Atlas Lithium Corp (filing registrant: Brazil Minerals, Inc.) — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; balance-sheet comparisons are with December 31, 2020. The filing identifies the registrant as Brazil Minerals, Inc., not Atlas Lithium Corp.
Business context
The company described a Brazil-focused minerals business combining a portfolio of mineral rights with mining of selected areas for gold, diamonds, and sand. It reported rights in lithium and several other minerals. The filing does not report material product or service revenue.
Financial performance and position
| Metric | Q1 2021 / March 31, 2021 | Comparable period / prior balance |
|---|---|---|
| Revenue | $4,459 | $2,630 in Q1 2020 |
| Gross loss | $18,530 | $26,603 in Q1 2020 |
| Operating expenses | $1,112,296 | $285,742 in Q1 2020 |
| Net loss attributable to Brazil Minerals stockholders | $716,022 | $522,618 in Q1 2020 |
| Cash and cash equivalents | $262,242 | $253,598 at December 31, 2020 |
| Total assets | $1,795,313 | $951,888 at December 31, 2020 |
| Total liabilities | $2,704,626 | $2,448,140 at December 31, 2020 |
| Working capital | Deficit of $2,294,870 | — |
| Cash flow from operations | Provided $488,711 | Used $190,647 in Q1 2020 |
| Cash flow from investing | Used $939,927 | Used $14,304 in Q1 2020 |
| Cash flow from financing | Provided $466,249 | Provided $258,291 in Q1 2020 |
Gross margin remained negative: cost of revenue exceeded revenue. Operating cash flow was helped substantially by an increase in accounts payable and accrued expenses. Investing outflow largely reflected a $939,927 increase in intangible assets. The filing says approximately $834,000 remained payable for mineral rights acquired during the quarter.
Changes, outlook, and risks
- Revenue increased 69.5% year over year, but remained very small. Management attributed lower cost of revenue to reduced production and mining costs, partly related to exploration activity and COVID-19 uncertainties.
- Operating expenses rose 289.3%, mainly due to public-company and financing-related general and administrative costs and stock-based compensation. Stock-based compensation was $711,446, versus $21,300 in Q1 2020.
- Other expense declined to $64,542 from $279,931, reflecting lower debt-related charges and the absence of the prior-year related-party share-exchange loss.
- Management anticipated revenue could increase with licensing of new production areas, but provided no quantified guidance. The filing states that limited working capital, recurring losses, and lack of material revenues create substantial doubt about the company’s ability to continue as a going concern. Funding plans rely on operating cash generation, equity sales, and debt financing; success is not assured.
- At March 31, convertible notes payable totaled $657,484 and related-party notes and other payables totaled $566,743. Some convertible notes were past due; variable-price conversion terms could cause dilution. The company issued 382,429,714 shares upon debt conversions during the quarter, and common shares outstanding increased to 2,552,577,359 from 1,997,930,297.
- Subsequent events: the filing reports a $270,000 debt conversion on April 9, a note conversion into 86,246,479 shares on May 6, and repayment of $276,391 to another lender on May 7. It states that after these transactions there was no outstanding investor debt on the books. A bylaw change filed April 12 prohibited certain third-party convertible debt with conversion prices that decrease as the stock price falls.
- COVID-19 had not been reported among the workforce, and local Brazilian operations continued; some exploration research was delayed by municipal restrictions on outside visitors. Other cited risks include mineral exploration and production uncertainty, regulation, commodity-market fluctuations, competition, weather, infrastructure, currency exposure, and key-person dependence.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing is for Brazil Minerals, Inc.; the request metadata names Atlas Lithium Corp.
- Review the going-concern disclosure, working-capital deficit, and the company’s dependence on future financing and operating cash generation.
- Reconcile equity-sale disclosures: the financial statements report $266,500 of private-offering proceeds, while Part II reports $191,500 of gross proceeds from common-stock sales during the quarter.
- Check the terms and status of past-due and variable-conversion notes, related-party obligations, and the subsequent debt conversions and payoff.
- Assess share issuance and potential dilution, including debt conversions and outstanding options.
- Confirm the status, valuation, and production prospects of mineral rights and whether licensing will generate meaningful revenue.