FORWARD LOOKING STATEMENTS

PART I

Item 1. Description of Business.

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. Now we have 30 mineral rights. These include:

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)

4 mineral rights in the phase of application for research permit ("Requerimento de Pesquisa").

Please refer to the table below for details on each of these mineral rights.

 

 

 

 

Some significant developments to our business during 2015 in chronological order were as follows:

(1)

In January 2015, Brazil's mining department approved the addition of sand as a mineral entity to one of our mining concessions. With the addition of sand, MDB's mining concession now permits the mining of diamonds, gold and sand. Geological work performed by an outside consultancy estimated at 454,813 tons the amount of free sand available superficially in one of several areas at our mining concession. Sand is beneficial to us in two ways: its cash flows are independent from diamond and gold operations and it is easily obtained with very low extraction costs. Our high quality sand, as attested by geochemical analysis, is sought after for use in civil construction and preparation of multiple materials. Sand is available naturally since we are at the margins of a river, but, in particular, sand can be continuously replenished or partially replenished over time since sand is also a byproduct of the processing of gravel at our diamond and gold recovery plant.

 

(2)

In March 2015, we retained José Francescatto, a well-known diamond and gold geologist, to be our Senior Geologist. Mr. Francescatto has over 36 years of experience primarily in diamond and gold properties. In particular, he was the Chief of Geology at Mineração Tejucana S/A ("Tejucana"). Tejucana has a revered history as the most successful diamond mining company in Brazil. It mined mostly inside the Jequitinhonha River using dredges. Our subsidiary RST is the successor owner for most of Tejucana's diamond and gold properties. The river banks of the RST areas were not explored by Tejucana, and thus remain promising locations for mining. Mr. Francescatto has also worked at Kinross, a large global miner.

 

 

(4)

In April 2015, we announced that we had mined our largest rough diamond to date at 4.01 carats. This diamond was cut and polished in Brazil, and yielded a highly attractive 2.01 carat pear shaped polished diamond.

(5)

In May 2015, we launched and began production of our mortar though our newly created subsidiary, Hercules Brasil Ltda. ("HBR").

Initially, Hercules is focused on the production and sale of mortar. A medium size plant that can produce mortar, grout and other industrialized sand products has been fully built and is operating. The plant is located next to a busy asphalt highway to facilitate transportation and is 18 miles away from our MDB sand mine. It operates on electric power which lowers costs and utilizes a staff of three. At full capacity, with a staff of five, the plant has the capacity to produce up to 25,000 bags of mortar per month.

The content of sand per weight in a mortar bag ranges from approximately 80% to 90%. On a per kilogram basis, the aggregate value realized from recent mortar sales is 10 to 40 times that of raw sand. Gross product margins obtained on initial mortar sales to stores have ranged from 100% to 300% depending on the type of mortar sold.

Specialists in mortar have worked in developing proprietary formulations which utilize the MDB raw sand for the Hercules mortar. Hercules currently produces the three basic types of mortar used in Brazilian construction: AC-I, AC-II, and AC-III, which have increasing levels of strength. Although mortars have been around for a long time, some specific and innovative solutions were devised that allow Hercules to increase the quality and lower the cost of its products. We believe that initial market response has noted that Hercules products are of high quality and comparable to the best national brands.

Hercules buys sand from our MDB mine and processes it at the mortar plant, adding specific other ingredients for each type of mortar, mixing them, and finally packaging the resulting mixtures in 20-kg bags. AC-I bags have blue details, whereas AC-II bags have details in red and AC-III green.

"Hercules" is the brand name adopted for the mortar business; it has been protected as a trademark in Brazil. Initial buyers of Hercules mortar have been small construction materials stores; some are already recurrent buyers with predictable bi-weekly orders. The Company believes that over time, it will have several additional as well as larger stores and chains as costumers. Some small amount of Hercules mortar has also been sold directly to retail buyers at higher gross margins. We believe that the metropolitan region of Montes Claros, northern part of Minas Gerais state, with a population of over 1 million residents, is an attractive market for our mortar.

In keeping with our entrepreneurial spirit, the entrance into construction materials added a new business which on a standalone basis can have strong prospects for margin and growth. Of relevance to us as a holding company is the fact that cash flows from the construction materials business are uncorrelated to those from diamond and gold mining.

(6)

In June 2015, we announced that we had cut our Brazilian fixed costs by 50% as a result of the relocation of our Brazilian administration to an office 15 miles away from our diamond, gold and sand mine operations. To facilitate oversight and communications we eliminated the Belo Horizonte office, which had been established before our acquisitions and located over 300 miles away from the MDB and RST areas. Because of savings in both labor and office costs and the elimination of travel and lodging expenses, the result of the relocation was a large decrease in Brazilian fixed costs.

(7)

In July 2015, we completed all contractual cash payments for the purchase of our 50% stake in RST, a Brazilian company with 10 mining concessions and  other minerals rights.. Prior to our involvement, the last time RST shares had been acquired by a publicly-traded company occurred in June 2008, when a Canadian issuer contractually agreed to pay US$10.5 million dollars for 100% of RST. Subsequently, and as part of such contractual agreement, this Canadian buyer paid US$2 million to the sellers, but was unable to pay the remainder due to the global financial crisis affecting its situation. RST was not explored by it or other owners since then and its areas have remained essentially untouched.

(8)

In September 2015, MDB obtained a 4-year renewal of its environmental license for operations ("Licença de Operação"). MDB can reapply for continuous renewals of such license every four years. On September 8, 2015, MDB's renewal application was voted favorably by the COPAM committee, which is made up of representatives from different segments of the local community; the tally was ten votes in favor of our renewal and one abstention. This public vote was held in Montes Claros, state of Minas Gerais, the nearest large city to MDB's mine. We believe that obtaining an environmental license for any mining company in Brazil is a substantial achievement, as the process is a long and detailed, and many studies are required.

(9)

In September 2015, we began to expand and improve a dirt road to connect our large diamond and gold recovery plant to the RST Initial Area a few miles away, where we intend to conduct operations for the next several years.

(10)

In November 2015, we filed the necessary documents for further permitting of a 24,708-acre gold area in the state of Amazonas, Brazil. In this filling, we have added the mineral copper, also identifiable in the area. In prior filings with the Securities and Exchange Commission, we have referred to this area as "Borba". It is a mineral right located in the Apui area of Amazonas, a region of the Amazon now well known for gold deposits.

(11)

In November 2015, we filed the necessary documents for further permitting of the second mineral right that belongs to MDB, and which encompasses an area of 982 acres. This mineral right has not been explored before and holds promise for future mining for diamonds and gold. Our technical team encountered in this area a type of gravel locally called "grupiária", which is known for having a lower density concentration of diamonds but yielding much larger stones diamonds when they do occur.

Emerging Growth Company Status

 

We may be deemed to be an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. As long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding an annual nonbinding advisory vote on executive compensation and seeking nonbinding stockholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company."

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We will remain an "emerging growth company" for up to five years, although we would cease to be an "emerging growth company" prior to such time if we have more than $1 billion in annual revenue, more than $700 million in market value of our common stock held by non-affiliates, or issue more than $1 billion of non-convertible debt over a three-year period.

Demand

Competition

 

Our competitive position among suppliers of diamonds and gold is particularly strong because both MDB and RST are known companies in the Brazilian diamond trade and have the necessary minerals rights and environmental licenses in place. Therefore, our merchandise, whether rough diamonds, polished diamonds, or gold is able to be purchased openly and without restrictions since all of the supporting proof of provenance is available and in good order. Other producers that lack rights or licenses do not enjoy our position and can only sell into the "black market," possibly at a substantial discount and facing legal risks.

  

A secondary reason for our strong competitive position is that the diamonds from the Jequitinhonha River valley are known in Brazil and in global diamond centers to be of high quality. Since our sources of diamonds are secondary valley deposits, it is presumed that the primary kimberlitic source of such diamonds suffered erosion by the river for millions of years. In this lengthy process, over millions of years, smaller, but well proportioned, "hardy" gems resulted. These rough diamonds are fairly easy to be cut and polished, and yield attractive, naturally-appealing polished diamonds.

 

Our ability to mine for diamonds and gold is highly seasonal. The rainy season where our diamond and gold production is lasts from December through April. We therefore expect that during these months our revenues will be substantially lower than during other periods. The ability to retrieve sand from our sand mine is also impacted during this rainy season, but in lesser scale. The ability to produce mortar is impacted only in the strongest adverse weather such as sometimes occur in January and February, with the heaviest rains.

We do not have any material dependence on any raw material or raw material supplier. All of the raw materials that we need are available from numerous suppliers and at market-driven prices.

We have secured the right to use the name "Hercules" for our mortar with the Brazilian intellectual property agency. We have proprietary formulations for three different types of mortar that we sell.

  

Environmental Regulation and Compliance

 

Export Regulation

 

The export of rough diamonds from Brazil complies with the United Nations Kimberley Process certification system of which Brazil is a signatory country. This system was implemented by a large number of member countries of the United Nations to marginalize and prevent entrance to the diamond marketplace of those gems produced in areas where human exploitation and other specific illicit activities exist. To our knowledge, Brazil was never a jurisdiction that had any issues of these types.

 

Our SEC filings are available from the SEC's internet website at www.sec.gov which contains reports, proxy and information statements and other information regarding issuers that file electronically. These reports, proxy statements and other information may also be inspected and copied at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.

Some, but not all, of our operating risk factors and the risks of any investment in our stock are listed below.

Risks Related to Our Operations

 

We have a limited operating history.

 

Our current business model and management team has been in place only since December 2012. Our limited operating history makes it difficult to evaluate our business or prospective operations. As an early stage company, we are subject to all of the risks inherent in the initial organization, financing, expenditures, complications, and delays inherent in a new business. Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive environment. Our business is dependent upon the implementation of our business plan. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.

 

Our ability to execute our business plan depends primarily on the continuation of a favorable mining environment in Brazil.

 

Mining operations in Brazil are heavily regulated. Any significant change in mining legislation or other changes in Brazil's current mining environment may slow down or alter our business prospects.

 

 

We do not have any reserves compliant with SEC Industry Guide 7.

 

Vaaldiam, a company which formally owned the mining concession which MDB now owns, performed geological studies in a subset of such mineral rights area leading to the publication of an NI 43-101 technical report in 2007, with an update in 2008, as required by the rules of the Canadian securities administrator. These NI 43-101 technical reports differ from the standards generally permitted in reports filed with the SEC. Therefore, investors should be aware that we have no "reserves" as strictly defined by SEC Industry Guide 7 since we have not performed any studies that follow the SEC Industry Guide 7, and that some or all of our mineralized material may never be confirmed or converted into SEC Industry Guide 7 compliant "reserves."

We have no plans to perform any studies that follow the SEC Industry Guide 7 at this time. The primary reason is that we know or have a good indication as to where diamondiferous and auriferous gravel layers are located, or can readily identify new locations using relatively inexpensive drilling and research methods without the need for an expensive study. At this time, the Company is focused on growing revenues and not in growing mineral assets compliant to Industry Guide 7. In the future, if and when we achieve cash flow profitability from operations, it is possible that we will revalue all or a substantial portion of our mineral rights utilizing the SEC Industry Guide 7 or other appropriate methodology.

We may be unable to find sources of funding if and when needed, resulting in the failure of our business.

 

  

Our quarterly and annual operating and financial results and our revenue are likely to fluctuate significantly in future periods.

 

Our quarterly and annual operating and financial results are difficult to predict and may fluctuate significantly from period to period. Our revenues, net income, and results of operations may fluctuate as a result of a variety of factors that are outside our control including, but not limited to, lack of sufficient working capital, equipment malfunction and breakdowns, inability to timely find spare machines or parts to fix the broken equipment, regulatory or licensing delays, and severe weather phenomena.

 

We do not intend to pay regular future dividends on our common stock and thus stockholders must look to appreciation of our common stock to realize a gain on their investments.

 

We have never paid a dividend and we do not have any plans to pay dividends in the foreseeable future. Our future dividend policy is within the discretion of our Board of Directors and will depend upon various factors, including future earnings, if any, our capital requirements and general financial condition, and other factors. Accordingly, stockholders must look solely to appreciation of our common stock to realize a gain on their investment. This appreciation may not occur, or may occur over a longer timeframe that is less interesting to short-term oriented investors.

 

 

We depend upon Marc Fogassa, our Chief Executive Officer and Chairman.

 

Our success is largely dependent upon the personal efforts of Marc Fogassa. Currently he is our only management team member that is fluent and fully conversant in both Portuguese, the language of Brazil, and English. The loss of the services of Mr. Fogassa would have a material adverse effect on our business and prospects. We maintain key-man life insurance on the life of Mr. Fogassa.

Risks Related to Our Capital Stock

 

Our Series A Preferred Stock has the effect of concentrating voting control over us in Marc Fogassa, our Chairman and Chief Executive Officer.

 

One share of our Series A Preferred Stock is issued, outstanding and held by Marc Fogassa, our Chairman and Chief Executive Officer. The Certificate of Designations, Preferences and Rights of our Series A Convertible Preferred provides that for so long as Series A Preferred Stock is issued and outstanding, the holders of Series A Preferred Stock shall vote together as a single class with the holders of our Common Stock, with the holders of Series A Preferred Stock being entitled to 51% of the total votes on all matters regardless of the actual number of shares of Series A Preferred Stock then outstanding, and the holders of Common Stock and any other class or series of capital stock entitled to vote with the Common Stock being entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power.

Our stock price may be volatile.

 

The market price of our Common Stock has been and is likely to continue to be volatile and could fluctuate in price in response to various factors, many of which are beyond our control, including the following:

(1)

our ability to grow and/or maintain revenue;

(2)

our ability to achieve profitability;

(3)

our ability to raise capital when needed;

(4)

our sales of our common stock;

(5)

our ability to execute our business plan;

(6)

our ability to acquire additional mineral properties;

(7)

legislative, regulatory, and competitive developments; and

(8)

economic and other external factors.

 

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

 

Because our common stock trades on the over-the-counter (OTC) market, you may not be able to buy and sell our common stock at optimum prices and you may face liquidity issues.

 

The trading of our stock on the OTC imposes, among others, the following risks:

·

Availability of quotes and order information

·

Liquidity risks

·

Dealer's spreads

Our convertible debt securities outstanding may adversely affect the market price for our common stock.

 

 

We may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing capital stock that would dilute your ownership.

 

We may largely finance our operations by issuing equity securities, which would materially reduce the percentage ownership of our existing stockholders. Furthermore, any newly issued securities could have rights, preferences, and privileges senior to those of our existing common stock. Moreover, any issuances by us of equity securities may be at or below the prevailing market price of our stock and in any event may have a dilutive impact on ownership interest of existing common stockholders, which could cause the market price of stock to decline. We may also raise additional funds through the incurrence of debt or the issuance or sale of other securities or instruments senior to our common shares. The holders of any debt securities or instruments we may issue could have rights superior to the rights of our common stockholders.

  

Our common stock is currently defined as "penny stock" and the rules imposed on the sale of the shares may affect your ability to resell any shares you may purchase, if at all.

 

Our common stock is defined as a "penny stock" under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and rules of the SEC.  The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly with spouse, or in transactions not recommended by the broker-dealer.  For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser's written agreement prior to the sale.  In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the SEC.  Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or trade our common stock and may also affect a stockholder's ability to resell any of our shares in the public markets.

None.

Item 2. Properties.

Our main assets are:

Within our subsidiaries, we own title to 30 mineral rights as detailed in the table below. These include: 10 mining concessions, the highest level of mineral right in Brazil ("Concessão de Lavra"), 8 mineral rights in the phase just below mining concession ("Requerimento de Lavra"), 8 mineral rights in the research permit phase ("Autorização de Resquisa"), and 4 mineral rights in the phase of application for research permit ("Requerimento de Pesquisa").

 

MDB's mining concession ("Concessão de Lavra") covers an area of 422 acres. It allows for the exploration and commercialization of diamonds, gold, and sand. "Concessão de Lavra" is the highest level of mineral right in Brazil. It permits the owner to mine in perpetuity provided that environmental licenses are kept current and that mining guidelines are followed.

There are no liens or other encumbrances on MDB's mining concession, and there are no fees to be paid to maintain such claim. Therefore, we have no outright payments to maintain MDB's mining concession.

We acquired from two Brazilian individuals, unrelated to us, 50% of RST for approximately $254,000. Previously in 2008, RST had been transacted for $10.5 million; the buyer paid $2 million and subsequently was unable to pay the remainder because of the global financial crisis. The RST mineral rights remained largely untouched until our acquisition.

RST has a storied history as holder of highly attractive areas for diamonds and gold. Most of its current mining concessions and mineral rights have never had land-based exploration performed properly. Many of the RST areas were owned before by Mineração Tejucana S.A., a famous Brazilian mining company that lasted for decades and mined inside the Jequitinhonha River by dredge boat.

Currently RST has title to 9 mining concessions and several other mineral rights, as seen in table attached above. All of RST areas are for diamonds and some for gold as well. All of them are located in the Jequitinhonha River valley in the northern part of the state of Minas Gerais, Brazil. Some of the RST areas, including one that is potentially very rich in diamonds and gold, is located next to MDB's plant and mining concession.

The quality of the RST areas is evidenced in an NI 43-101 technical report published in 2008.  We do not claim that RST's NI 43-101 technical report is compliant with the SEC-sanctioned Industry Guide 7. Under the SEC's Industry Guide 7, no assertion can be made about reserves; moreover, Industry Guide 7 does not recognize the term "resources." 

4)	Hercules Brasil Ltda. ("HBR")

 

Initially, Hercules is focused on the production and sale of mortar. A medium size plant that can produce mortar, grout and other industrialized sand products has been fully built and is operating. The plant is located next to a busy asphalt highway to facilitate transportation and is 18 miles away from our MDB sand mine. It operates on electric power which lowers costs and utilizes a staff of three. At full capacity, with a staff of five, the plant has the capacity to produce up to 25,000 bags of mortar per month.

Brazil Minerals has an office in Pasadena, California. The Company's Brazilian office is in the city of Olhos D'Agua, state of Minas Gerais, in Brazil. The Company has additional office spaces at the MDB mine and at the HBR mortar factory.

Item 3. Legal Proceedings.

None material.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is traded under the symbol "BMIX". The following table sets forth, for each of the quarterly periods indicated, the range of high and low sales prices, in U.S. dollars, for our common stock for each quarter in 2014 and 2015.

 

 

Sales of Unregistered Securities

During the 4^th quarter of 2015, we received from Benjamin Khowong $60,000 in exchange for shares of our Series B Convertible Preferred Stock ("Series B Stock"), and $80,000 in exchange for shares of our Series C Convertible Preferred Stock ("Series C Stock"). The shares of Series B Stock and Series C Stock were issued in accordance with an exemption 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 only one accredited investor which represented to us that he had such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment and was acquiring the shares for investment and could bear the economic risk of the investment.

During the 4^th quarter of 2015, we received $27,000 from the Kincaid group (Candice Kincaid, Craig Kincaid, Farris Kincaid, and Kenneth Kincaid) in exchange for restricted shares of our common stock. The shares were issued in accordance with an exemption from the registration requirements of 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 investors who represented to us that they had such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the prospective investment and were acquiring the shares for investment and could bear the economic risk of the investment.

 

Item 6. Selected Financial Data.

The information to be reported under this Item is not required of smaller reporting companies.

 

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation.

The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes to those financial statements appearing elsewhere in this 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. Now we have 30 mineral rights. These include: 10 mining concessions, the highest level of mineral right in Brazil ("Concessão de Lavra"), 8 in the phase just below mining concession ("Requerimento de Lavra"), 8 in the research permit phase ("Autorização de Resquisa"), and 4 in the application for research permit ("Requerimento de Pesquisa"). Please refer to the table below.

 

In 2015, we finalized the acquisition of our stake in RST, which has a large number of mineral rights that could be mined by us in the next several decades. In particular, we chose to focus on the study through focused drilling in one are located approximately 2 miles from the MDB plant. A photo of our Banka 4-inch drill is attached.

Multiple drilling performed by us in this RST area indicates that it contain a potentially large amount of "white gravel," a photo of which is below.

In 2016, we expect to be able to increase our mortar sales as our brand becomes better known and as we acquire new sales outlets. The biggest difficulty with the uptake of our mortar has been related to the general economic malaise of the Brazilian internal market. The year 2014 was marked by a GDP contraction of 0.5%, followed by a large decline of 4% in 2015. Experts predict that the economy will contract an additional 4 to 5% in 2016. This is the deepest recession in Brazil in many decades. With this backdrop, the civil construction industry had its worst year in 2015 for the last 12 years. We anticipate that we will manage to grow our mortar business and its margins in 2016, and aim to be able to provide enough free cash flows from the mortar operations to pay any fixed costs on the mining side

 

In 2015, we had revenues of $63,610 as compared to revenues of $492,129 in 2014, a decline of 87.1%. In 2015, most of our revenues came from sales of our sand and the initiation of sales of our industrialized mortar.  In 2015, the effort of our diamond and gold units were on the selection among dozens of our mineral rights of a dry, high quality location for mining. This effort entailed extensive field research and consultation with geologists, mining engineers, and environmental experts. Extensive drilling was then carried out, and the results obtained enabled us to choose one of our mineral rights, starting approximately 6 km from our large recovery plants for diamonds and gold. We applied for, and successfully received initial permitting from the environmental authority on July 10, 2015. Our extensive protocol report and affiliated schedules constituting our request for permitting from the mining department was submitted to that regulatory body on September 2, 2015. On November 5, 2015, a massive accident involving another company which has no connection to us, and causing the rupture of a dam in the city of Mariana and the largest environmental disaster in Brazil, lead the state offices of the mining department to be overwhelmed with activity surrounding this unforeseen situation. In fact, protocols for all companies, including our application for permitting, were delayed in analysis. Following submission of our application, our diamond and gold units focused in expanding and substantially improving a dirt road that connects this new area to our plant. The road has been ready for use since early 2016, and we have been awaiting the permit approval. We understand that our application for permitting has now been analyzed, and we believe that we will successfully receive approval during the second quarter of 2016. If that is the case, we anticipate starting operations in this dry, potentially very rewarding new diamond and gold area still during the second quarter of 2016. If our projections are correct, and assuming we do not experience equipment failure or maintenance issues, our revenues in 2016 should be materially higher than our revenues in 2015.

 

 

We had an aggregate of $1,183,257 in operating expense in 2015, as compared to an aggregate of $1,901,561 in operating expenses in 2014, a decline of $718,304 or 37.8%. This decrease was mostly due to lower professional and consulting fees, general and administrative expenses, and stock-based compensation, all of which declined much more than the increase seen in compensation and related costs.

In 2015, we had total other expenses of $595,473, as compared to $1,544,888 in total other expenses in 2014, a decline of 61.5%. This decrease was primarily related to a $1,286,573 gain on derivative liability in 2015 as compared to a 120,258 loss on derivative liability in 2014 and of no derivative expense in 2015 compared to a $499,126 derivative expense in 2014 which more than offset higher interest on promissory notes, amortization of debt discount, and loss on extinguishment of debt in 2015 as compared to 2014.

 

 

Net cash provided by investing activities was $248,927 in 2015, as compared to $1,356,032 net cash used in investing activities in 2014.

 

Net cash provided by financing activities was $832,390 in 2015, as compared to $1,656,205 in 2014.

 

 

We believe that financial resources and funds generated from mining will generate enough revenues to make us cash flow positive at some point in 2016. In the meantime, we will rely on financing from the issuance of equity and/or debt, the availability of which on terms satisfactory to us is not assured. We anticipate that most, if not all, of our existing convertible debt will be converted to equity in 2016, although in certain circumstances the holders of such debt have the right to require cash payments of such debt.

 

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.

 

Off-Balance Sheet Arrangements

 

The Company currently has 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 December 31, 2015, 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 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

(a)  Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Principal Executive Officer and Principal Financial Officer, has evaluated the design, operation, and effectiveness of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of December 31, 2015. On the basis of that evaluation, management concluded that the Company's disclosure controls and procedures are designed, and are effective, to provide reasonable assurance that the information required to be disclosed in reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Commission, and that such information is accumulated and communicated to management, including its Principal Executive Officer and Principal Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

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

(c)  Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting that occurred in the fourth quarter of 2015 that materially affected, or would be reasonably likely to materially affect, the Company's internal control over financial reporting.

(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.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The following table sets forth certain information as of March 25, 2016 concerning our directors and executive officers:

 

 

Ambassador Roger Noriega, age 56, has been a director since 2012. He has extensive experience in Latin America. Ambassador Noriega was appointed by President George W. Bush and confirmed by the U.S. Congress as U.S. Assistant Secretary of State, and served from July 2003 to October 2005. In that capacity, Ambassador Noriega managed a 3,000-person team of professionals in Washington and in 50 diplomatic posts to design and implement political and economic strategies in Canada, Latin America, and the Caribbean. Prior to this assignment, Ambassador Noriega served as U.S. Ambassador to the Organization of American States ("OAS") from August 2001 to July 2003. Since February 2009 Ambassador Noriega has been the Managing Director of VisionAmericas, a Latin America-focused consulting group that he founded. Ambassador Noriega has a Bachelor of Arts degree from Washburn University of Topeka, Kansas. We appointed Ambassador Noriega as a director because of his extensive experience in Latin America, business and government contacts, management skills and judgment. 

Ambassador Paul Durand, age 74, has been a director since 2012. He has had extensive experience in Latin America. From August 2001 to August 2006, Ambassador Durand was Canada's Ambassador to the OAS. From August 2000 to July 2001 he was Canada's Ambassador to Chile, and from August 1992 to August 1995 he was Canada's Ambassador to Costa Rica, with concurrent accreditation to Honduras, Nicaragua, and Panama. For the past five years, Ambassador Durand has also personally provided consulting services to several businesses and organizations, including the University of Ottawa advising the executive student class on political and economic conditions in Brazil and Chile; the OAS on elections and a referendum in Chile; and Infinito Gold Inc. on negotiations with the government of Costa Rica regarding the development of a gold mine. He has a Bachelor of Arts degree in Political Economy from the University of Toronto, and has pursued further studies in International Relations and Economics at Northwestern University in Chicago and Carleton University in Ottawa. Ambassador Durand joined the Canadian government after working in international banking in Latin America (Colombia, El Salvador), the Caribbean (Bahamas) and the U.S. We appointed Ambassador Durand as a director because of his extensive experience in Latin America, business and government contacts, management skills and judgment.

Board Composition

●

had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time,

●

been convicted in a criminal proceeding and is not subject to a pending criminal proceeding,

●

been subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction, permanently, or temporarily enjoining, barring, suspending, or otherwise limiting his involvement in any type of business, securities, futures, commodities, or banking activities; or

●

been found by a court of competent jurisdiction (in a civil action), the Securities Exchange Commission, or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

 

Item 11. Executive Compensation.

 

												Non-Equity		Non-Qualified
												Incentive		Deferred		All
Name and								Stock				Plan		Compensation		Other
Principal	Year		Salary			Bonus		Awards		Option		Compensation		Earnings		Compensation		Total
Position	Ended		($)			($)		($)		Awards		($)		($)		($)		($)
Marc Fogassa	12/31/2014		112,500	(A)		-		-		-		-		-		-		112,500
CEO	12/31/2015		100,000	(B)		-		-		-		-		-		-		100,000

 

 

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

 

———————

* Less than 1%

 

(1) Unless otherwise specified, the mailing address of each of the officers and directors set forth below is in care of Brazil Minerals, Inc., 1443 East Washington Boulevard, Suite 278, Pasadena, California 91104.  

 

(2) Beneficial ownership is determined in accordance with rules promulgated by the Commission.

 

(3) Based on 6,438,163,390 shares of common stock outstanding and computed in accordance with rules promulgated by the Commission.

 

(4) The holders of our Preferred Stock vote together as a single class with the holders of our Common Stock, with the holders of Preferred Stock being entitled to 51% of the total votes on all matters regardless of the actual number of shares of Preferred Stock then outstanding, and the holders of Common Stock being entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power. Based on their beneficial ownership of shares of Preferred Stock and Common Stock as of February 9, 2016, each person set forth in the table had the approximate percentage of the voting power of the common and preferred stock voting together as a single class as of such date set forth opposite their name.

 

 

(5) Includes 496,141,804 shares of common stock owned by Sainte Valiere, LLC, a limited liability company owned by a trust of which Mr. Fogassa is the sole beneficiary and options owned by Sainte Valiere, LLC to purchase 79,999 shares of our common stock at $1.00 per share.

(6) Includes options owned by Sainte Valiere, LLC to purchase 79,999 shares of our common stock at $1.00 per share.

 

(7) Includes options to purchase 200,000 shares of our common stock at $0.58 per share, options to purchase 200,000 shares of our common stock at $0.09 per share, options to purchase 141,520 shares of our common stock at $0.0959 per share, options to purchase 188,430 shares of our common stock at $0.08175 per share, options to purchase 326,820 shares of our common stock at $0.05 per share and options to purchase 535,727 shares of our common stock at $0.0265 per share..

(8) Includes options to purchase 141,520 shares of our common stock at $0.0959 per share, options to purchase 326,820 shares of our common stock at $0.05 per share and options to purchase 535,727 shares of our common stock at $0.0265 per share.

(9) Includes options to purchase an aggregate of 4,047,541 shares of common stock at exercise prices ranging from $0.0265 to $1.00 per share.

(10) Includes of trusts of which the person or a member of the family is a trustee.

Item 14. Principal Accounting Fees and Services.

PART IV

Item 15. Exhibits, Financial Statement Schedules

 

BRAZIL MINERALS, INC.

 

TABLE OF CONTENTS

DECEMBER 31, 2015

 

 

 

  

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and Stockholders of Brazil Minerals, Inc.:

 

 

/s/ B F Borgers CPA PC

 

 

 

 

 

 

 

		Year Ended December 31, 2015				Year Ended December 31, 2014
Revenues		$	63,610			$	492,129
Costs of goods sold:
Production expenses			163,149				441,132
Mining tax			-				5,474
Total cost of goods sold			163,149				446,606
Gross profit (loss)			(99,539	)			45,523
Operating expenses:
Professional fees			143,779				254,487
Consulting fees			-				12,200
General and administrative expenses			665,160				868,399
Compensation and related costs			216,172				191,979
Stock based compensation			158,146				574,280
Depreciation			-				216
Total operating expenses			1,183,257				1,901,561
Loss from operations			(1,282,796	)			(1,856,038	)
Other expense (income)
(Gain) loss on derivative liabilities			(1,286,573	)			619,384
Interest on promissory notes			137,725				94,324
Amortization of debt discount and other fees			1,025,221				733,282
Loss on extinguishments of debt			719,119				97,898
Other			(20	)			-
Total other expense (income)			595,472				1,544,888
Loss before provision for income taxes			(1,878,268	)			(3,400,926	)
Provision for corporate income taxes			-				(27,809	)
Net loss		$	(1,878,268	)		$	(3,428,735	)
Loss attributable to non-controlling interest			61,021				(7,908	)
Loss attributable to Brazil Minerals Inc.		$	(1,817,247	)		$	(3,436,643	)
Net loss per share: Basic		$	(0.00	)		$	(0.04	)
Net loss per share: Diluted		$	(0.00	)		$	(0.04	)
Weighted average number of shares outstanding: Basic			2,386,196,346				81,692,030
Weighted average number of shares outstanding: Diluted			2,386,196,346				81,692,030

 

 

 

 

 

 

		Year Ended December 31, 2015				Year Ended December 31, 2014
Net loss		$	(1,878,268	)		$	(3,436,643	)
Foreign currency translation:
Change in cumulative translation adjustment			(313,357	)			(138,773	)
Income tax benefit (expense)			-				-
Total comprehensive net loss		$	(2,191,625	)		$	(3,575,416	)
Total comprehensive net loss attributable to non-controlling interest			-				-
Total comprehensive net loss attributable to Brazil Minerals, Inc.		$	(2,191,625	)		$	(3,575,416	)

 

 

 

 

 

		Series B Preferred Stock								Series C Preferred Stock								Common Stock
		Shares				Amount				Shares				Amount				Shares				Amount				Additional Paid-in Capital				Accumulated Other Comprehensive Loss				Common Stock Warrants				Deferred Stock Compensation				Accumulated Deficit				Non-Controlling Interest				Stockholders' Equity (Deficit)
December 31, 2013			-			$	-				-			$	-				74,639,834			$	74,640			$	39,334,784			$	(226,700	)		$	129,772			$	(69,611	)		$	(38,981,390	)		$	409,962			$	671,457
Shares issued for cash			-				-				-				-				9,147,618				9,148				383,852				-				-				-				-				-				393,000
Shares issued for conversion of debt			-				-				-				-				23,531,590				23,531				333,691				-				-				-				-				-				357,222
Shares issued for services			-				-				-				-				4,104,797				4,105				310,439				-				-				69,611				-				-				384,155
Shares issued for mineral properties			-				-				-				-				626,677				626				43,242				-				-				-				-				-				43,868
Shares issued for investment in MDB			-				-				-				-				2,817,857				2,818				209,282				-				-				-				-				-				212,100
Shares issued for diamond transactions			-				-				-				-				3,750,000				3,750				331,346				-				-				-				-				-				335,096
Stock options issued with sale of shares for cash			-				-				-				-				-				-				93,280				-				-				-				-				-				93,280
Stock options issued for services			-				-				-				-				-				-				190,175				-				-				-				-				-				190,175
Warrants issued with convertible debt			-				-				-				-				-				-				-				-				88,884				-				-				-				88,884
Extinguishment of convertible debt			-				-				-				-				-				-				97,898				-				-				-				-				-				97,898
Non-controlling interest			-				-				-				-				-				-				(844,230	)			-				-				-				(7,908	)			(409,962	)			(1,262,100	)
Foreign currency translation			-				-				-				-				-				-				-				(138,773	)			-				-				-				-				(138,773	)
Net loss			-				-				-				-				-				-				-				-				-				-				(3,428,735	)			-				(3,428,735	)
December 31, 2014			-			$	-				-			$	-				118,618,373			$	118,618			$	40,483,759			$	(365,473	)		$	218,656			$	-			$	(42,418,033	)		$	-			$	(1,962,472	)
Shares issued for cash			279				270,000				-				-				1,600,897,436				1,600,897				(1,396,397	)			-				-				-				-				-				474,500
Shares issued for conversion of debt			100				166,667				-				-				5,031,333,042				5,031,333				(3,733,201	)			-				-				-				-				-				1,464,799
Shares issued for services			-				-				-				-				7,409,184				7,409				17,399				-				-				-				-				-				24,808
Shares returned in exchange of Series C Preferred Stock			-				-				200,000				250,000				(1,000,000,000	)			(1,000,000	)			920,000				-				-				-				-				-				170,000
Shares issued to CEO in satisfaction of $25,000			-				-				-				-				461,760,088				461,760				(362,795	)			-				-				-				-				-				98,965
Shares returned in connection with RST			-				-				-				-				(626,677	)			(626	)			(55,907	)			-				-				-				-				-				(56,533	)
Series B Preferred Stock issued exchanged in diamond contract			668				1,113,333				-				-				-				-				-				-				-				-				-				-				1,113,333
Accrual of Series B Preferred Stock dividends			-				10,433				-				-				-				-				(10,433	)			-				-				-				-				-				-
Beneficial conversion on convertible notes payable			-				-				-				-				-				-				87,720				-				-				-				-				-				87,720
Options issued for services			-				-				-				-				-				-				151,700				-				-				-				-				-				151,700
Options issued with notes payable			-				-				-				-				-				-				44,845				-				-				-				-				-				44,845
Non-controlling interest			-				-				-				-				-				-				-				-				-				-				61,021				131,054				192,075
Foreign currency translation			-				-				-				-				-				-				-				(313,357	)			-				-				-				-				(313,357	)
Net loss			-				-				-				-				-				-				-				-				-				-				(1,878,268	)			-				(1,878,268	)
December 31, 2015			1,047			$	1,560,433				200,000			$	250,000				6,219,391,446			$	6,219,392			$	36,146,689			$	(678,830	)		$	218,656			$	-			$	(44,235,280	)		$	131,054			$	(387,885	)