Filing summary
Entity and period: The supplied filing is a Form 10-Q for Brazil Minerals, Inc. (formerly Flux Technologies, Corp.), an exploration-stage company, for the quarter ended March 31, 2013. This does not match the request metadata naming Atlas Lithium Corp.; verify the filing belongs to the intended issuer.
Financial results and position
- Revenue: $5,763 in Q1 2013, versus none in Q1 2012. The filing attributes the amount to the company’s share of diamond production revenue from its related party, Brazil Mining. It reports no gross margin or cost of revenue.
- Expenses and earnings: Operating expenses were $182,588, including $92,063 in management fees paid or payable to Brazil Mining. Net loss was $176,825, compared with $4,712 in the prior-year quarter. Basic and diluted loss per share was reported as $0.00, rounded.
- Cash flow: Cash used in operating activities was $224,729; investing activities used $1,300; financing provided no cash. Cash declined $226,029, from $863,189 at year-end 2012 to $637,160.
- Liquidity and liabilities: Current assets were $642,923 and current liabilities $25,213, yielding reported working capital of $617,710. Total liabilities were $25,213. The filing shows no material interest-bearing borrowings; it lists a $100 demand loan from a director and $6,263 due to Brazil Mining.
- Assets and equity: Total assets were $1,444,115, including $800,000 in mineral production rights and $637,160 in cash. Stockholders’ equity was $1,418,902. Accumulated deficit was $36,139,342 in the balance sheet.
- Cash concentration: The company disclosed that bank deposits exceeded the $250,000 insured limit at March 31, 2013.
Changes and business developments
- The company changed from a technology business to mineral exploration following a December 2012 change in control; it abandoned the technology business, which is presented as discontinued operations.
- In Q1, the company held a right to 20% of Brazil Mining’s diamond-production revenue associated with Brazil Mining’s 55% interest in Mineração Duas Barras Ltda. (MDB), and held exploration rights to the Borba Project in Amazonas.
- MDB reported Q1 revenue of $160,971 from gold and raw diamond sales, but those results were not consolidated into Brazil Minerals’ Q1 financial statements. The filing says Brazil Minerals acquired the full 55% economic interest in MDB on April 30, 2013, after quarter-end, and would consolidate MDB going forward.
- MDB’s processing plant was stopped for about a month while a generator was repaired. High seasonal rains also curtailed alluvial mining activity. MDB purchased a used dredge and was pursuing access to the electric grid, which management expected could materially reduce diesel costs.
- After quarter-end, the company hired a Vice President of Geology and appointed John Bell to its board. The filing describes geological assessment and sampling at Borba as preliminary; it provides no assay results.
Outlook, risks, and contingencies
- Management said available capital should fund operations for at least 12 months, but noted that additional equity or debt financing may be needed for acquisitions or investments. Its longer-term plan depends on developing mines and participating in other mineral projects.
- Risks identified include failure to discover commercially viable deposits, inadequate deposit size or quality, commodity-market fluctuations, regulation and environmental requirements, competition, key-personnel loss, weather, infrastructure disruption, and general economic conditions. Management also cautioned that mineral-property title may have defects.
- The CEO’s employment agreement provides for an annual salary of $150,000, rising to $175,000 or $200,000 if specified equity-raising thresholds are met; it also provides for $500,000 severance upon termination and $2 million upon certain changes in control. The agreement has no set term.
- The company reported no off-balance-sheet arrangements. Management concluded disclosure controls were effective as of March 31, 2013 and reported no material quarterly change in internal control over financial reporting.
- Management stated that no meaningful comparison could be made because the company was newly formed and had changed its business plan. The reported Q1 loss nevertheless rose from the prior-year quarter, when operations were minimal.
Important facts to verify
- Confirm the issuer: the filing identifies Brazil Minerals, Inc., not Atlas Lithium Corp.
- Reconcile the filing’s inconsistent share-count references: the cover page gives 70,963,463 shares and says “as of May 13, 2012,” while the balance sheet reports 69,963,434 shares at March 31, 2013; the cover-page date appears inconsistent with the May 2013 filing.
- Reconcile accumulated-loss figures: the balance sheet reports a $36.1 million accumulated deficit, while Note 1 says accumulated losses since inception were $313,967 and the statements report cumulative net loss of $356,000.
- Review the related-party transactions and the terms and completion of the April 30 MDB acquisition, including the distinction between Q1 operator revenue and revenue recognized by Brazil Minerals.
- Assess the company’s actual cash runway, uninsured bank balances, funding needs, and potential exposure under the CEO severance provisions.
- Seek geological, title, permitting, and operating evidence for Borba and MDB; the filing provides no clear assay results or demonstrated commercial reserve values.