL Taxonomy Extension Presentation Linkbase Document
   


SIGNATURES

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

 
 
BRAZIL MINERALS, INC.
 
       
Date: November 21, 2016
By:
/s/ Marc Fogassa
 
   
Marc Fogassa
 
   
Chief Executive Officer
 
 
 
 
 
 
 
- 12 -
EX-31.1 2 ex31_1.htm
 

Exhibit 31.1
  
CERTIFICATION

I, Marc Fogassa, the Chief Executive Officer and President of Brazil Minerals, Inc. (the "registrant"), certify that:

1.  
I have reviewed this quarterly report on Form 10-Q of the registrant for the quarter ended June 30, 2016;
 
2.   
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
3.   
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.  
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

a.  
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is prepared;

b.  
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.  
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluation; and


d.  
disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.  
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
 
 
     a.
 all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 
 
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November 21, 2016        
                     
                                                      
  /s/ Marc Fogassa
 
       Marc Fogassa
 
       President and Chief Executive Officer
 
      (principal executive officer)
 
EX-31.2 3 ex31_2.htm
 
 
Exhibit 31.2
 
CERTIFICATION

I, Marc Fogassa, Chief Financial Officer of Brazil Minerals, Inc. (the "registrant"), certify that:

1.    
I have reviewed this quarterly report on Form 10-Q of the registrant for the quarter ended June 30, 2016;
 
2.    
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
3.    
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.    
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

a.  
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is prepared;

b.  
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.  
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluation; and

d.  
disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.    
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
 
a.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 
b.
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November 21, 2016  
 
                                              
  /s/ Marc Fogassa
 
       Marc Fogassa
 
       Chief Financial Officer
 
       (principal financial officer and accounting officer)
 
EX-32.1 4 ex32_1.htm
 
 
Exhibit 32.1



Certification of Chief Executive Officer and Principal Financial Officer
 Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Marc Fogassa, certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Brazil Minerals, Inc. for the quarter ended September 30, 2016 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 
 
 
Date: November 21, 2016  
By:
/s/ Marc Fogassa
 
 
 
Marc Fogassa
 
 
 
Chief Executive Officer
and Chief Financial Officer
 
 
 
(principal executive officer
and principal accounting and financial officer)
 
 
 
 
 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.


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Document And Entity Information - shares
9 Months Ended
Sep. 30, 2016
Nov. 17, 2016
Document And Entity Information [Abstract]    
Entity Registrant Name Brazil Minerals, Inc.  
Document Type 10-Q  
Document Period End Date Sep. 30, 2016  
Amendment Flag false  
Trading Symbol bmxi  
Entity Central Index Key 0001540684  
Current Fiscal Year End Date --12-31  
Entity Common Stock, Shares Outstanding   12,797,376,461
Entity Filer Category Smaller Reporting Company  
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Well-known Seasoned Issuer No  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q3  
XML 12 R2.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONSOLIDATED BALANCE SHEETS - USD ($)
Sep. 30, 2016
Dec. 31, 2015
Current Assets    
Cash and cash equivalents $ 12,002 $ 64,364
Accounts receivable 1,750 2,886
Taxes recoverable 28,390 50,100
Inventory 6,507 0
Deposits and advances 156,560 145,079
Total Current Assets 205,209 262,429
Capital Assets    
Property, plant & equipment, net of accumulated depreciation 435,396 361,563
Other Assets    
Intangible assets 630,842 508,865
Total Assets 1,271,447 1,132,857
Current Liabilities    
Accrued expenses and accounts payable 483,182 471,337
Convertible notes payable, net of debt discount of $41,251 and $49,182 314,809 491,698
Derivative liabilities 88,175 281,345
Related party payable 231,344 160,214
Total current liabilities 1,117,510 1,404,594
Long term liabilities    
Convertible notes payable -- noncurrent, net of debt discounts totaling zero and $83,852, respectively 0 116,148
Other noncurrent liabilities 192,244 0
Total Liabilities 1,309,754 1,520,742
Stockholders' deficit:    
Preferred Stock, Value, Issued 908,973 1,810,434
Common stock, $0.001 par value. 12,500,000,000 and 7,000,000,000 shares authorized, respectively; 12,421,756,892 and 6,219,391,446 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively 12,421,757 6,219,392
Additional paid-in-capital 30,797,476 36,146,689
Accumulated other comprehensive loss (492,483) (678,830)
Stock warrants 218,656 218,656
Accumulated deficit (45,274,735) (44,235,280)
Total Brazil Minerals, Inc. stockholders' deficit (1,420,356) (518,939)
Non-controlling interest 1,382,049 131,054
Total stockholders' deficit (38,307) (387,885)
Total liabilities and stockholders' deficit 1,271,447 1,132,857
Series A Preferred Stock [Member]    
Stockholders' deficit:    
Preferred Stock, Value, Issued [1] 1 1
Series B Preferred Stock [Member]    
Stockholders' deficit:    
Preferred Stock, Value, Issued [2] 908,972 1,560,433
Series C Preferred Stock [Member]    
Stockholders' deficit:    
Preferred Stock, Value, Issued [3] $ 0 $ 250,000
[1] Series A preferred stock, $0.001 par value. 10,000,000 shares authorized; 1 share issued and outstanding
[2] Series B preferred stock, $0.001 par value. 10,000,000 shares authorized; 584 and 1,047 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively
[3] Series C preferred stock, $0.001 par value. 10,000,000 shares authorized; zero and 200,000 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively
XML 13 R3.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
Sep. 30, 2016
Dec. 31, 2015
Debt Instrument, Unamortized Discount $ 98,491 $ 302,111
Debt discounts $ 0 $ 83,852
Common Stock, Par or Stated Value Per Share $ 0.001 $ 0.001
Common Stock, Shares Authorized 12,500,000,000 7,000,000,000
Common Stock, Shares, Issued 12,421,756,892 6,219,391,446
Common Stock, Shares, Outstanding 12,421,756,892 6,219,391,446
Series A Preferred Stock [Member]    
Preferred Stock, Par or Stated Value Per Share $ 0.001 $ 0.001
Preferred Stock, Shares Authorized 10,000,000 10,000,000
Preferred Stock, Shares Issued 1 1
Preferred Stock, Shares Outstanding 1 1
Series B Preferred Stock [Member]    
Preferred Stock, Par or Stated Value Per Share $ 0.001 $ 0.001
Preferred Stock, Shares Authorized 10,000,000 10,000,000
Preferred Stock, Shares Issued 584 1,047
Preferred Stock, Shares Outstanding 584 1,047
Series C Preferred Stock [Member]    
Preferred Stock, Par or Stated Value Per Share $ 0.001 $ 0.001
Preferred Stock, Shares Authorized 10,000,000 10,000,000
Preferred Stock, Shares Issued 0 200,000
Preferred Stock, Shares Outstanding 0 200,000
XML 14 R4.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Consolidated Statements Of Operations        
Revenue $ 7,752 $ 18,326 $ 11,821 $ 58,512
Cost of revenue 47,461 8,573 112,293 145,599
Gross margin (39,709) 9,753 (100,472) (87,087)
Operating expenses:        
Professional fees 51,512 21,035 147,634 120,076
General and administrative expenses 92,883 138,300 287,569 365,836
Compensation and related costs 50,261 16,753 146,066 65,851
Stock based compensation 0 37,500 57,568 120,646
Total operating expenses 194,656 213,588 638,837 672,409
Loss from operations (234,365) (203,835) (739,309) (759,496)
Other expense (income):        
(Gain) loss on derivative liabilities (34,760) (488,824) (193,170) (1,237,329)
Interest on promissory notes (24,555) 22,120 91,913 121,523
Amortization of debt discount and other fees 82,144 313,575 199,886 962,507
Other expense (income) 226,295 (1) 226,294 (14)
Total other expense (income) 249,124 (153,130) 324,923 (153,313)
Loss before provision for income taxes (483,489) (50,705) (1,064,232) (606,183)
Provision for income taxes 0 0 0 0
Net loss (483,489) (50,705) (1,064,232) (606,183)
Loss attributable to non-controlling interest (38,762) 0 (24,777) 0
Net loss attributable to Brazil Minerals, Inc. stockholders $ (444,727) $ (50,705) $ (1,039,455) $ (606,183)
Net loss per share attributable to Brazil Minerals, Inc. common stockholders: Basic $ 0 $ 0 $ 0 $ 0
Net loss per share attributable to Brazil Minerals, Inc. common stockholders: Diluted $ 0 $ 0 $ 0 $ 0
Weighted average number of shares outstanding: Basic 10,840,851,799 2,945,531,462 9,620,555,961 1,173,938,535
Weighted average number of shares outstanding: Diluted 10,840,851,799 2,945,531,462 9,620,555,961 1,173,938,535
XML 15 R5.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE (LOSS) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Consolidated Statements Of Other Comprehensive Loss        
Net Loss $ (483,489) $ (50,705) $ (1,064,232) $ (606,183)
Foreign currency translation adjustment 0 (168,965) 0 (299,131)
Comprehensive loss (483,489) (219,670) (1,064,232) (905,314)
Comprehensive loss attributable to noncontrolling interests (24,777) 0 (24,777) 0
Comprehensive loss attributable to Brazil Minerals, Inc. stockholders $ (458,712) $ (219,670) $ (1,039,455) $ (905,314)
XML 16 R6.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Cash flows from operating activities of continuing operations:    
Net loss $ (1,064,232) $ (606,183)
Adjustments to reconcile net loss to cash used in operating activities:    
Stock based compensation and services 57,568 111,508
Unrealized (gain) loss from change in derivative liabilities (193,170) (1,237,329)
Amortization of debt discount 199,886 667,417
Amortization of deferred financing costs 507 0
Excess fair market value of common stock issued in satisfaction of liabilities 37,784 209,723
Gain on exchange of preferred shares for common stock to noncontrolling interests of subsidiary company (2,964) 0
Loss on extinguishment of debt 229,426 0
Depreciation and amortization 60,576 40,164
Changes in operating assets and liabilities:    
Accounts receivable 1,586 (2,521)
Taxes recoverable (20,529) 22,685
Prepaid expenses (1,116) 45,648
Inventory 16,594 67,566
Deposits and advances 0 (17,891)
Accounts payable and accrued expenses 182,708 92,770
Accrued salary due to officer 104,130 0
Other noncurrent liabilities (26,732) 0
Customer deposits 0 (12,421)
Net cash provided by (used in) operating activities (417,976) (618,864)
Cash flows from investing activities:    
Acquisition of capital assets (18,492) (10,019)
Advances to related party 0 (23,777)
Increase in intangible assets (26,052) 0
Net cash provided by (used in) financing activities (44,544) (33,796)
Cash flows from financing activities:    
Loan from officer (28,960) 37,089
Net proceeds from sale of common stock 188,300 152,500
Payment of notes payable 0 (88,095)
Proceeds from sale of preferred stock 34,500 210,000
Proceeds from sale of subsidiary common stock to noncontrolling interests 31,000 0
Proceeds from convertible notes payable 147,500 620,566
Repayment of convertible notes payable 0 0
Net cash provided by (used in) financing activities 372,340 932,060
Effect of exchange rates on cash and cash equivalents 37,825 (185,161)
Net increase (decrease) in cash and cash equivalents (52,355) 94,239
Cash and equivalents, beginning of period 64,364 19,776
Cash and equivalents, end of period 12,002 114,015
Supplemental disclosure of cash flow information:    
Cash paid for interest 0 0
Cash paid for income taxes 0 0
Supplemental disclosure of non-cash investing and financing activities:    
Purchase of equipment with note and customer deposits 0 82,601
Purchase of equipment offset by related party receivable 0 44,854
Note issued in connection with RST acquisition 0 124,680
Increase in non-controlling interest of RST 0 290,517
Shares issued in connection with conversion of debt and accrued interest 322,584 1,081,366
Value of stock options and beneficial conversion feature recorded with notes payable 0 132,566
Discount on notes payable related to fair market value of derivative liability 0 203,780
Conversion of notes payable into preferred stock 0 100,000
Conversion of notes payable and accrued interest into subsidiary common stock 156,250 0
Conversion of Series B preferred stock into common stock of subsidiary company 733,811 0
Deferred financing costs accrued in relation to the issuance of debt 5,800 0
Discount for beneficial conversion features on convertible notes 165,343 0
Dividends payable to Series B preferred shareholders 82,350 0
Acquisition of capital assets with taxes receivable $ 49,883 $ 0
XML 17 R7.htm IDEA: XBRL DOCUMENT v3.5.0.2
ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Sep. 30, 2016
Accounting Policies [Abstract]  
Significant Accounting Policies

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

 

Organization and Description of Business

 

Brazil Minerals, Inc. ("BMIX" or the "Company") was incorporated as Flux Technologies, Corp. under the laws of the State of Nevada, U.S. on December 15, 2011.  The Company, through subsidiaries, mines and sells diamonds, gold, sand and mortar. The Company, through subsidiaries, outright or jointly owns 10 mining concessions and 28 other mineral rights in Brazil, for diamonds, gold, and sand. The Company, through subsidiaries, owns a large alluvial diamond and gold processing and recovery plant, a sand processing and mortar plant, trucks and earth-moving capital equipment used for mining.

 

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its 99.99% owned subsidiary, BMIX Participações Ltda. ("BMIX Subsidiary"), which includes the accounts of its wholly-owned subsidiary, Mineração Duas Barras Ltda. ("MDB").

 

During the year ended December 31, 2014, the BMIX Subsidiary acquired an initial 25% interest in RST Recursos Minerais Ltda. ("RST"), and during the first quarter of 2015, it acquired an additional 25% interest in RST, thus bringing its total ownership of RST to 50%. As of March 18, 2015, RST has been consolidated within the Company's financial statements.

 

On April 17, 2015, the BMIX Subsidiary incorporated Hercules Resources Corporation ("HRC"). On May 27, 2015, HRC formalized title to 99.99% of Hercules Brasil Comercio e Transportes Ltda. ("Hercules Brasil"). Thus, as of December 31, 2015, Hercules Brasil is a wholly owned subsidiary and has been consolidated within the Company's consolidated financial statements.

 

On July 27, 2016, upon approval by its Board of Directors, the Company entered into a stock purchase and sale agreement pursuant to which HRC transferred its 99.99% equity interest in Mineração Jupiter Ltda to the Company which immediately thereafter sold such equity interest to Jupiter Gold Corporation ("JGC"), a newly created company. In addition, the Company simultaneously acquired all of the common stock of JGC. As such, the accounts and results of JGC and MJL have been included in the Company's consolidated financial statements. See Note 2 for more information.

 

All material intercompany accounts and transactions have been eliminated in consolidation. See subsequent events for discussion of an additional subsidiary formed subsequent to quarter end.

 

Going Concern

The consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has limited working capital, has incurred losses in each of the past two years, and has not yet received material revenues from sales of products or services. These factors create substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

 

The ability of the Company to continue as a going concern is dependent on the Company generating cash from its operations, the sale of its stock, and/or obtaining debt financing. During the nine months ended September 30, 2016, the Company funded operations through the receipt of proceeds from revenues, and the sale of equity and debt securities. Management's plan to fund its capital requirements and ongoing operations include an increase in cash received from sales primarily of gold derived from processing in a small, low operational cost gold plant its inventory of alluvial material and gravel already mined, as well as an increase in cash received from mortar and sand sales, all of which are expected to occur within the next two quarters. Management's secondary plan to cover any shortfall is selling its equity securities and obtaining debt financing. There can be no assurance the Company will be successful in these efforts.

 

Interim Consolidated Financial Statements

The accompanying unaudited interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission.  Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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.  These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2015. The results of operations for the nine months ended September 30, 2016 are not indicative of the results that may be expected for the full year.

 

Basis of Presentation

The consolidated financial statements of the Company have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles ("GAAP") of the United States of America and are presented in U.S. dollars.

 

Use of Estimates

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

 

Fair Value of Financial Instruments

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

 

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 September 30, 2016 and December 31, 2015, the Company's derivative liabilities were considered a level 2 liability. See Note 4 for a discussion regarding the determination of the fair market value. The Company does not have any level 3 assets or liabilities. 

 

The Company's financial instruments consist of cash and cash equivalents, accounts receivable, taxes recoverable, prepaid expenses, inventory, deposits and other assets, accounts payable, accrued expenses, deferred revenue and convertible notes payable. The carrying amount of these financial instruments approximates fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.

 

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent that the funds are not being held for investment purposes. The Company's bank accounts are deposited in FDIC insured institutions. Funds held in U.S. banks are insured up to $250,000 and funds held in Brazilian banks are insured up to 250,000 Brazilian Reais (translating into approximately $70,050 as of September 30, 2016).

 

Inventory

Inventory for the Company consists of rough diamonds, gold, ore stockpile, parts, supplies and related production costs and is stated at lower of cost or market. The amount of any write-down of inventories to net realizable value and all losses, are recognized in the period the write-down of loss occurs. At September 30, 2016 and December 31, 2015, all inventory consisted primarily of rough ore stockpile for gold and diamonds. No value was placed on sand.

 

Value-Added Taxes Receivable

The Company records a receivable for value added taxes recoverable from Brazilian authorities on goods and services purchased by its Brazilian subsidiaries. The Company intends to recover the taxes through the acquisition of capital equipment from sellers who accept tax credits as payments. On April 20, 2016, the Company's taxes receivable decreased by $50,100 with the recovery of such amount being used in the acquisition of a Mercedes Benz truck, through a state-government program.

 

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.

 

The diamond and gold processing plant and other machinery are depreciated over an estimated useful life of 10 years; and computer and other office equipment over an estimated useful life of 3 years. As of September 30, 2016 and December 31, 2015, all property and equipment related to the diamond, sand and mortar processing plants and other production machinery except for approximately $1,300 in computer equipment. Accumulated depreciation as of September 30, 2016 and December 31, 2015, was $253,995 and $157,381, respectively.

 

Mineral Properties

Costs of exploration, carrying and retaining unproven mineral lease properties are expensed as incurred. Mineral property acquisition costs, including licenses and lease payments, are capitalized. Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company's rights. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

 

Impairment losses are recorded on mineral properties used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. As of September 30, 2016 and December 31, 2015, the Company did not recognize any impairment losses related to mineral properties held.

 

Intangible Assets

For intangible assets purchased in a business combination, the estimated fair values of the assets received are used to establish their recorded values. For intangible assets acquired in a non-monetary exchange, the estimated fair values of the assets transferred (or the estimated fair values of the assets received, if more clearly evident) are used to establish their recorded values, unless the values of neither the assets received nor the assets transferred are determinable within reasonable limits, in which case the assets received are measured based on the carrying values of the assets transferred. Valuation techniques consistent with the market approach, income approach and/or cost approach are used to measure fair value. Intangible assets consist of mineral right agreements held by MDB, RST, and MJL.

 

Impairment of Long-Lived Assets

For long-lived assets, such as property and equipment and intangible assets subject to amortization, the Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. 

 

Revenue Recognition

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.  Typically, the Company records revenues upon delivery of the products to the customer. As of September 30, 2016 and December 31, 2015, the Company had deposits of $0 and $0, respectively, related to proceeds received for future diamond and gravel sales which have been recorded as customer deposits. See Note 4 and 6 for additional information related to these agreements.

 

Costs of Goods Sold

Included within costs of goods sold are the costs of cutting and polishing rough diamonds, and costs of production such as diesel fuel, labor, and transportation.

 

Stock-Based Compensation

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

 

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

 

The Company has adopted a stock plan to attract, retain and motivate its directors, officers, employees, consultants and advisors. The Company's stock plan provides for the issuance of up to 15,000,000 common shares for employees, consultants, directors, and advisors.

 

Foreign Currency

The Company's foreign subsidiaries use a local currency as the functional currency. Resulting translation gains or losses are recognized as a component of accumulated other comprehensive income. Transaction gains or losses related to balances denominated in a currency other than the functional currency are recognized in the consolidated statements of operations. Net foreign currency transaction losses included in the Company's consolidated statements of operations were negligible for all periods presented.

 

Income Taxes

We account for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. As of September 30, 2016 and December 31, 2015, the Company's deferred tax assets had a full valuation allowance.

 

Under ASC 740, a tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company has identified the United States Federal tax returns as its "major" tax jurisdiction.

 

Basic Income (Loss) Per Share

The Company computes loss per share in accordance with ASC Topic 260, Earnings per Share, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. As of September 30, 2016, the Company's potentially dilutive securities relate to common stock issuable in connection with convertible notes payable, options and warrants. Dilutive loss per share for the three and nine months ended September 30, 2016 excludes all potential common shares if their effect is anti-dilutive. As of September 30, 2016, if all holders of preferred stock, convertible notes payable, options and warrants exercised their right to convert their securities to common stock, the common stock issuable would be in excess of the Company's authorized, but unissued shares of common stock.

 

Other Comprehensive Income

 

Other comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, other than net income and including foreign currency translation adjustments. 

 

Recent Accounting Pronouncements

 

In April 2015, the FASB issued Accounting Standard Update ("ASU") 2015-03, Simplifying the Presentation of Debt Issuance Costs. This update requires capitalized debt issuance costs to be classified as a reduction to the carrying value of debt rather than a deferred charge, as is currently required. This update will be effective for the Company for all annual and interim periods beginning after December 15, 2015 and is required to be adopted retroactively for all periods presented, and early adoption is permitted. The Company adopted this ASU with no impact on the accompanying consolidated financial statements as the issuance costs were already accounted for as a reduction of the carrying value of the debt.

 

In August 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-15, "Presentation of Financial Statements Going Concern", which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. The guidance is not expected to have a material impact on the Company's financial statements. 

 

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The amendments in this update simplify the presentation of deferred taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. These amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The guidance is not expected to have a material impact on the Company's financial statements.

 

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

 

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

XML 18 R8.htm IDEA: XBRL DOCUMENT v3.5.0.2
ACQUISITIONS
9 Months Ended
Sep. 30, 2016
Notes to Financial Statements  
ACQUISITIONS

NOTE 2 –ACQUISITIONS

 

RST Recursos Minerais Ltda

 

In June 2014, the Company entered into an agreement to purchase 25% of the equity of RST for cash payments of 250,000 Brazilian Reais and the issuance of shares of the Company's common stock valued at 100,000 Brazilian Reais. In connection with this agreement the Company issued 1,428,572 shares of common stock with a value of $43,868 and made cash payments of $107,858. At December 31, 2014, the investment was accounted for using the equity method. Effective March 18, 2015, the Company purchased an additional 25% of RST from a third party for R$400,000 or $124,680. Under the terms of the agreement, the Company is to make monthly payments ranging from R$75,000 to R$100,000 beginning March 25, 2015. As of December 31, 2015, all required payments had been made. In December 2015, the 1,428,572 shares of common stock previously issued with a value of $43,868 were returned to the Company. The Company reversed the initial amount of the investment recorded upon return.

 

As a result of the additional 25% acquired, the Company owns 50% of RST and has consolidated the operations in the Company as of March 18, 2015. The remaining 50% ownership is held by Brazil Mining, Inc. ("BMI"), an entity controlled through management and stock ownership by the Company's Chief Executive Officer. On the date of consolidation, the Company determined the fair market value of RST to be $570,548. The fair market value was based upon the average price paid by the Company for the 50% ownership, including the relief of monies advanced to RST and increasing for the non-controlling interest which represents 50%. The Company allocated 100% of the fair market value to the mineral rights held by RST. Since the date of acquisition, the value of the Brazilian Reais has decreased significantly, thus, has the value of the Company's intangibles.

 

The purpose of the Company's acquisition of RST was due to the quality of its mineral assets, close proximity to the Company's MDB diamond and gold processing plant, and attractive acquisition price. Pro-forma financial statements have not been provided as the assets, liabilities and operations of RST are not significant. The Company expects the future expected cash flows to exceed the carrying value of the assets due to the close proximity to MDB's plant which is expected to shorten the exploration period as new plant and equipment do not need to be procured.

 

Jupiter Gold Corporation and Mineração Jupiter Ltda

 

On July 27, 2016, upon approval by its Board of Directors, the Company entered into a stock purchase and sale agreement pursuant to which HRC transferred its 99.99% equity interest in MJL to the Company which immediately thereafter sold such equity interest to JGC. In addition, the Company simultaneously agreed to pay the sum of $4,000, equal to the par value of 4,000,000 shares of JGC common stock.

 

Subsequent to the agreement, the Company transferred approximately 40% of its ownership in JGC to noncontrolling interests through both sales of JGC common stock at $1.00 per share to outside investors and conversions of certain of the Company's notes payable and preferred stock into JGC common stock. As a result of these transactions, a noncontrolling interest of $1,267,394 was recognized in the consolidated financial statements.

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS
9 Months Ended
Sep. 30, 2016
Notes to Financial Statements  
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

NOTE 3 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

 

Intangible Assets

 

Intangible assets consist of mining rights at MDB and RST and are not amortized as the mining rights are perpetual.  The carrying value was $630,842 and $508,865 at September 30, 2016 and December 31, 2015, respectively.

 

Accounts Payable and Accrued Liabilities

 

    As of     As of  
    September 30, 2016     December 31, 2015  
Accounts payable and other accruals   $ 245,377     $ 354,467  
Deposits on purchases of common stock     150,000       -  
Accrued interest     87,806       116,870  
Total   $ 483,183     $ 471,337  

XML 20 R10.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONVERTIBLE PROMISSORY NOTES PAYABLE
9 Months Ended
Sep. 30, 2016
Convertible Promissory Note Payable [Abstract]  
Convertible Promissory Note Payable

NOTE 4 – CONVERTIBLE PROMISSORY NOTES PAYABLE

 

Convertible Notes Payable - Fixed Conversion Price

 

On January 7, 2014, the Company issued to a family trust a Senior Secured Convertible promissory note in the principal amount of $244,000 (the "Note") and warrants to purchase an aggregate of 488,000 shares of the Company's common stock, par value $0.001 per share at an exercise price of $0.125 per share through December 26, 2018 (the "Warrants"). The Company received gross proceeds of $244,000 for the sale of such securities. The outstanding principal of the Note bears interest at the rate of 12% per annum. All principal on the Note was payable on September 30, 2015 (the "Maturity Date"), which as of the date of this filing is past due and in technical default. However, no demands for payment have been made. Interest was payable on September 30, 2014 and on the Maturity Date. The Note is convertible at the option of the holder into common stock of the Company at a conversion rate of one share for each $0.10 of principal and interest converted. A debt discount related to the value of the warrants in the amount of $10,252 was recorded and was being amortized over the life of the note.  During the nine months ended September 30, 2016 and 2015, $0 and $1,025 of the discount was amortized to interest expense, respectively. As of December 31, 2015, the discount was fully amortized.

 

In January 2015, the Company issued four convertible promissory notes totaling $200,000 in proceeds and options to purchase an aggregate of 40,000,000 shares of the Company's common stock at an exercise price of $0.005 per share for a period of three years. The convertible promissory notes incur interest at 10.0% and are due January 30, 2018. The convertible promissory notes are convertible at the option of the holder at a rate of $0.0024 per share. A debt discount related to the relative fair market value of the options in the amount of $22,423 and an implied beneficial conversion features of $22,423 were recorded, totaling $44,846 and are being amortized over the life of the notes.  During the nine months ended September 30, 2016 and 2015, $27,406 and $17,440 of the discount was amortized to interest expense, respectively. As of September 30, 2016, the discount was fully amortized to interest expense, and the notes were converted into 80,000,000 shares of the Company's common stock, 192,000 shares of JGC common stock, and 384,000 stock purchase warrants for JCG common stock. The 192,000 shares of JGC common stock were valued at $192,000, or $1.00 per share, which represents fair market value as of such date. The 384,000 warrants are exercisable at $1.50 for a two year period from issuance. The JGC warrants were valued at $37,426 using the Black-Scholes option pricing model and the following assumptions: an exercise price of $1.50, a stock price of $1.00 on the date of grant, an expected dividend yield of 0%, an expected volatility of 40.0%, a risk free interest rate of 0.71% and an expected term of 2.0 years. As a result, a noncontrolling interest of $229,426 was recorded in the consolidated financial statements.

 

In January 2015, the Company purchased machinery and equipment from a third party making an initial deposit of $10,910 (R$35,000), issuing notes payable totaling $38,963 (R$125,000) payable in five equal monthly installments starting March 15, 2015 and $43,638 in customer deposits (R$140,000) in which are to be satisfied through gravel produced by MDB. The note payable was convertible into common stock of the Company at the market rate on the date of issuance and thus a beneficial conversion feature was not recorded. In June 2015, the Company cancelled this agreement returning the machinery and equipment and forfeiting amounts already paid to the seller.

 

In June 2015, the Company issued three convertible promissory notes and received an aggregate $100,000 in proceeds. The convertible promissory notes incur interest at 10.0% per annum and are due December 31, 2016. The convertible promissory notes are convertible at the option of the holder at a 40% discount to the average of the five lowest closing prices of the Company's common stock over the previous 20 days. In addition, the notes conversion rate has a ceiling of $0.03 and a floor of $0.000033. A debt discount related to the beneficial conversion feature of $87,720 was recorded and is being amortized over the life of the notes. As of September 30, 201, the discount was fully amortized to interest expense, and the notes were converted into 100 shares of Series B Preferred Stock; see Note 5.

 

Convertible Notes Payable - Variable Conversion Price

 

On December 29, 2015, the Company filed with the Nevada Secretary of State a Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock ("Series C Stock") to designate 1,000,000 shares of a new series of preferred stock. The Series C Stock has an original issue price of $1,000 per share. Cumulative dividends on such shares are payable annually (or upon conversion of such stock into Common Stock) in Common Stock at the rate of $0.04 per share per annum. The holders of Series C Stock shall be entitled to vote on all matters as one class with the holders of Common Stock, with the holders of Series C Stock being entitled to such number of votes as shall equal the number of whole and fractional shares of Common Stock into which such share is then convertible. At any time until December 31, 2016 each holder of Series C Stock may elect to convert all or a portion of the preference amount into shares of Common Stock at a conversion price which is the lower of $0.00008 or the volume weighted average price of the Company's Common Stock for the 90 trading days before a notice of conversion with a floor of $0.00004. On December 31, 2016, all outstanding shares of Series C Stock shall automatically convert into Common Stock at the applicable conversion price.

 

On December 29, 2015, the Company issued 200,000 shares of Series C Stock in exchange for 1,000,000,000 shares of common stock in which had been previously sold for $80,000 in proceeds. In connection with the exchange, the Company recorded other expense of $170,000 due to the Series C Stock having an estimated fair market value of $250,000 on the date of the exchange. The Company estimated the fair market value of the Series C Stock based upon the number of common shares it could be converted into.

 

On July 30, 2016, the Company entered into an agreement with the holders of its Series C Preferred Stock whereby the holders exchanged 200,000 shares preferred stock for 125,000 shares of Jupiter Gold Corporation common stock. As a result, a noncontrolling interest of $125,000 was recorded in the consolidated financial statements.

 

Nine Months Ended September 30, 2016 Transactions

 

During the nine months ended September 30, 2016, the Company issued 350,000,000 shares of common stock for cash proceeds of $21,000. In addition, the Company received cash deposits in 150,000 for the sale of common stock. At September 30, 2016, the Company recorded the amount as a current liability.

 

During the nine months ended September 30, 2016, the Company issued 418,242,912 shares of common stock to its CEO in satisfaction of amounts payable. The shares were valued based upon the closing market price of the Company's common stock on the date the service was complete. In addition, the Company has agreed to issue additional shares of common stock if the effective price of a future common stock transaction decreases.

 

See Note 4 for discussion of additional common stock issuances.

 

Nine Months Ended September 30, 2015 Transactions

 

During the nine months ended September 30, 2015, the Company issued 7,409,184 shares of common stock with a fair market value of $24,808 to consultants in lieu of cash payments. The shares were valued based upon the closing market price of the Company's common stock on the date the service was complete.

 

Convertible Customer Deposits

 

In July 2015, as discussed below in Note 6, the Company has previously provided customers with the option to convert their deposits of diamonds into common stock if the diamonds are not delivered on the scheduled timeline.

 

Derivative Liabilities

 

In connection with convertible notes payable the Company records derivative liabilities for the conversion feature. The derivative liabilities are valued on the date of issuance of the convertible note payable and revalued at each reporting period. During the nine months ended September 30, 2015, the Company recorded derivative liabilities of $667,658 based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.0015 to $0.00005, our stock price on the date of grant ($0.0033 to $0.0001), expected dividend yield of 0%, expected volatility of 217.53% to 313%, risk free interest rate of 0.12% and an expected term of 0.50 years. Upon initial valuation, the derivative liability exceeded the face value of the convertible note payable of $302,111, a day one loss on derivative liability of $372,878 was recorded. No derivative liabilities were recorded during the nine months ended September 30, 2016.

 

On September 30, 2016, the derivative liabilities were revalued at $88,175 resulting in a gain of $193,170 related to the change in fair market value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following average assumptions: an exercise price of $0.00005, our stock price on the date of valuation ($0.0002), expected dividend yield of 0%, expected volatility of 446%, risk-free interest rate of 0.45%, and an expected term of 0.25 years.

 

Future Potential Dilution

 

Most of the Company's convertible notes payable contain adjustable conversion terms with significant discounts to market. As of September 30, 2016, the Company's convertible notes payable from holders indicating desire to convert into equity are convertible into an aggregate of approximately 3.2 billion shares of common stock. Due to the variable conversion prices on some of the Company's convertible notes, the number of common shares issuable is dependent upon the traded price of the Company's common stock. As of September 30, 2016, if all holders of convertible notes payable exercised their right to the common stock, the Company would have an obligation to issue shares of its common stock in excess of its authorized, but unissued shares of common stock. In November 2016, the Company amended its Articles of Incorporation to increase its authorized number of shares of common stock by 2.5 billion shares to fifteen (15) billion shares.

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STOCKHOLDERS' EQUITY
9 Months Ended
Sep. 30, 2016
Common Stock Disclosure [Abstract]  
STOCKHOLDERS' EQUITY

NOTE 5 – STOCKHOLDERS' DEFICIT

 

Authorized and Amendments

 

On March 21, 2016, the Company amended its Articles of Incorporation to increase the authorized number of shares of its common stock to ten (10) billion shares. On August 23, 2016, the Company further amended its Articles of Incorporation to increase the authorized number of shares of its common stock to twelve and one half (12.5) billion shares.

 

As of December 31, 2015, the Company had seven (7) billion common shares authorized with a par value of $0.001 per share.

 

Series A Preferred Stock

 

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

 

Series B Preferred Stock

 

On August 26, 2015, the Company filed with the Nevada Secretary of State a Certificate of Designations, Preferences and Rights of par value $0.001 Series B Convertible Preferred Stock ("Series B Stock") to designate 1,000,000 shares of a new series of preferred stock. The Series B Stock has an original issue price of $1,000 per share. Cumulative dividends on such shares are payable annually (or upon conversion of such stock into Common Stock) in Common Stock at the rate of 10% per stated share value per annum. The holders of Series B Stock shall be entitled to vote on all matters as one class with the holders of Common Stock, with the holders of Series B Stock being entitled to such number of votes as shall equal the number of whole and fractional shares of Common Stock into which such share is then convertible. At any time until December 31, 2016 each holder of Series B Stock may elect to convert all or a portion of the preference amount into shares of Common Stock at a conversion price which is a 40% discount to the average of the lowest 5 closing prices of the Common Stock in the 20 calendar day period before a notice of conversion is given, but the conversion price shall not be higher than $.03 nor lower than $.000033. On December 31, 2016, all outstanding shares of Series B Stock shall automatically convert into Common Stock at the applicable conversion price. During the nine months ended September 30, 2016, the Company accrued dividends of $82,350, recorded as interest expense which increased the dividends payable balance to $92,783 at September 30, 2016.

 

During the year ended December 31, 2015, the Company issued 273 shares of Series B Stock for $270,000 in cash proceeds. In addition, six shares of Series B Stock were issued to a placement agent.

 

As discussed in Note 4, during the year ended December 31, 2015, the Company issued 100 shares of Series B Stock in satisfaction of $100,000 in convertible notes payable. In connection with the exchange, the Company recorded other expense of $66,667 due to the Series B Stock having an estimated fair market value of $166,667 on the date of the exchange. The Company estimated the fair market value of the Series B Stock based upon the number of common shares it could be converted into.

 

See Note 6 for discussion related to the exchange of customer deposits received in connection with the delivery of diamonds for 668 shares of Series B Stock.

 

During the three months ended September 30, 2016, the Company entered into an agreement with the holders of its Series B Preferred Stock whereby the holders exchanged 471.3 shares preferred stock for 785,248 shares of Jupiter Gold Corporation common stock and options to purchase common stock of Jupiter Gold. The options were issued in two tranches. The first tranche of 581,548 options are exercisable at $1.50 for a one year period from issuance. The second tranche of 785,248 options are exercisable at $1.50 for a two year period from issuance. The options were valued at $97,349 using the Black-Scholes option pricing model and the following assumptions: an exercise price of $1.50, a stock price of $1.00 on the date of grant, an expected dividend yield of 0%, an expected volatility of 40.0%, a risk free interest rate of 0.56%-0.72% and an expected term of 1.0-2.0 years. As a result, a noncontrolling interest of $980,847 was recorded in the consolidated financial statements.

 

Series C Preferred Stock

 

On December 29, 2015, the Company filed with the Nevada Secretary of State a Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock ("Series C Stock") to designate 1,000,000 shares of a new series of preferred stock. The Series C Stock has an original issue price of $1,000 per share. Cumulative dividends on such shares are payable annually (or upon conversion of such stock into Common Stock) in Common Stock at the rate of $0.04 per share per annum. The holders of Series C Stock shall be entitled to vote on all matters as one class with the holders of Common Stock, with the holders of Series C Stock being entitled to such number of votes as shall equal the number of whole and fractional shares of Common Stock into which such share is then convertible. At any time until December 31, 2016 each holder of Series C Stock may elect to convert all or a portion of the preference amount into shares of Common Stock at a conversion price which is the lower of $0.00008 or the volume weighted average price of the Company's Common Stock for the 90 trading days before a notice of conversion with a floor of $0.00004. On December 31, 2016, all outstanding shares of Series C Stock shall automatically convert into Common Stock at the applicable conversion price.

 

On December 29, 2015, the Company issued 200,000 shares of Series C Stock in exchange for 1,000,000,000 shares of common stock in which had been previously sold for $80,000 in proceeds. In connection with the exchange, the Company recorded other expense of $170,000 due to the Series C Stock having an estimated fair market value of $250,000 on the date of the exchange. The Company estimated the fair market value of the Series C Stock based upon the number of common shares it could be converted into.

 

On July 30, 2016, the Company entered into an agreement with the holders of its Series C Preferred Stock whereby the holders exchanged 200,000 shares preferred stock for 125,000 shares of Jupiter Gold Corporation common stock. As a result, a noncontrolling interest of $125,000 was recorded in the consolidated financial statements.

 

Nine Months Ended September 30, 2016 Transactions

 

During the nine months ended September 30, 2016, the Company issued 350,000,000 shares of common stock for cash proceeds of $21,000. In addition, the Company received cash deposits in 150,000 for the sale of common stock. At September 30, 2016, the Company recorded the amount as a current liability.

 

During the nine months ended September 30, 2016, the Company issued 418,242,912 shares of common stock to its CEO in satisfaction of amounts payable. The shares were valued based upon the closing market price of the Company's common stock on the date the service was complete. In addition, the Company has agreed to issue additional shares of common stock if the effective price of a future common stock transaction decreases.

 

See Note 4 for discussion of additional common stock issuances.

 

Nine Months Ended September 30, 2015 Transactions

 

During the nine months ended September 30, 2015, the Company issued 7,409,184 shares of common stock with a fair market value of $24,808 to consultants in lieu of cash payments. The shares were valued based upon the closing market price of the Company's common stock on the date the service was complete.

 

During the nine months ended September 30, 2015, the Company issued 230,043,183 shares of common stock to its CEO in satisfaction of amounts payable. The shares were valued based upon the closing market price of the Company's common stock on the date the service was complete.

 

During the nine months ended September 30, 2015, the Company issued 750,897,439 shares of common stock for cash proceeds of $152,500.

 

Common Stock Options

 

In January 2015, options to purchase 400,000,000 shares of common stock were issued in connection with $200,000 in convertible notes payable. See Note 4 for additional information. The options expire on January 30, 2018 and have an exercise price of $0.005 per share. The fair value of the options was $79,111, of which $22,423 was allocated to the options based upon the relative fair market value. The options were valued using the Black-Scholes option pricing model with the following assumptions: our stock price on date of grant ($0.0024), expected dividend yield of 0%, expected volatility of 176.16%, risk-free interest rate of 1.70%, and an expected term of 3.00 years.

 

During the nine months ended September 30, 2015, the Company granted options to purchase an aggregate of 12,922,854 shares of common stock to non-management directors. The options were valued at $39,200 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 ($0.0018), expected dividend yield of 0%, expected volatility of 176%, risk-free interest rate of 1.70%, and an expected term of 5.00 years.

 

During the nine months ended September 30, 2016, the Company granted options to purchase an aggregate of 313,340,000 shares of common stock to non-management directors. The options were valued at $25,000 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 ($0.0001), expected dividend yield of 0%, historical volatility of 113%, risk-free interest rate of 1.13%, and an expected term of 5.00 years.

 

See Note 6 discussion regarding options issued in connection with future diamond sales.

 

Common Stock Warrants

 

In June 2015, in connection with a common stock raise, the Company issued warrants to purchase an aggregate of 31,153,846 shares of the Company's common stock that expire on August 31, 2017 and have an exercise price of $0.001 per share. The value of the warrants was approximately $30,000 based upon Black-Scholes option pricing model. No entry was required as the warrants were issued in connection with raising capital and thus would have offset any proceeds received.

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COMMITMENTS AND CONTINGENCIES
9 Months Ended
Sep. 30, 2016
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure

NOTE 6 – COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

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

 

Mine Option

 

On July 30, 2013, the BMIX Subsidiary acquired for zero cost an option to develop and own up 75% of a vanadium, titanium, and iron property in the state of Piauí in Brazil in exchange for the performance over a period of time of certain defined geological research steps, as well as the payment, over a period of time, of 875,000 Brazilian reais in cash ($269,675 as of September 30, 2016) and the equivalent of 125,000 Brazilian reais in common stock ($38,525 as of September 30, 2016). To date the option has not been exercised.

 

Diamond Delivery Agreements

 

On March 4, 2014, the Company received proceeds of $500,000 from a sale of polished and GIA graded diamonds pursuant to an agreement with two buyers that agreed to receive these diamonds over a period of one year. One of the buyers has expertise and a long and successful history of investments in natural resources. As part of this transaction, the Company pledged with a third party collateral agent an aggregate of 11,000,000 shares of its common stock, valued at approximately $990,000 at the time the transaction was consummated, in order to secure the delivery of the diamonds. The number of shares pledged is subject to periodic adjustment as diamonds are delivered and as the market price of our common stock may change. The Company also issued to the buyers two-year options to purchase an aggregate of 3,000,000 shares of its common stock at an exercise price (subject to adjustment upon the occurrence of certain events) of $0.12 per share, a premium of 33% above the stock price when the transaction was consummated. These options initially expired on March 4, 2016 and have an exercise price of $0.12, which was reduced to $0.08 per share in October 2014 and the expiration date extended to March 4, 2018. The fair value of the options was $93,280 was calculated using the Black-Scholes option pricing model with the following assumptions: our stock price on date of grant ($0.09), expected dividend yield of 0%, expected volatility of 77.56%, risk-free interest rate of 0.78%, and an expected term of 2 years. In July 2015, the Company extended these agreements until December 31, 2016. Under the new agreements, quarterly the Company is required to deliver diamonds with $15,000 in aggregate Rappaport value. If the diamonds are not delivered, then the customer has the option of converting the required value at 50% of market. Due to the variable conversion price, the Company is recording a derivative liability upon each tranche becoming convertible. As of September 30, 2015, total amounts convertible into common stock were $35,158. In addition, the collateral shares for this contract were increased to 465,293,570. During the year ended December 31, 2015, the Company did not deliver any of the diamonds. 

 

On April 30, 2014, the Company entered into Subscription Agreements with four investors (the "Buyers"), pursuant to which the Buyers agreed to pay to the Company an aggregate of $500,000 and the Company agreed to deliver to the Buyers from time to time on or before December 31, 2015, polished and GIA-graded diamonds of at least 0.4 carats having a certain aggregate Rappaport value. The Company agreed to pledge with third party collateral agents for the Buyers an aggregate of 8,000,000 shares of its common stock, valued at approximately $800,000 at the time the transaction was consummated, in order to secure the delivery of the diamonds. The number of shares pledged is subject to periodic adjustment as diamonds are delivered and as the market price of the Company's stock may change. As of December 31, 2014, the required reserve was 123,076,923 shares of common stock. On the date of the agreement, the Company reserved for the Buyers or their designees, an aggregate of 3,750,000 shares of the Company's common stock (the "Shares") and two year options to purchase an aggregate of 1,875,000 shares of Common Stock at an exercise price of $0.12 per share, payable in cash to the Company (the "Options"). The fair value of the options was $57,662 was calculated using the Black-Scholes option pricing model with the following assumptions: our stock price on date of grant ($0.09), expected dividend yield of 0%, expected volatility of 77.56%, risk-free interest rate of 0.11%, and an expected term of 2 years.  The common stock issued was valued at $348,750 based upon the closing market price of the Company's common stock. Since the agreement contained various elements, the Company allocated the $47,544 to the options, $287,552 to the shares issued and $164,904 to deferred revenue based upon the relative fair market value.  In July 2015, the Company extended these agreements until December 31, 2016. Under the new agreements, quarterly the Company is required to deliver diamonds with aggregate Rappaport values ranging from $10,000 to $20,000. If the diamonds are not delivered, then the customer has the option of converting the required value at 50% of market. Due to the variable conversion price, the Company is recording a derivative liability upon each tranche becoming convertible. As of September 30, 2015, total amounts convertible into common stock were $40,000. A total of 200,000,000 in collateral shares were issued for this contract. There were no deliveries under this contract during the year ended December 31, 2015.

 

On December 30, 2015, the diamond agreements described were exchanged for 668 shares of Series B Stock. Under the terms of the agreement, all obligations under the agreement to deliver diamonds and other guarantees were removed, including the derivative liability. On the date of the exchange the Company determined that the value of the Series B Stock was $1,113,333 based upon the number of common shares the Series B Stock is convertible into. The agreement relieved $543,630 in customer deposits, $182,300 in derivative liabilities less a remaining discount of $68,057, a total relief of $657,873. The Company recorded the excess value of the Series B Stock issued of $455,460 as a loss on extinguishment.

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RELATED PARTY TRANSACTIONS
9 Months Ended
Sep. 30, 2016
Related Party Transactions [Abstract]  
Related Party Transactions Disclosure

NOTE 7 - RELATED PARTY TRANSACTIONS

Brazil Mining, Inc.

 

Previously the Company had amounts due from Brazil Mining, Inc. ("BMI"), a related party through common management. The loans did not incur interest and were due on demand. During the year ended December 31, 2015, BMI transferred equipment with a carrying value of $44,854 to the Company as a partial offset to the amounts due. During December 2015, in satisfaction of the remaining receivable, BMI transferred the rights to two mineral right properties. At the time of the transfer, the Company's subsidiary RST retained a 50% ownership in these rights, thus, the value of the two mineral rights transferred is included within consolidation of RST. Thus, the Company recorded other expense of $93,580 during the year ended December 31, 2015 as the assets had already been reflected at their fair market value on the Company's financial statements. The Company agreed to the transaction to ensure there were no potential violations of the Sarbanes Oxley Act as the Company's CEO also controls BMI though management and stock holdings.

 

Chief Executive Officer

 

As of September 30, 2016 and December 31, 2015, amounts payable to the Chief Executive Officer for accrued salaries, retirement contributions, and advances made included within related party payable were $231,344 and $160,214, respectively. During 2015, $25,000 of the balance was converted into shares of the Company's common stock at a 50% discount to market. In addition, the agreement included a true up provision which requires the Company to issue additional shares of common stock after conversion or true up at the lowest effective common stock transaction for a period of up to 250 trading days. See common stock issuances above for disclosure of amounts converted and shares issued.

 

The following is a roll forward of amounts due to the Chief Executive Officer for the nine months ended September 30, 2016:

 

Balance at December 31, 2015   $ 160,214  
Salary Accrual     112,500  
401(k) Contribution Accrual     40,500  
Advances to the Company     7,740  
Repayments     (85,570 )
Issuance of Common Stock     (4,040 )
Balance at September 30, 2016    $ 231,344  
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SUBSEQUENT EVENTS
9 Months Ended
Sep. 30, 2016
Subsequent Events [Abstract]  
Subsequent Events

NOTE 8 - SUBSEQUENT EVENTS

 

In accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to June 30, 2016 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.

 

The Company increased its authorized shares to 15 billion on November 3, 2016.

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ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
9 Months Ended
Sep. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Description of Business

Organization and Description of Business

 

Brazil Minerals, Inc. ("BMIX" or the "Company") was incorporated as Flux Technologies, Corp. under the laws of the State of Nevada, U.S. on December 15, 2011.  The Company, through subsidiaries, mines and sells diamonds, gold, sand and mortar. The Company, through subsidiaries, outright or jointly owns 10 mining concessions and 28 other mineral rights in Brazil, for diamonds, gold, and sand. The Company, through subsidiaries, owns a large alluvial diamond and gold processing and recovery plant, a sand processing and mortar plant, trucks and earth-moving capital equipment used for mining.

 

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its 99.99% owned subsidiary, BMIX Participações Ltda. ("BMIX Subsidiary"), which includes the accounts of its wholly-owned subsidiary, Mineração Duas Barras Ltda. ("MDB").

 

During the year ended December 31, 2014, the BMIX Subsidiary acquired an initial 25% interest in RST Recursos Minerais Ltda. ("RST"), and during the first quarter of 2015, it acquired an additional 25% interest in RST, thus bringing its total ownership of RST to 50%. As of March 18, 2015, RST has been consolidated within the Company's financial statements.

 

On April 17, 2015, the BMIX Subsidiary incorporated Hercules Resources Corporation ("HRC"). On May 27, 2015, HRC formalized title to 99.99% of Hercules Brasil Comercio e Transportes Ltda. ("Hercules Brasil"). Thus, as of December 31, 2015, Hercules Brasil is a wholly owned subsidiary and has been consolidated within the Company's consolidated financial statements.

 

On July 27, 2016, upon approval by its Board of Directors, the Company entered into a stock purchase and sale agreement pursuant to which HRC transferred its 99.99% equity interest in Mineração Jupiter Ltda to the Company which immediately thereafter sold such equity interest to Jupiter Gold Corporation ("JGC"), a newly created company. In addition, the Company simultaneously acquired all of the common stock of JGC. As such, the accounts and results of JGC and MJL have been included in the Company's consolidated financial statements. See Note 2 for more information.

 

All material intercompany accounts and transactions have been eliminated in consolidation. See subsequent events for discussion of an additional subsidiary formed subsequent to quarter end.

Going Concern

Going Concern

The consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has limited working capital, has incurred losses in each of the past two years, and has not yet received material revenues from sales of products or services. These factors create substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

 

The ability of the Company to continue as a going concern is dependent on the Company generating cash from its operations, the sale of its stock, and/or obtaining debt financing. During the nine months ended September 30, 2016, the Company funded operations through the receipt of proceeds from revenues, and the sale of equity and debt securities. Management's plan to fund its capital requirements and ongoing operations include an increase in cash received from sales primarily of gold derived from processing in a small, low operational cost gold plant its inventory of alluvial material and gravel already mined, as well as an increase in cash received from mortar and sand sales, all of which are expected to occur within the next two quarters. Management's secondary plan to cover any shortfall is selling its equity securities and obtaining debt financing. There can be no assurance the Company will be successful in these efforts.

Interim Consolidated Financial Statements

Interim Consolidated Financial Statements

The accompanying unaudited interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission.  Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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.  These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2015. The results of operations for the nine months ended September 30, 2016 are not indicative of the results that may be expected for the full year.

Basis of Presentation

Basis of Presentation

The consolidated financial statements of the Company have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles ("GAAP") of the United States of America and are presented in U.S. dollars.

Use of Estimates

Use of Estimates

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

Fair Value of Financial Instruments

Fair Value of Financial Instruments

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

 

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 September 30, 2016 and December 31, 2015, the Company's derivative liabilities were considered a level 2 liability. See Note 4 for a discussion regarding the determination of the fair market value. The Company does not have any level 3 assets or liabilities. 

 

The Company's financial instruments consist of cash and cash equivalents, accounts receivable, taxes recoverable, prepaid expenses, inventory, deposits and other assets, accounts payable, accrued expenses, deferred revenue and convertible notes payable. The carrying amount of these financial instruments approximates fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent that the funds are not being held for investment purposes. The Company's bank accounts are deposited in FDIC insured institutions. Funds held in U.S. banks are insured up to $250,000 and funds held in Brazilian banks are insured up to 250,000 Brazilian Reais (translating into approximately $70,050 as of September 30, 2016).

Inventory

Inventory

Inventory for the Company consists of rough diamonds, gold, ore stockpile, parts, supplies and related production costs and is stated at lower of cost or market. The amount of any write-down of inventories to net realizable value and all losses, are recognized in the period the write-down of loss occurs. At September 30, 2016 and December 31, 2015, all inventory consisted primarily of rough ore stockpile for gold and diamonds. No value was placed on sand.

Value-Added Taxes Receivable

Value-Added Taxes Receivable

The Company records a receivable for value added taxes recoverable from Brazilian authorities on goods and services purchased by its Brazilian subsidiaries. The Company intends to recover the taxes through the acquisition of capital equipment from sellers who accept tax credits as payments. On April 20, 2016, the Company's taxes receivable decreased by $50,100 with the recovery of such amount being used in the acquisition of a Mercedes Benz truck, through a state-government program.

Property and Equipment

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.

 

The diamond and gold processing plant and other machinery are depreciated over an estimated useful life of 10 years; and computer and other office equipment over an estimated useful life of 3 years. As of September 30, 2016 and December 31, 2015, all property and equipment related to the diamond, sand and mortar processing plants and other production machinery except for approximately $1,300 in computer equipment. Accumulated depreciation as of September 30, 2016 and December 31, 2015, was $253,995 and $157,381, respectively.

Mineral Properties

Mineral Properties

 

Costs of exploration, carrying and retaining unproven mineral lease properties are expensed as incurred. Mineral property acquisition costs, including licenses and lease payments, are capitalized. Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company's rights. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

 

Impairment losses are recorded on mineral properties used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. As of September 30, 2016 and December 31, 2015, the Company did not recognize any impairment losses related to mineral properties held.

 

Intangible Assets

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 right agreements held by MDB, RST, and MJL.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

 

For long-lived assets, such as property and equipment and intangible assets subject to amortization, the Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. 

Revenue Recognition

Revenue Recognition

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.  Typically, the Company records revenues upon delivery of the products to the customer. As of September 30, 2016 and December 31, 2015, the Company had deposits of $0 and $0, respectively, related to proceeds received for future diamond and gravel sales which have been recorded as customer deposits. See Note 4 and 6 for additional information related to these agreements.

Costs of Goods Sold

Costs of Goods Sold

Included within costs of goods sold are the costs of cutting and polishing rough diamonds, and costs of production such as diesel fuel, labor, and transportation.

Stock-Based Compensation

Stock-Based Compensation

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

 

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

 

The Company has adopted a stock plan to attract, retain and motivate its directors, officers, employees, consultants and advisors. The Company's stock plan provides for the issuance of up to 15,000,000 common shares for employees, consultants, directors, and advisors.

Foreign Currency

Foreign Currency

The Company's foreign subsidiaries use a local currency as the functional currency. Resulting translation gains or losses are recognized as a component of accumulated other comprehensive income. Transaction gains or losses related to balances denominated in a currency other than the functional currency are recognized in the consolidated statements of operations. Net foreign currency transaction losses included in the Company's consolidated statements of operations were negligible for all periods presented.

Income Taxes

Income Taxes

We account for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. As of September 30, 2016 and December 31, 2015, the Company's deferred tax assets had a full valuation allowance.

 

Under ASC 740, a tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company has identified the United States Federal tax returns as its "major" tax jurisdiction.

 

Basic Income (Loss) Per Share

Basic Income (Loss) Per Share

The Company computes loss per share in accordance with ASC Topic 260, Earnings per Share, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. As of September 30, 2016, the Company's potentially dilutive securities relate to common stock issuable in connection with convertible notes payable, options and warrants. Dilutive loss per share for the three and nine months ended September 30, 2016 excludes all potential common shares if their effect is anti-dilutive. As of September 30, 2016, if all holders of preferred stock, convertible notes payable, options and warrants exercised their right to convert their securities to common stock, the common stock issuable would be in excess of the Company's authorized, but unissued shares of common stock.

 

Other Comprehensive Income

Other Comprehensive Income

 

Other comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, other than net income and including foreign currency translation adjustments. 

Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In April 2015, the FASB issued Accounting Standard Update ("ASU") 2015-03, Simplifying the Presentation of Debt Issuance Costs. This update requires capitalized debt issuance costs to be classified as a reduction to the carrying value of debt rather than a deferred charge, as is currently required. This update will be effective for the Company for all annual and interim periods beginning after December 15, 2015 and is required to be adopted retroactively for all periods presented, and early adoption is permitted. The Company adopted this ASU with no impact on the accompanying consolidated financial statements as the issuance costs were already accounted for as a reduction of the carrying value of the debt.

 

In August 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-15, "Presentation of Financial Statements Going Concern", which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. The guidance is not expected to have a material impact on the Company's financial statements. 

 

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The amendments in this update simplify the presentation of deferred taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. These amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The guidance is not expected to have a material impact on the Company's financial statements.

 

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

 

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

XML 26 R16.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Tables)
9 Months Ended
Sep. 30, 2016
Notes to Financial Statements  
Schedule of Accounts Payable and Accrued Liabilities

Accounts Payable and Accrued Liabilities

 

    As of     As of  
    September 30, 2016     December 31, 2015  
Accounts payable and other accruals   $ 245,377     $ 354,467  
Deposits on purchases of common stock     150,000       -  
Accrued interest     87,806       116,870  
Total   $ 483,183     $ 471,337  
XML 27 R17.htm IDEA: XBRL DOCUMENT v3.5.0.2
RELATED PARTY TRANSACTIONS (Tables)
9 Months Ended
Sep. 30, 2016
Common Stock Disclosure [Abstract]  
Schedule of Related Party Transactions

The following is a roll forward of amounts due to the Chief Executive Officer for the nine months ended September 30, 2016:

 

Balance at December 31, 2015   $ 160,214  
Salary Accrual     112,500  
401(k) Contribution Accrual     40,500  
Advances to the Company     7,740  
Repayments     (85,570 )
Issuance of Common Stock     (4,040 )
Balance at September 30, 2016    $ 231,344  
XML 28 R18.htm IDEA: XBRL DOCUMENT v3.5.0.2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)
9 Months Ended 12 Months Ended
Sep. 30, 2016
USD ($)
shares
Dec. 31, 2015
USD ($)
Sep. 30, 2016
BRL
shares
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | shares 15,000,000   15,000,000
Cash, FDIC Insured Amount $ 250,000    
Cost of Goods Sold, Depreciation 192,373 $ 157,381  
Interest-bearing Deposits in Banks and Other Financial Institutions 0 0  
Depreciation, Nonproduction $ 1,300 0  
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period | shares 1,210,391    
Accumulated depreciation property and equipment $ 253,995 157,381  
Deposits 0 $ 0  
US Banks [Member]      
Cash, FDIC Insured Amount $ 250,000    
Brazilian Banks [Member]      
Cash, FDIC Insured Amount | BRL     BRL 250,000
Brazilian Reais [Member]      
Noncontrolling Interest, Ownership Percentage by Parent 20.00%   20.00%
Cash, FDIC Insured Amount $ 70,050    
BMIX Participacoes Ltd [Member]      
Noncontrolling Interest, Ownership Percentage by Parent 99.99%   99.99%
Other Capitalized Property Plant and Equipment [Member]      
Property, Plant and Equipment, Useful Life 3 years    
Machinery and Equipment [Member]      
Property, Plant and Equipment, Useful Life 10 years    
XML 29 R19.htm IDEA: XBRL DOCUMENT v3.5.0.2
ACQUISITIONS (Details Narrative) - RST Recursos Minerais Ltda [Member] - USD ($)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Sale of Stock, Number of Shares Issued in Transaction   1,428,572
Fair value of Shares Issued in Transaction $ 124,680 $ 43,868
Monthly payments for acquisition $ 100,000  
Business Acquisition, cash paid   $ 107,858
Purpose of acquisition  

The purpose of the Company's acquisition of RST was due to the quality of its mineral assets, close proximity to the Company's MDB diamond and gold processing and recovery plant, and the attractive acquisition price. Pro-forma financial statements have not been provided as the assets, liabilities and operations of RST are not significant. The Company expects the future expected cash flows to exceed the carrying value of the assets due to the close proximity to MDB's plant which is expected to shorten the exploration period as new plant and equipment do not need to be procured.

XML 30 R20.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Details) - USD ($)
Sep. 30, 2016
Dec. 31, 2015
Notes to Financial Statements    
Accounts payable and other accruals $ 245,377 $ 354,467
Deposits on purchases of common stock 150,000 0
Accrued interest 87,806 116,870
Total $ 483,183 $ 471,337
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (Details Narrative) - USD ($)
Sep. 30, 2016
Dec. 31, 2015
Notes to Financial Statements    
Intangible assets $ 630,842 $ 508,865
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONVERTIBLE PROMISSORY NOTES PAYABLE (Details Narrative)
1 Months Ended 9 Months Ended
Jan. 31, 2015
USD ($)
$ / shares
Jan. 31, 2014
Sep. 30, 2016
USD ($)
$ / shares
shares
Sep. 30, 2015
USD ($)
$ / shares
shares
Sep. 30, 2016
BRL
shares
Jul. 30, 2016
USD ($)
Dec. 31, 2015
USD ($)
shares
Jan. 07, 2014
USD ($)
$ / shares
shares
Fair Value Measurements, Valuation Techniques     Black-Scholes option pricing model Black-Scholes option pricing model        
Fair Value Assumptions, Expected Dividend Rate     0.00% 0.00%        
Fair Value Assumptions, Expected Volatility Rate     446.00%          
Fair Value Assumptions, Risk Free Interest Rate     0.45% 0.12%        
Fair Value Assumptions, Expected Term     3 months          
Debt Instrument, Unamortized Discount     $ 98,491       $ 302,111  
Exercise price | $ / shares     $ 1.50          
Stock price | $ / shares     $ 0.00005          
Amortization of Debt Discount (Premium)     $ 199,886 $ 667,417        
Conversion Of Convertible Debt Amount Issued     35,158 40,000        
Derivative liabilities     88,175          
Change in fair market value of the derivative liabilities     $ 193,170          
Loss on derivative liability       $ 372,878        
Common Stock Shares Issued | shares     12,421,756,892   12,421,756,892   6,219,391,446  
Common Stock Value     $ 12,421,757       $ 6,219,392  
Noncontrolling interest     150,000     $ 125,000    
Receipt of cash from sale of common stock     $ 150,000          
Chief Executive Officer [Member]                
Common Stock Shares Issued | shares     418,242,912   418,242,912      
Consultants [Member]                
Common Stock Shares Issued | shares     750,897,439 7,409,184 750,897,439      
Common Stock Value     $ 152,500 $ 24,808        
Minimum [Member]                
Fair Value Assumptions, Expected Volatility Rate       217.53%        
Fair Value Assumptions, Risk Free Interest Rate     0.56%          
Fair Value Assumptions, Expected Term     1 year          
Stock price | $ / shares       $ 0.0033        
Maximum [Member]                
Fair Value Assumptions, Expected Volatility Rate       313.00%        
Fair Value Assumptions, Risk Free Interest Rate     0.72%          
Fair Value Assumptions, Expected Term     2 years          
Stock price | $ / shares       $ 0.0001        
Two Hundred Forty-Four Thousand [Member]                
Debt Instrument, Issuance Date   Jan. 07, 2014            
Debt Instrument Aggregate Face Amount | BRL         BRL 244,000      
Debt Instrument, Face Amount | BRL         BRL 244,000      
Maturity date   Sep. 30, 2015            
Debt Instrument, Unamortized Discount       $ 1,025        
Convertable Promissory Note Payable [Member]                
Debt Instrument Aggregate Face Amount               $ 244,000
Debt Instrument, Face Amount               $ 244,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares               488,000
Debt Instrument, Interest Rate, Stated Percentage               12.00%
Debt Instrument Convertible Conversion Price Of Warrants | $ / shares               $ .12
Fair Value Assumptions, Expected Dividend Rate 0.00%              
Fair Value Assumptions, Expected Volatility Rate 87.67%              
Fair Value Assumptions, Risk Free Interest Rate 0.07%              
Fair Value Assumptions, Expected Term 8 months 1 day              
Stock price | $ / shares $ 1.00              
Amortization of Debt Discount (Premium) $ 20,138              
Debt Instrument, Convertible, Stock Price Trigger | $ / shares $ 0.11              
Debt Instrument, Call Feature one-half of the stock and cash              
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.5.0.2
STOCKHOLDERS' DEFICIT (Details Narrative)
1 Months Ended 9 Months Ended
Jan. 31, 2015
USD ($)
$ / shares
Sep. 30, 2016
USD ($)
$ / shares
shares
Sep. 30, 2016
BRL
Sep. 30, 2015
USD ($)
$ / shares
shares
Sep. 30, 2016
BRL
shares
Jul. 30, 2016
USD ($)
Dec. 31, 2015
USD ($)
$ / shares
shares
Dec. 31, 2015
BRL
shares
Apr. 30, 2014
$ / shares
Mar. 04, 2014
$ / shares
Common Stock Shares Authorised | shares   12,500,000,000     12,500,000,000   7,000,000,000 7,000,000,000    
Common Stock, Par value   $ 0.001         $ 0.001      
Common Stock Shares Issued | shares   12,421,756,892     12,421,756,892   6,219,391,446 6,219,391,446    
Common Stock Value | $   $ 12,421,757         $ 6,219,392      
Interest expense | BRL     BRL 82,350              
Dividends payable | BRL         BRL 92,783          
Exercise price   $ 1.50                
Stock Price   $ 1.00             $ 0.09 $ 0.09
Fair value of warrants | BRL     BRL 97,349              
Fair Value Measurements, Valuation Techniques   Black-Scholes option pricing model Black-Scholes option pricing model Black-Scholes option pricing model            
Expected Life (years)   3 months 3 months              
Expected Volatility   446.00% 446.00%              
Expected dividend yield   0.00% 0.00% 0.00%            
Risk-free interest rate   0.45% 0.45% 0.12%            
Stock price on date of grant   $ 0.00005                
Warrants and Rights Outstanding | $   $ 218,656         $ 218,656      
Noncontrolling interest | $   150,000       $ 125,000        
Receipt of cash from sale of common stock | $   $ 150,000                
Common Stock [Member] | Equity Option [Member]                    
Exercise price $ 1.50                  
Fair Value Measurements, Valuation Techniques Black-Scholes option pricing model Black-Scholes option pricing model Black-Scholes option pricing model Black-Scholes option pricing model            
Expected Life (years) 3 years 5 years 5 years 5 years            
Expected Volatility 176.16% 113.00% 113.00% 176.00%            
Expected dividend yield 0.17% 0.00% 0.00% 0.00%            
Risk-free interest rate 300.00% 0.13% 0.13% 0.17%            
Stock price on date of grant   $ 0.0001   $ 0.0018            
Fair value of Options | $ $ 79,111                  
Chief Executive Officer [Member]                    
Common Stock Shares Issued | shares   418,242,912     418,242,912          
Consultants [Member]                    
Common Stock Shares Issued | shares   750,897,439   7,409,184 750,897,439          
Common Stock Value | $   $ 152,500   $ 24,808            
Minimum [Member]                    
Expected Life (years)   1 year 1 year              
Expected Volatility       217.53%            
Risk-free interest rate   0.56% 0.56%              
Stock price on date of grant       $ 0.0033            
Maximum [Member]                    
Expected Life (years)   2 years 2 years              
Expected Volatility       313.00%            
Risk-free interest rate   0.72% 0.72%              
Stock price on date of grant       $ 0.0001            
Series B Preferred Stock [Member]                    
Preferred Stock, Shares Issued | shares   584     584   1,047 1,047    
Sale proceed of Preffered Stock | BRL               BRL 270,000    
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMMITMENTS AND CONTINGENCIES (Details narrative) - USD ($)
1 Months Ended 9 Months Ended 12 Months Ended
Mar. 04, 2014
Apr. 30, 2014
Sep. 30, 2016
Sep. 30, 2015
Dec. 31, 2015
Notes to Financial Statements          
Amounts convertible into common         $ 40,000
Collateral shares issued         200,000,000
Customer deposits         $ 543,630
Derivative liabilities         182,300
Discount         68,057
Total relief         657,873
Loss on extinguishment         $ 455,460
Fair Value $ 93,280 $ 57,662      
Fair Value Assumptions, Method Used Black-Scholes option pricing model Black-Scholes option pricing model      
Stock price $ 0.09 $ 0.09 $ 1.00    
Fair Value Assumptions, Expected Term 2 years 2 years      
Fair Value Assumptions, Expected Volatility Rate 77.56% 77.56%      
Fair Value Assumptions, Expected Dividend Rate 0.00% 0.00%      
Fair Value Assumptions, Risk Free Interest Rate 0.11% 0.11%      
Value convertible into common stock     $ 35,158 $ 40,000  
Increasement of collateral shares     465,293,570 200,000,000  
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.5.0.2
RELATED PARTY TRANSACTIONS (Details)
9 Months Ended
Sep. 30, 2016
USD ($)
Related Party Transactions [Abstract]  
Balance at beginning $ 160,214
401(k) Contribution Accrual 40,500
Advances to the Company 7,740
Repayments (85,570)
Issuance of Common Stock (4,040)
Balance at ending $ 231,344
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.5.0.2
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)
12 Months Ended
Dec. 31, 2015
Sep. 30, 2016
Common Stock, Shares, Issued 6,219,391,446 12,421,756,892
Common Stock, Value, Issued $ 6,219,392 $ 12,421,757
Due to Other Related Parties 160,214 $ 231,344
Brazil Mining Inc [Member]    
Value of equipment transferred $ 44,854  
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.5.0.2
SUBSEQUENT EVENTS (Details narrative)
Nov. 03, 2016
shares
Common Stock Disclosure [Abstract]  
Increasement of authorized shares 15,000,000,000
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