Filing summary
Issuer discrepancy: The request identifies Atlas Lithium Corp., but the supplied filing is Brazil Minerals, Inc.’s Form 10-K. This summary reflects the filing provided, not an Atlas Lithium filing.
Business context and reporting period
Annual report for the fiscal year ended December 31, 2018, filed April 15, 2019. Brazil Minerals describes a dual strategy: build a portfolio of Brazilian mineral rights and mine selected areas for gold, diamonds, and sand. Its portfolio also includes exploration interests in lithium, cobalt, copper, nickel, manganese, and gemstones. The company consolidated Jupiter Gold, in which it held approximately 51.7% at year-end 2018.
Financial performance and liquidity
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $19,716 | $43,253 |
| Cost of revenue | $126,217 | $208,840 |
| Gross loss | $106,501 | $165,587 |
| Operating expenses | $1,052,830 | $1,217,217 |
| Loss from operations | $1,159,331 | $1,382,804 |
| Total other expense | $689,341 | $508,103 |
| Net loss attributable to Brazil Minerals shareholders | $1,666,200 | $1,691,433 |
| Net cash used in operating activities | $511,313 | $734,294 |
Revenue fell 54.4%, which management attributed to fewer months of mining and waiting for licensing of a new production area. Cost of revenue declined 39.6%; operating expenses declined 13.5%, chiefly due to lower stock-based compensation. Higher debt-discount amortization and fees contributed to the increase in other expense. Basic and diluted loss per share was $0.01 in 2018 versus $0.02 in 2017.
At December 31, 2018, cash was $2,407; current assets were $63,286 and current liabilities were $2,073,564, producing a 0.03 current ratio and a $2,010,278 working-capital deficit. Total liabilities were $2,261,987. Current debt included $866,624 of convertible notes, $228,320 of demand loans, and $447,330 of related-party notes and other payables. Operating cash outflow was partly offset by $389,274 of financing cash inflow; year-end cash was down from $84,107 in 2017. No cash interest or income taxes were reported as paid.
Material changes, outlook, and risks
- The company issued 210,986,220 shares in 2018 to convert $159,023 of notes and accrued interest. It reported approximately 1.402 billion potential shares issuable on conversion of year-end convertible notes, with variable conversion prices. Common shares outstanding increased from 121.3 million at year-end 2017 to 332.3 million at year-end 2018.
- After year-end, the company reported a private-placement funding campaign with $120,000 gross proceeds received to date, and an April 8, 2019 sale of 200 million shares for $100,000. The filing reported 462,591,931 common shares outstanding as of April 10, 2019.
- Management’s funding plan relies on operating cash generation, equity sales, and/or debt financing. It expected a new mining area to become operational in 2019 and planned further studies at several exploration properties; the filing provides no quantified production or revenue guidance.
- The auditor issued an unqualified opinion on the financial statements but highlighted substantial doubt about the company’s ability to continue as a going concern. The company reported recurring losses, limited working capital, minimal revenue, and dependence on additional financing; management stated there was no assurance its funding plans would succeed.
- Management reported positive visual gold observations in all 35 Pindaíba drill holes and a high likelihood of diamond recovery in 57% of holes. These are exploration observations, not established reserves. The company stated that none of its projects had reserves under the SEC definition and warned that prior NI 43-101 work was not prepared under SEC Industry Guide 7.
- Key risks include dilution and potentially large share issuance from discounted convertible debt, past-due notes (including a $244,000 note in technical default with a 30% default interest rate), demand loans, mining and environmental regulation, weather-related seasonality, exploration uncertainty, and reliance on the CEO. One Series A preferred share gives its holder 51% of total voting power.
- Management stated disclosure controls and internal control over financial reporting were effective as of year-end; the auditor did not attest to internal-control effectiveness. No material legal proceedings or off-balance-sheet arrangements were reported. The company does not expect to pay dividends in the foreseeable future.
Important facts for investors to verify
- Confirm that this Brazil Minerals filing is the intended document; it does not identify Atlas Lithium Corp. as the registrant.
- Review the audited financial statements and debt footnotes for maturity, default, conversion-price, accrued-interest, and dilution terms, including the related-party note.
- Verify subsequent financing proceeds, share issuances, and the current fully diluted share count; the filing’s post-year-end figures may not reflect later changes.
- Check licensing and operating status of the proposed new mining area and whether exploration results have been independently quantified; no SEC-defined reserves are disclosed.
- Assess the going-concern warning against actual cash balances, operating cash burn, and the company’s ability to raise capital.