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JUPGF Jupiter Gold

 
 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 20-F

(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the fiscal year endedDecember 31, 2019

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report:

 

For the transition period from ______ to ______

 

Commission file number 333-214872  

 

JUPITER GOLD CORPORATION

(Exact name of Registrant as specified in its charter)

 

Not Applicable

(Translation of Registrant's name into English)

 

Republic of the Marshall Islands

(Jurisdiction of incorporation or organization)

 

Rua Vereador João Alves Praes nº 95-A

Olhos D'Água, MG 39398-000, Brazil

 (Address of principal executive offices)

 

Marc Fogassa

Rua Vereador João Alves Praes nº 95-A

Olhos D'Água, MG 39398-000, Brazil

Telephone:+55-31-3956-1109

Email: marc.fogassa@jupitergoldcorp.com

(Name, Telephone, E-mail and/or Facsimile number and Address, of Company Contact Person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act: None

 

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

 

Common Stock, par value $0.001 per share

(Title of Class)

 

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

 

There were 5,348,757 shares outstanding on April 27, 2020.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 

Yes No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  

Yes No

 

Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the registrant (1) has 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, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer Accelerated filer Non-accelerated filer
   Emerging growth company

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check which basis of accounting the registrant has used to prepare the financial statements included in this filing:

US GAAPInternational Financial Reporting Standards as issued by the International Accounting Standards Board    ☐Other

 

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17     Item 18  

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes  No

 
 
 
 

 TABLE OF CONTENTS

 

Cautionary Note Regarding Forward Looking Statements1
  
Part I
   
Item 1.Identity of Directors, Senior Management and Advisers2
Item 2.Offer Statistics and Expected Timetable2
Item 3.Key Information2
Item 4.Information on the Company9
Item 4A. Unresolved Staff Comments9
Item 5.Operating and Financial Review and Prospects10
Item 6.Directors, Senior Management and Employees30
Item 7.Major Shareholders and Related Party Transactions33
Item 8.Financial Information34
Item 9.The Offer and Listing34
Item 10.Additional Information35
Item 11.Quantitative and Qualitative Disclosures About Market Risk38
Item 12.Description of Securities Other Than Equity Securities38
   
Part II
   
Item 13.Defaults, Dividend Arrearages and Delinquencies38
Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds38
Item 15.Controls and Procedures38
Item 16.Reserved39
Item 16AAudit Committee Financial Expert39
Item 16BCode of Ethics40
Item 16CPrincipal Accountant Fees and Services40
Item 16DExemptions from the Listing Standards for Audit Committees.40
Item 16EPurchases of Equity Securities by the Issuer and Affiliated Purchasers.40
Item 16FChanges in Registrant's Certifying Accountant40
Item 16GCorporate Governance40
Item 16HMine Safety Disclosure40
   
Part III
   
Item 17.Financial Statements41
Item 18.Financial Statements41
Item 19.Exhibits41

 

   
Financial Statements  F-1 
   
Signature Page42

 

 
 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 20-F contains or incorporates by reference forward-looking statements.  All statements, other than statements of historical facts, that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements.  Such statements are characterized by terminology such as "anticipates," "believes," "expects," "future," "intends," "assuming," "projects," "plans," "will," "should" and similar expressions or the negative of those terms or other comparable terminology.  These forward-looking statements, which include statements about the mineral industry; market size, share and demand; performance; our expectations, objectives, anticipations, intentions and strategies regarding the future, expected operating results, revenues and earnings and potential litigation are not guarantees of future performance and are subject to risks and uncertainties, including those risks described under the heading "Risk Factors" set forth herein, or in the documents incorporated by reference herein, that could cause actual results to differ materially from the results contemplated by the forward-looking statements.

 

Investors are cautioned that our forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements.

 

As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainty of estimates, forecasts and projections may be better or worse than projected. Given these uncertainties, you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this filing to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events.

 

We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures we make in our reports on Form 20-F and Form 6-K, or their successors. We also note that we have provided a cautionary discussion of risks and uncertainties under the caption "Risk Factors" in this Annual Report. These are factors that we think could cause our actual results to differ materially from expected results.  Other factors besides those listed here could also adversely affect us.

 

Information regarding market and industry statistics contained in this Annual Report is included based on information available to us which we believe is accurate. We have not reviewed or included data from all sources, and cannot assure stockholders of the accuracy or completeness of the data included in this Annual Report. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services.

 

 -1-

PART I

 

Item 1. Identity of Directors, Senior Management and Advisers.

 

Not applicable.

 

Item 2. Offer Statistics and Expected Timetable.

 

Not applicable.

 

Item 3. Key Information.

 

Item 3.A. Selected Financial Data.

 

The following selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in these statements. The selected consolidated financial data presented below are derived from our audited consolidated financial statements as of December 31, 2019, and for the year from January 1, 2019 to December 31, 2019, which are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP").

 

Except as may be otherwise indicated, all dollar amounts are stated in U.S. dollars, the Registrant's reporting currency.  The following table sets out the exchange rates, based on the data from the website of Brazil’s “Banco Central” (an equivalent to the U.S. Federal Reserve), for the conversion of the Brazilian real (R$) currency into the United States dollar (US$), for the period from January 1, 2019 to December 31, 2019.  The average exchange rates are based on the average of the daily closing exchange rates during such periods:

 

  Average High Low Close
                   
 Fiscal Year Ended 12/31/2019  $3.9628  $4.2602  $3.6519  $4.0307 

 

The exchange rate on April 27, 2020 was $5.6358 Brazilian reais per one U.S. dollar.

 

Item 3.B. Capitalization and Indebtedness. 

 

As of April 27, 2020, we had issued5,348,757shares of Common Stock and 1 share of a Series A Preferred Stock.

 

As of December 31, 2019, we had current liabilities of $17,618 all of which was unsecured and attributable to non-related parties. We had no long-term liabilities.

 

 -2-

Item 3.C. Reasons for the Offer and Use of Proceeds.

 

Not applicable.

 

Item 3.D. Risk Factors.

 

You should carefully consider the following risk factors and all other information contained in this Report before purchasing our shares. We have assembled these risk factors based upon publicly available information, our own analysis and our own beliefs relative to our understanding of our business. If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected, in which case, the value of our shares could decline, and you may lose some or all of your investment.

  

General Risks Relating to Our Business

 

Risks Related to Operations

 

Our results are likely to fluctuate significantly in future periods.

 

Our operating and financial results are difficult to predict and may fluctuate significantly from period to period. Results of operations may fluctuate as a result of a variety of factors that are outside of our control including, but not limited to, lack of sufficient working capital, equipment malfunction and breakdowns, and regulatory or licensing delays.

 

We may be unable to access funding on acceptable terms or at all.

 

We may seek additional debt or equity financing to finance our business model and for growth.  Such financing may not be available on acceptable terms or at all and any failure to obtain additional financing when needed could severely impact our business. Additional equity financing may be dilutive to shareholders, and debt financing may involve significant covenants and future repayment obligations.

 

Global Risks

 

While for the most part we have been to continue our operations during the coronavirus pandemic, there can be no assurance that a significant worsening

 

Risks Related to Operating in Brazil

 

We are subject to extensive mining and environmental regulation in Brazil.

 

We are subject to various Brazilian federal mining laws and regulations and federal, state and local environmental laws and regulations. For any of the operations that we intend to pursue directly, we will be required to obtain a certain number of permits from regulators. After operations begin, we will have capital expenditures on an ongoing basis to continue to ensure compliance with the permits obtained as well as other mining and environmental laws and regulations. In addition, due to the possibility of changes to mining and environmental laws and regulations, the amount and timing of future regulatory expenditures may vary substantially from those currently anticipated. We could be subject to civil or criminal penalties for non-compliance with mining and environmental laws and regulations under Brazilian law.

 

 -3-

Significant volatility in the value of the Brazilian real in relation to the U.S. dollar could harm our results.

 

The local costs in Brazil are in the currency of Brazil, the Brazilian real. There have been significant fluctuations in the exchange rate between the Brazilian real and the U.S. dollar and this may at times be detrimental to us.

 

Brazilian economic and political conditions may have an impact on our businesses.

 

The Brazilian economy has been characterized by frequent, and occasionally drastic, intervention by the Brazilian government, which has often changed monetary, credit and other policies to influence the economy. Actions taken by the Brazilian government concerning the economy may have important effects on us. Our financial condition and results of operations may be adversely affected by the following factors, among others, and by any of the Brazilian government's actions in response to them: economic and social instability, energy and/or fuel shortages, exchange rate controls and restrictions on remittances abroad, and tax policy. 

 

Brazilian contract and corporate laws may negatively affect us.

 

The judicial enforcement of contracts in Brazil is a lengthy process, requiring skill and tenacity, and the application of corporate laws through the Brazilian legal system can be uneven, haphazard and unreliable.

 

Brazilian tax laws are complex and may be detrimental to us.

 

Brazilian taxation tends to be one of the more complex tax regimes in the world.  We make every effort, in conjunction with Brazilian advisors, to limit the taxes to which we are subject; however, there is no assurance that the tax laws in Brazil will not be changed nor interpreted by Brazilian authorities in a manner that could be detrimental to us.

 

The coronavirus pandemic may affect us more severely

 

While for the most part we have been to continue our planned pursuits during the coronavirus pandemic, a worsening of such situation in Brazil may lead to significant delays in some or all of our timelines.

 

Risks Related to Our Common Stock

 

There is currently a very limited trading market for our Common Stock.

 

Our Common Stock trades on Pink Open Market, a platform of OTC Markets, and as of now it has low liquidity. A possible reason for this includes the fact that only a small percentage of our Common Stock is available to be traded and is held by a small number of holders. Another possible reason may be related to the fact that we are a new company and therefore the demand for our shares is limited by the lack of knowledge about us. We believe that liquidity will be dependent, among other things, on the perception of our business, alongside with steps that we may take to raise investor awareness, including press releases, road shows, and conferences. There can be no assurance as to when an increase in liquidity will occur.

 

 -4-

The price and liquidity of our Common Stock may be affected by many reasons, some beyond our control.

 

The price and liquidity of our Common Stock may be affected by a variety of factors and events outside of our control, some, but not all, of which are listed below:

 

 ·overall market conditions;
 ·changes in the market valuations of other similar or comparable companies;
 ·announcements by competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
 ·the absence of consistent administrative supervision of "bid" and "ask" quotations;
 ·adoption of new accounting standards;
 ·changes in estimates and recommendations by advisors and analysts; and
 ·changes in gold prices.

  

The price and liquidity of our Common Stock may also impair our ability to raise capital by selling shares of our stock, to acquire mineral properties by using our stock as consideration, or to recruit and retain executives with equity-based stock incentive plans.

 

Our operating results may be volatile and difficult to predict, and if it fails to meet expectations the market price of our Common Stock may decline significantly.

 

Our operating results may fluctuate significantly from period to period, due to a number of factors. These factors include, but are not limited to:

 

 ·the global price for gold;
 ·costs related to our operations;
 ·the Brazilian real – U.S. dollar exchange rate;
 ·extreme weather periods;
 ·delays in licensing of mines or mineral properties;
 ·departures of key personnel;
 ·research results related to any of their projects and mineral rights;
 ·new mining, environmental, and/or tax regulations in Brazil; and
 ·fluctuations in economic, political, and market conditions.

 

Many of these factors are entirely outside of our control, and for others we only have limited influence. As a result of the factors above, and others, we may be unable to forecast our financial projections accurately and may be unable to adjust our spending in a timely manner to compensate for any unexpected revenue and/or funding shortfalls. Additionally, a failure to meet revenue or expense projections may have an immediate and negative impact on our operating results. If this were to happen, the market price of our Common Stock could decline significantly.

 

 -5-

Our Common Stock may be considered a "penny stock" and may be difficult to sell.

 

The U.S. Securities and Exchange Commission (the “SEC”) has adopted regulations which generally define a "penny stock" to be an equity security that has a market price of less than US$5.00 per share or an exercise price of less than US$5.00 per share, subject to specific exemptions. The SEC's penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from the rules, to deliver to its customer a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and the salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules generally require that before a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's agreement to the transaction. These rules may adversely impact the liquidity of our Common Stock and may affect the ability of investors to sell their shares.

 

We do not anticipate paying dividends on our Common Stock for the foreseeable future.

 

We anticipate that, for the foreseeable future, if and when we generate profits, that our Board of Directors may choose to reinvest such profits or save them as reserves and not pay dividends.

 

Risks Specific to Jupiter Gold

 

Our results of operations, financial position and business outlook may become highly dependent on the price of gold, which is subject to significant volatility and uncertainty

 

Our results may become substantially related to gold prices. As a result of the volatility of gold prices, such results may fluctuate substantially.

 

We currently do not have mineral reserves as such term is defined by the SEC.

 

Although several of our projects are known to have gold, as determined by our own research exploration studies, none of these studies were carried out in a manner as to allow the measurement of “reserves” under the SEC’s definition of such term. Lack of “reserves” may lead to lesser desirability from investors and potential partners.

 

We are highly dependent on certain members of our management.

 

We depend on the efforts of a small number of officers and directors. In particular, we are heavily dependent upon the expertise of Marc Fogassa, our Chairman and Chief Executive Officer, who is also formally our Chief Financial Officer and Principal Accounting Officer. Mr. Fogassa speaks Portuguese and English fluently, has extensive networks in both Brazil and the United States of America, and relevant experience in management and finance. If it occurs, any loss of the services of Mr. Fogassa could have a material adverse effect upon our results of operations and financial position. 

 

 -6-

Marc Fogassa is both our Chairman and Chief Executive Officer as well as Chairman and Chief Executive Officer of Brazil Minerals, Inc. and may be subject to potential conflicts of interest in matters involving both companies.

 

Mr. Fogassa, our Chairman and Chief Executive Officer, is also Chairman and Chief Executive Officer of Brazil Minerals, Inc. (“Brazil Minerals”), our largest shareholder. Potential conflicts of interest may occur between us and Brazil Minerals as related to allocation of opportunities and of Mr. Fogassa's working time, among others. As a practical manner to diminish or eliminate such potential conflicts of interests between these two companies, the Board of Directors of each company has a different composition. In board votes that involve a potential conflict of interest, Mr. Fogassa recuses himself, and let the disinterested directors decide.

  

Our Series A Preferred Stock has the effect of concentrating voting control 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, Chairman and Chief Executive Officer, since 2016. Mr. Fogassa holds the only outstanding share of such Series A Preferred Stock. The Certificate of Designations, Preferences and Rights of the 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 our Common Stock being entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power. Therefore, so long as he holds the only outstanding shares of Series A Preferred Stock, Mr. Fogassa will have effective voting control on all matters requiring a stockholder vote.

 

Under our Bylaws, stockholders that initiate certain proceedings may be obligated to reimburse us and our officers and directors for all fees, costs and expenses incurred in connection with such proceedings if the claim proves unsuccessful.

 

Our Bylaws include a fee-shifting provision in Article VI, Section 7 for stockholder claims (the "Fee Shifting Provision"), which reads as follows: "In the event that (a) any current or prior shareholder of the  Company  or  anyone  on their  behalf ("Claiming Party") initiates or asserts any claim or counterclaim  ("Claim")  or joins, offers assistance to,  or has  a direct  interest  in  any Claim  against  the Corporation and/or any of its shareholders, officers, or directors (together, the Corporation and/or any of its  shareholders, officers, or directors are henceforth called "Receiving Parties"), including any Claim purportedly filed on behalf of the Corporation or any shareholder, whether direct or derivative, in any jurisdiction, and (b) the Claiming Party (or the third party that received assistance from the Claiming Party or in whose Claim the  Claiming Party  had  a  direct  interest) does not obtain a favorable judgment on all of the merits of its Claim, with such determination made by the Corporation, then each Claiming Party shall be obligated jointly and severally to reimburse the Receiving Parties for all fees, costs and expenses of every kind and description (including, but not limited to, all attorneys'  fees) that the Receiving  Parties may incur in connection with such Claim."

 

 -7-

The Fee Shifting Provision was adopted to eliminate or decrease nuisance and frivolous litigation. We intend to apply the Fee Shifting Provision broadly to all actions, including U.S. federal securities law claims. The level of recovery for the plaintiff to avoid any payment, quoting verbatim the language of the Fee Shifting Provision, would necessitate such plaintiff obtaining a "favorable judgment on all of the merits of its Claim." The Fee Shifting Provision is intended to apply to "any current or prior shareholder of the Company or anyone on their behalf" and the Company will make such determination based on the facts of any case it may encounter. The parties entitled to recover, quoting verbatim, are "the Corporation and/or any of its shareholders, officers, or directors."

 

We are incorporated in the Marshall Islands, which may have fewer rights and protections for shareholders.

 

We are incorporated in the Republic of the Marshall Islands (“Marshall Islands”). Our corporate affairs are governed by our Articles of Incorporation and Bylaws and by the Marshall Islands Business Corporations Act (the "BCA"). The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain U.S. jurisdictions. Shareholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, our public shareholders may have more difficulty in protecting their interests in the face of actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction. Further, the Marshall Islands does not have a well-developed body of bankruptcy law. As such, in the case of our bankruptcy, there may be a delay of bankruptcy proceedings and the ability of shareholders and creditors to receive recovery after a bankruptcy proceeding. Additionally, our incorporation in the Marshall Islands may make service of process more difficult.

 

Substantially all of our assets are in Brazil.

 

Substantially all of our assets (mineral properties, equipment) are located in Brazil. We therefore depend on complying with laws and regulations in Brazil to keep such assets free of any liens or judgments. On the other hand, it may be difficult to enforce judgments from other countries’ courts against such assets.

 

 -8-

Item 4. Information on the Company.

 

Item 4.A. History and Development of the Company.

 

Date of Incorporation, Legal Form, Domicile, & Business Summary

 

We were incorporated under the laws of the Republic of the Marshall Islands on July 27, 2016, and has been in continuous, active operations since that date. Our common stock symbol is JUPGF and we are currently listed in Pink Open Market, a platform of OTC Markets.

 

We are focused on gold properties in Brazil, a well-regarded jurisdiction that we know well and one that presents attractive opportunities. We plan to mine properties that lend themselves to year-round, simple open-sky operations to enable steady profitability on gold retrieval. In other situations, we will prefer to partner and collect royalties while another entity operates the project. Our main goal is to become a profitable company as soon as possible.

 

We have no issued debt, except for operational payables. We have been primarily funded to date by sales of our common stock. We are prohibited from issuing variable-rate convertible debt by our Bylaws.

 

Sector Outlook

 

We believe that gold will continue to grow in its usage as a medium of value storage, in addition to uses in jewelry and manufacturing. We also believe that Brazil, a country that is larger than the continental United States, with varied geology, will continue to yield promising areas for gold exploration. Brazil also has a detailed mining code and a long history of welcoming exploration of its resources by foreign groups. We believe the trends favoring gold mining in stable jurisdictions such as Brazil will continue for the next several decades.

 

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 $1,070,000,000 in annual revenue, more than $700,000,000 in market value of our common stock is held by non-affiliates, or we issue more than $1,000,000,000 of non-convertible debt over a three-year period.

 

 -9-

Item 4A. Unresolved Staff Comments.

 

Not applicable.

 

Item 5. Operating and Financial Review and Prospects.

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes and other information included elsewhere in this registration statement. This discussion contains forward-looking statements that are based on management's current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements and as a result of the factors we describe under "Risk Factors" and elsewhere in this filing. See "Special Note Regarding Forward-looking Statements" and "Risk Factors." We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

Operational Overview

 

During the year 2019, Jupiter Gold strengthened considerably its portfolio of gold mineral rights in both quality and size Brazil:

 

·

Alpha Project:

 

i) we acquired a substantial volume of data pertaining to prior detailed geological drilling, trenching, and mineralogical and bulk sampling, among other studies; this data includes a detailed research report filed by the prior owner with the Brazilian mining authorities which reported two tons of gold (approximately 64,000 ounces) with an average of 1.54 g/t of gold in the area studied.

 

ii) we also acquired other mineral rights in the vicinity of the original area and thus increased the size of this project by over 500%, from 4,653 acres to 28,167 acres in the state of Minas Gerais.

 

·

Alta Floresta Project: we added this project with 24,610 acres in a well-known gold mining district of the state of Mato Grosso

 

·Cavalcante Project: we added this project with 3,068 acres in a high potential area of the state ofGoiás.

 

 -10-

Alpha Project

 

·

Our Alpha Project is located approximately 100 miles east of Belo Horizonte, capital of the state of Minas Gerais in Brazil. The area has excellent infrastructure (roads, power, labor availability).

 

·

Only ~2% of the total area of our Alpha Project has been researched in detail by a prior owner, and only its saprolite and colluvial layers, and 64,000 oz. of gold (cutoff = 0.8 g/t) was reported in the detailed technical report filed with the Brazilian mining department.

 

·Our technical team believes that there is potential to increase our gold mineralization in the Alpha Project for multiple reasons:
oExpansion of the surface study areas;
oDrilling in rock directly underneath the saprolite and colluvial layers with known gold mineralization to characterize primary gold deposits;
oThe price of gold at $1,500-1,600/oz. now (vs. $250-300/oz. then) allows for a lower cutoff for profitable recovery.

 

·In the map below, produced by CPRM (Brazil’s Geological Service), our initial mineral right in the Alpha Project is outlined in yellow; later we added the additional mineral rights outlined in red.

 

 

 -11-

 

·Summary translation of the legend (part of the CPRM map shown above and in Portuguese):
oYellow: gold mine (inactive)
oBlue: gold deposit
oGreen: gold occurrence
oOrange: gold indication

 

 -12-

·Our Alpha Project is located within a geological formation known as the “Supergrupo Rio das Velhas”, where some of the largest gold mines in Brazil have existed. In the map below, also produced by CPRM, the Alpha Project is outlined in the yellow rectangle; multiple gold and iron mines in this geological formation are indicated by red dots.

 

 

·We confirmed by geological exploration 58 deep shafts (up to 70-ft deep) built by the prior owner of one of the areas in the Alpha Project, as can be seen in the map below.

 

 

 -13-

·Our field geology team descended on 2 of the 58 deep shafts and collected samples at 1-meter interval in each, for a total of 37 samples; photos of the shafts and walls of the shafts are below.

 

·36 of the 37 samples had gold verified by fire assay (FA505) at SGS-Geosol, an analytical laboratory used by the global mining companies in Brazil.

 

·The results obtained included a 16 g/t gold intersect, and a band of 4-meter width with average 5.1 g/t of gold mineralization.

 

 

  
  
  

 

 -14-

·In January 2020, we retained GE21 Consultoria Mineral Ltda. (“GE21”) to work towards an independent technical report to validate the scope of the Alpha Project. GE21 is a premier analytical firm used by major gold companies operating in Brazil, and has counted as its clients, among others, Yamana Gold and AngloGold Ashanti. Mario Conrado Reinhardt, Co-Founder and Master Geologist at GE21, is an independent Qualified Person (“QP”) for our Alpha Project. Mr. Reinhardt has more than 38 years of geological and mining related experience ranging from exploration to mining operation with special expertise for gold. He is a Member of the Australian Institute of Geoscientists (CP 3707). During the last ten years, Mr. Reinhardt has written several NI43-101 and JORC technical reports and resource certifications for a variety of gold projects as well as projects in other minerals such as iron, manganese, copper, nickel, and phosphate. Below is a photograph of the GE21 team while visiting our Alpha Project.

 

 

·

In late February, 2020, we pre-analyzed, negotiated and then purchased a large trove of data from a local geologist which had been affiliated with a prior owner of one of the mineral rights which are now part of the Alpha Project.

 

 ·

In March 2020, this purchased data was thoroughly analyzed, and it has allowed us a greater understanding of the potential of the Alpha Project The information retrieved from this data has allowed us to save on substantial costs and several months of exploratory work.

 

·In April 2020, we have begun and are currently pursuing a second phase of field exploratory work in the Alpha Project aiming at gathering the remaining data for an initial independent technical report by mid-year.

 

 -15-

Our Projects

 

Our projects are summarized in the following map and table.

 

 

 

Jupiter Gold

Project Name

 

Minerals

Location

(state in Brazil)

Total Area

(acres)

Status
AlphaGoldMinas Gerais28,167Research Exploration
BrotasGold, Palladium, PlatinumBahia9,578Research Exploration
ParacatuGoldMinas Gerais733Research Exploration
ApuíGoldAmazonas69,330Research Exploration
SerritaGoldPernambuco13,731Research Exploration
CrixásGoldGoiás3,068Research Exploration
CavalcanteGoldGoiás4,771Research Exploration
Alta FlorestaGoldMato Grosso24,610Research Planning
DiamantinaIron, ManganeseMinas Gerais233Research Exploration

 

Note 1: None of our projects currently has “reserves” in accordance with the definition of such term by the Securities and Exchange Commission (the “SEC”). Our Alpha Project has gold reserves as per the definition of such term under Brazilian mining department guidelines.

  

Note 2: Below, ANM is the acronym for “Agência Nacional de Mineração”, the Brazilian mining department.

 

 -16-

Capital Equipment

 

We built and own a modular gold processing and recovery plant (see photo below); its capacity can be easily increased. This plant uses high speed centrifugation as the primary method of gold separation. Its applicable for gold in saprolite and colluvial layers, as seen for instance in the more superficial layers in the Alpha Project.

 

The use of centrifugal concentrators for free gold recovery from alluvial ore has been a common practice in the mining industry for decades. This method uses the difference in intrinsic densities for separation; whereas the native gold density is 19.0 g/cm³, and the density of silica, the main component of the waste, is approximately 2.6 g/cm³. This equipment has several advantages over other processes, such as:

 

 ·No use of chemicals (such as cyanide and mercury)
 ·Low maintenance and low energy consumption
 ·Recovery of gold in a wide particle size range
 ·Simple installation and operation, with excellent mobility

 

 

 -17-

An example of a gold bar obtained from the processing of material in our plant is below.

 

 

 -18-

Details on Projects

 

Alpha Project

 

Mineral:Gold

 

Location:

 

State of Minas Gerais, Brazil

 

Area:

 

28,167 acres

 

Status:

 

Active research exploration in one of the mineral rights of this project. Awaiting formal authorization from ANM for research exploration to begin on other mineral rights in this project.

 

Highlights:

 

·

Located ~100 miles east of Belo Horizonte, capital of Minas Gerais; excellent infrastructure (roads, power, availability of local labor) 

·

Only ~2% of the total area was researched in detail ~ 15 years ago by a prior owner, primarily saprolite and colluvial layers 

·

64,000 oz. of gold (cutoff = 0.8 g/t) was reported in their technical report filed with the Brazilian mining department (note: not “reserves” in accordance with the definition of such term by the “SEC”) 

·

Our own geochemical work in two deep shafts identified a gold intersection at 16 g/t, and width of up to 4m above 5 g/t 

·There exists potential to increase mineralized gold potential in multiple ways, including:

 

·expanding study areas (only ~2% of the area of the Alpha Project was researched);
·drilling in rock underneath saprolite layer to characterize and model primary deposit
·gold is at $1,700/oz now (vs. $250-300/oz. when prior studies done) allows lower cutoff;

 

Map:

 -19-

Brotas Project

 

Mineral:Gold, Palladium, Platinum

 

Location:

 

State of Bahia, Brazil

 

Area:

9,578 acres

 

Status:Active research exploration in a mineral right of this project with a deadline of 07/30/2022 for submission of its initial research report to ANM. Awaiting formal authorization from ANM for research exploration to begin on the other mineral right of this project.

 

Highlights:

 

·Our Brotas Project is located in the state of Bahia, where large gold mines have existed for centuries (eg, Jacobina now owned by Yamana Gold)

 

·Brotas presents a geological setting associated with historical gold artisanal mining (one of the best indicators) as well as multiple gold deposits and occurrences described in geological studies performed by CPRM (Brazil’s Geological Survey)

 

·Our initial geochemical sampling from trend samples showed 71 g/t of gold; the gold in Brotas appears to be of an orogenic type

 

Map:

 

 -20-

Paracatu Project

 

Mineral:Gold

 

Location:

 

State of Minas Gerais, Brazil

 

Area:

 

733 acres

 

Status:

 

Active research exploration in the mineral right of this project.

 

Highlights:

 

·

Our Paracatu Project is located within Paracatu, a municipality well-known for gold for over two centuries; excellent infrastructure (roads, power, technical labor)

 

·

Our Paracatu Project is located 4 miles from the largest gold mine in Brazil, Morro do Ouro (Gold Hill), an open-sky mine within an ore body of 16,000,000 ounces of gold and annual production of ~600,000 ounces, owned and operated by Kinross Gold

 

·

We conducted an initial drilling campaign in 2018 and 18 of 23 drill holes were positive for gold

 

·We have obtained a Guia de Utilizacao (initial commercial license) from the mining department

  

Map:

 

 -21-

Apuí Project

 

Mineral:

Gold

 

Location:

State of Amazonas, Brazil

 

Area:

69,330 acres

 

Status:

Active research exploration in a mineral right of this project, with a deadline of 08/30/2021 for submission of its initial research report to ANM. Awaiting formal authorization from ANM for research exploration to begin on other mineral rights of this project.

 

Highlights:

 

·

Our Apuí Project is located in a new gold frontier; multiple new large (> 1M oz.) primary deposits in this region of Brazil have been found

 

·Areas with verified gold mineralization in this region of Brazil have fetched prices between US$15M-$160M in disclosed transactions involving public companies

  

Map:

 

 -22-

Serrita Project

 

Mineral:

Gold, Copper, Nickel

 

Location:

State of Pernambuco, Brazil

 

Area:

13,731 acres

 

Status:Active research exploration in the mineral rights of this project, with a deadline of 12/06/2022 for submission of initial research reports to ANM.

 

Highlights:

 

·

Our Serrita Project is located in the Serrita gold district, part of the Borborema Neoproterozoic Orogenic Belt, an area known to host narrow high-grade gold mineralized quartz veins from geological research performed by CPRM (Brazil’s Geological Survey)

 

·There are intrusive related gold deposits on the Serrita Granite Suite, and gold mineralization potential is associated with an ephithermal model or copper-gold porphyry model in the Serrita Granite Suite

  

Map:

  

  

 -23-

Crixás Project

 

Mineral:

Gold

 

Location:

State of Goiás, Brazil

 

Area:

13,731 acres

 

Status:Active research exploration in one of the mineral rights of this project.

 

Highlights:

 

·

Our Crixás Project is located in Crixás, a municipality well-known for gold for over two centuries; excellent infrastructure (roads, power, technical labor)

 

·

It is located 11 miles from 4 active open-sky gold mines owned and operated by AngloGold Ashanti (NYSE: AU) within an ore body with 9,000,000 ounces of gold and annual production of ~130,000 ounces

 

·We conducted an exploratory campaign in 2019:

 

·Gold mineralization was found to be associated with alluvial sediments of “Rio Vermelho”; gold was identified and recovered using gravitational methods
·Low-cost secondary gold extraction appears feasible

  

Map:

 

 -24-

Cavalcante Project

 

Mineral:

Gold

 

Location:State of Goiás, Brazil
  
Area:

4,771 acres

 

Status:

Active research exploration in the mineral right of this project, with a deadline of 09/24/2022 for submission of its initial research report to ANM.

 

Highlights:

 

·Our Cavalcante Project presents potential for a gold placer deposit
·Cavalcante is delimited within the red lines in the map which comes from Brazil’s CPRM (Brazil’s Geological Survey), indicating evidence of gold within our project area

  

Map:

 

 

 -25-

Alta Floresta Project

 

Mineral:

Gold

 

Location:

State of Mato Grosso, Brazil

 

Area:

24,610 acres

 

Status:Awaiting formal authorization from ANM for research exploration to begin on the mineral rights of this project.

 

Highlights:

 

·Our Alta Floresta Project is located within a new district with many recent discoveries for gold and copper; excellent infrastructure (roads, power, technical labor)
·In geological maps from CPRM (Brazil’s Geological Survey), a number of documented gold occurrences were found in the vicinity of Alta Floresta, with good probability of continuity

  

Map:

 

  

 -26-

Diamantina Project

 

Minerals:

Iron, Manganese

 

Location:

State of Minas Gerais, Brazil

 

Area:

233 acres

 

Status:Active research exploration in the mineral right of this project, with a deadline of 05/03/2020 for submission of its initial research report to ANM (note: because of covid-19 all deadlines to ANM are currently suspended).

  

Map:

 

 

 -27-

Results of Operations

  

Fiscal Year Ended December 31, 2019 Compared to Fiscal Year Ended December 31, 2018

  

We did not record any revenue during the year ended December 31, 2019, compared to revenue of $8,525 during the year ended December 31, 2018. Our prior year revenues were realized through the sale of a gold bar generated from our exploratory mining efforts. We expect revenues to increase in future periods as we increase our mining operations; however, can offer no assurances that we will be successful in efforts.

 

Our operating expenses are comprised primarily of stock-based compensation, general administrative expenses, and to lesser extent professional fees and other compensation related costs. Operating expenses totaled $287,984 for the year ended December 31, 2019, compared to operating expenses of $410,290 during the year ended December 31, 2018. The decrease in operating expenses of 29.8% is explained primarily by lower general and administrative expenses and stock-based compensation costs related to stock options granted.

 

We incurred a net loss of $312,328 for the year ended December 31, 2019, representing a decrease of $89,437, or 22.3%, compared to a net loss of $401,765 incurred during the year ended December 31, 2018. 

 

Net cash used in operating activities was $72,518 for the year ended December 31, 2019, compared to net cash used in operating activities of $82,989 during the year ended December 31, 2018. Net cash used in investing activities was $20,254 for the year ended December 31, 2019, compared to $803 during the year ended December 31, 2018. Net cash provided by financing activities was $150,000 for the year ended December 31, 2019, compared to $5,000 during the year ended December 31, 2018.

 

Fiscal Year Ended December 31, 2018 Compared to Fiscal Year Ended December 31, 2017

  

Revenue totaled $8,525 for the year ended December 31, 2018, compared to no revenue recorded during the year ended December 31, 2017. Our revenues were realized through the sale of a gold bar generated from our exploratory mining efforts.

 

Operating expenses totaled $410,290 for the year ended December 31, 2018, compared to operating expenses of $436,141 during the year ended December 31, 2017. The decrease in operating expenses of 5.9% is explained primarily by lower stock-based compensation costs related to stock options granted, offset by an increase in general and administrative expenses.

 

 -28-

We incurred a net loss of $401,765 for the year ended December 31, 2018, representing a decrease of $35,870, or 8.2%, compared to a net loss of $437,635 incurred during the year ended December 31, 2017.

 

Net cash used in operating activities was $82,989 for the year ended December 31, 2018, compared to net cash used in operating activities of $166,230 during the year ended December 31, 2017. Net cash used in investing activities was $803 for the year ended December 31, 2018, compared to $6,552 during the year ended December 31, 2017. Net cash provided by financing activities was $5,000 for the year ended December 31, 2018, compared to $250,100 during the year ended December 31, 2017.

 

Liquidity and Capital Resources

 

As of December 31, 2019, we had total current assets of $156,772 and total current liabilities of $17,618 for a current ratio of 8.9 to one and working capital of $139,154. By comparison, we had total current assets of $177,034 and total current liabilities of $10,454 for a current ratio of 16.9 to one and working capital of $166,580 at December 31, 2018.

   

For both the years ended December 31, 2019 and 2018, our primary source of liquidity was derived from the sale of our common stock. We expect that our primary source of liquidity will continue to be generated from the sale of our common stock, as well as increased revenues generated from the operation of our modular plant.

 

Item 5.C. R&D, Patents and Licenses

 

None, except mineral rights described above.

 

Item 5.E. Off-Balance Sheet Arrangements

 

None.

 

Item 5F. Tabular Disclosure of Contractual Obligations.

 

The following table sets forth our contractual obligations and commercial commitments as of December 31, 2019, due on demand:

 

Payable To Description Amount 
Marc Fogassa 

 

Honorarium

 $5,120 
       
Various third-parties Professional fees and other general obligations $12,498 

 

 -29-

Item 6. Directors, Senior Management and Employees.

 

Item 6.A. Directors and Senior Management.

 

Our officers and directors as of April 27, 2020 were as follows:

 

Name  Age Position
     
Marc Fogassa 53 Chairman of the Board of Directors, Chief Executive Officer, and Chief Financial Officer
Joel de Paiva Monteiro, Esq. 35 Director and Vice-President
Areli Nogueira da Silva Júnior 40 Director and Secretary

 

Executive officers are appointed by and serve at the pleasure of our Board of Directors. A biography of each director and officer follows.

 

Marc Fogassa is our Founder and has been our Chairman and Chief Executive Officer since July 2016. He has over 21 years of investment experience in venture capital, and private and public equity investing, and has served on boards of directors of multiple private companies. Mr. Fogassa has worked at Goldman Sachs & Co. (1997), Atlas Venture (1998-2000), and Axiom Ventures (2000-2005). He also worked as investment manager with Hedgefort Capital Management LLC from May 2005 to June 2012, and as an investment banker from November 2011 to January 2014 with Hunter Wise Financial Group, LLC. He has been Chairman and CEO of Brazil Minerals, Inc., a publicly-traded company and our largest shareholder, since December 2012. Mr. Fogassa has been invited numerous times to speak about investment issues, particularly as related to Brazil. Mr. Fogassa double majored at the Massachusetts Institute of Technology (M.I.T.), graduating with two Bachelor of Science degrees in 1990. He later graduated from the Harvard Medical School with a Doctor of Medicine degree in 1995, and also from the Harvard Business School with a Master in Business Administration degree in 1999. Mr. Fogassa was born in Brazil and is fluent in Portuguese and English. 

 

Joel de Paiva Monteiro, Esq. is a partner of the Brazilian law firm PRA Advogados - Pimenta da Rocha Andrade, with three offices and headquarters in Belo Horizonte, state of Minas Gerais. Mr. Monteiro works with all aspects of Brazilian business law, has extensive experience in a wide range of areas, from strategic business planning to litigation. His current clients include large corporations in a variety of economic sectors in diverse states in Brazil. Mr. Monteiro has a law degree from the Milton Campos Faculty in Belo Horizonte, Brazil. Subsequently he achieved a post-graduate degree in Business and Civil Law from the Pontifical Catholic University of Minas Gerais.

 

Areli Nogueira da Silva Júnior is the Founder and Chief Technical Officer of MineXplore, a consultancy focused on mineral rights in Brazil. He is also a consultant geologist with GeoEspinhaço, a firm that undertakes geological studies in a variety of minerals across Brazil. Mr. da Silva Júnior has been a faculty member in two colleges teaching geology-related courses. Previously, he worked at Departamento Nacional de Produção Mineral (the Brazilian mining department) and before that as a geologist at Usimimas Mineração. Mr. da Silva Júnior has a Master of Geology degree from the Federal University of Rio de Janeiro, and an undergraduate degree in Geological Engineering from the School of Mines of the Federal University of Ouro Preto, a premier and the oldest mining-focused college in Brazil.

 

There are no family relationships between or among any of the persons listed above.

 

 -30-

Item 6.B. Compensation.

 

As of December 31, 2019, Marc Fogassa has not been paid any cash compensation for his service as chief executive officer and director. As of December 31, 2019, the other two directors receive together monthly cash compensation amounting to an aggregate of 2,000 Brazilian real (approximately $496 at the then current exchange rate).

 

We adopted an incentive plan (the "2016 Incentive Plan") to compensate employees, directors, and consultants, and allow it to acquire and retain human talent. The 2016 Incentive Plan is hereby incorporated by reference to Exhibit 10.7 in our Registration Statement on Form F-1 (Registration No. 333-214872) filed with the Securities and Exchange Commission on December 1, 2016 (the "F-1").

 

Marc Fogassa, our Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer has entered into a six-month employment agreement with us commencing September 1, 2016, which has been extended to date. Under the agreement, Mr. Fogassa shall receive no cash compensation, and is remunerated monthly with five-year options to purchase 25,000 shares of our common stock at $1.00 per share. Under the agreement, Mr. Fogassa received five-year options to purchase 100,000 shares of our common stock at $1.25 per share when a draft of the Registration Statement on F-1 was filed with the Commission on September 30, 2016. Additionally, he received options to purchase 250,000 shares of our common stock at $1.25 per share when the Registration Statement on Form F-1 became effective. On October 30, 2017, our Board of Directors voted to award Mr. Fogassa five-year options to purchase 250,000 shares of our common stock at $1.00 per share for his work on our initial public offering. Mr. Fogassa has also entered into a director and chairmanship agreement with us commencing September 1, 2016. Under the agreement, he receives no cash compensation and is remunerated monthly with options to purchase 5,000 shares of our common stock at the fair market value per share. The employment and director and chairmanship agreements are hereby incorporated by reference to Exhibits 10.8 and 10.11, respectively, in our F-1.

 

Board members will be reimbursed for reasonable travel expenses associated with attending any meetings of the Board of Directors or committees of the Board of Directors.

 

Item 6.C. Board Practices.

 

Our business is managed by the directors who exercise all the powers of the Company, subject to the Business Corporations Act of the Republic of the Marshall Islands, our Articles of Incorporation and our Bylaws, and any special resolution of the Board of Directors. Our Bylaws specify the procedures for the election and removal of directors. Our Bylaws are hereby incorporated by reference to Exhibit 1.3 in our F-1. 

 

 -31-

Item 6.D. Employees.

 

As of December 31, 2019, we had two full time equivalent employees. We also had various consultants with specific expertise being utilized.

  

We have no labor-related litigation.

 

Item 6.E. Share Ownership.

 

The following table sets forth certain information as of April 27, 2020 regarding the beneficial ownership of our Common Stock by: each of our executive officers, each member of our board of directors and all officers and directors as a group. The number and percentage of our Common Stock beneficially owned by each person is based on5,348,757 shares of our Common Stock outstanding as of April 27, 2020 and the Common Stock owned by such person determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 (the "Exchange Act"). The information contained in the table below is not necessarily indicative of beneficial ownership for any other purpose.

 

Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares issuable upon the exercise of stock options or warrants or the conversion of other securities held by that person that are exercisable or convertible within 60 days are deemed to be issued and outstanding. These shares, however, are not deemed outstanding for the purposes of computing percentage ownership of each other shareholder.

 

Name and Address of Shareholder (1) Number of Shares 

Percentage of

Shares

Beneficially

Owned

     
Marc Fogassa  3,565,565 (2)(3)   48.26%
Other Directors and Officers  0   0 
All Officers and Directors as a Group (3 persons)  3,565,565 (2)(3)   48.26%

                                        

  

 (1)

The address for each officer is: c/o Jupiter Gold Corporation, Rua Vereador João Alves Praes nº 95-A, Olhos D'Água, MG 39398-000, Brazil.

 

 (2)

Includes 1,010,064 shares of common stock owned by both Brazil Minerals, of which company Mr. Fogassa is the Chief Executive Officer and Chairman, and a subsidiary of Brazil Minerals. Also includes 2,040,000 shares of common stock issuable to Mr. Fogassa upon exercise of options, the vast majority of which was awarded in lieu of any cash salary, with an average exercise price of $1.06 per share and an average maturity of 3.71 years (expiration dates from 09/30/2021 to 04/01/2025).

 

 (3)Mr. Fogassa owns the only outstanding share of our Series A Convertible Preferred Stock ("Preferred A Stock"). The Certificate of Designations, Preferences and Rights of our Preferred A Stock provides that for so long as Preferred A Stock is issued and outstanding, the holders of Preferred A Stock shall vote together as a single class with the holders of our common stock, with the holders of Preferred A Stock being entitled to 51% of the total votes on all matters regardless of the actual number of shares of Preferred A Stock then outstanding, and the holders of our common stock being entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power. Mr. Fogassa is thus deemed to have voting control on all matters requiring a stockholder vote. The Certificate of Designations, Preferences and Rights of our Preferred A Stock is hereby incorporated by reference to Exhibit 1.4 in our F-1.

 

 -32-

Item 7. Major Shareholders and Related Party Transactions.

 

 A.Major Shareholders

 

The following table sets forth certain information as of April 27, 2020 regarding the beneficial ownership of our Common Stock by our major shareholders who beneficially own more than 5% of our voting securities. The number and percentage of our Common Stock beneficially owned by each person is based on5,348,757 shares of our Common Stock outstanding as of April 27, 2020 and the Common Stock owned by such person determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 (the "Exchange Act"). The information contained in the table below is not necessarily indicative of beneficial ownership for any other purpose.

 

Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares issuable upon the exercise of stock options or warrants or the conversion of other securities held by that person that are exercisable or convertible within 60 days are deemed to be issued and outstanding. These shares, however, are not deemed outstanding for the purposes of computing percentage ownership of each other shareholder.

Name and Address of Shareholder (1) Number of Shares 

Percentage

of Shares

Beneficially

Owned

     
Marc Fogassa  3,565,565 (2)(3)   48.26%
Brazil Minerals, Inc.  1,010,064   18.88%
HSP Resources LLC  900,000   16.82%
Daniel S. Bernstein  517,828 (4)   9.68%
Michael S. Nazari  278,916 (5)   5.21%

                                         

 

 (1)

The mailing address for each listed shareholder is c/o Jupiter Gold Corporation, Rua Vereador João Alves Praes nº 95-A, Olhos D'Água, MG 39398-000, Brazil.

 

 (2)

Includes 1,010,064 shares of common stock owned by both Brazil Minerals, of which company Mr. Fogassa is the Chief Executive Officer and Chairman, and a subsidiary of Brazil Minerals. Also includes 2,040,000 shares of common stock issuable to Mr. Fogassa upon exercise of options, the vast majority of which was awarded in lieu of any cash salary, with an average exercise price of $1.06 per share and an average maturity of 3.71 years (expiration dates from 09/30/2021 to 04/01/2025).

 

 (3)

Mr. Fogassa owns the only outstanding share of our Series A Convertible Preferred Stock ("Preferred A Stock"). The Certificate of Designations, Preferences and Rights of our Preferred A Stock provides that for so long as Preferred A Stock is issued and outstanding, the holders of Preferred A Stock shall vote together as a single class with the holders of our common stock, with the holders of Preferred A Stock being entitled to 51% of the total votes on all matters regardless of the actual number of shares of Preferred A 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. Mr. Fogassa is thus deemed to have voting control on all matters requiring a stockholder vote.

 

 (4)

Includes 238,914 shares of common stock owned by the 2016 Peter Bernstein Trust and 238,914 shares of common stock owned by the 2016 Michelle Bernstein Trust, both of which have as Trustee the spouse of Mr. Daniel Bernstein.

 

 (5)Includes 172,583 shares of common stock owned by the Nazari/Singley Family Trust and 106,333 shares of common stock owned by the Nazari & Associates International Group, Inc. Defined Benefit Plan, both of which have as Trustee Mr. Michael Nazari.

 

To the best of our knowledge, as of April 27, 2020, 99.7% of the outstanding shares of our common stock were beneficially owned or controlled by U.S. persons, and there were 63 record holders of our common stock who were U.S. persons.

 

We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

 

 -33-

Item 7.B. Related Party Transactions.

 

As of December 31, 2019, Jupiter Gold was owed $94,575 by Brazil Minerals, Inc. and its subsidiaries for expenses paid or loans made on behalf of the group, and for consideration paid in connection with the acquisition of fixed assets from the group, offset nominally by amounts accrued under the new service agreement. Details are available in the footnotes to the attached financial statements.

 

Item 7.C. Interests of Experts and Counsel.

 

Not applicable.

 

Item 8. Financial Information.

 

Item 8.A. Consolidated Statements and Other Financial Information.

 

Our consolidated financial statements are stated in U.S. Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP").

 

The financial statements as required under Item 18 of Form 20-F are attached hereto and found immediately following the text of this Annual Report. The audit report of BF Borgers CPA P.C., our independent auditors, is included herein immediately preceding the financial statements.

 

Item 8.A.7. Legal/Arbitration Proceedings.

 

None that are material.

 

Item 8.A.8. Policy on Dividend Distributions.

 

No dividends are intended to be declared or paid by us in the foreseeable future.

 

Item 8.B. Significant Changes.

 

None

 

Item 9. The Offer and Listing.

 

The common stock is not currently listed or traded on any stock exchange or other market.

 

 -34-

Item 10. Additional Information.

 

Item 10.A.

 

As of April 27, 2020, we had5,348,757 shares of our Common Stock, par value $0.001 per share, and 1 share of our Preferred A Stock, par value $0.001 per share, issued and outstanding.

 

As of April 27, 2020, we had 40 millioncommon shares and 10 million preferred shares authorized.

 

Item 10.B. Memorandum and Articles of Association.

 

Our Articles of Incorporation and Certificate of Incorporation are hereby incorporated by reference to Exhibits 1.1 and 1.2, respectively, in our F-1.

 

Item 10.C. Material Contracts.

        

The following descriptions of the material provisions of the referenced agreements do not purport to be complete and are subject to, and qualified in their entirety by reference to the agreements which have been filed as exhibits to this report.

   

Service Agreement

 

Starting on October 31, 2017, we pay a fixed monthly fee of $1,250 to Brazil Minerals for infrastructure support.

 

Registration Rights Agreement

 

The Registration Rights Agreement provides that whenever we propose to register any of its securities under the Securities Act of 1933, as amended (the "Securities Act") and the registration form to be used may be used for the registration and contemplated disposition of Registrable Securities (a "Piggyback Registration"), we will give prompt written notice to Brazil Minerals of its intention to effect such a registration so that such notice is received by Brazil Minerals at least twenty (20) days before the anticipated filing date.  We will include in such registration all securities covered by the Registration Agreement ("Registrable Securities") with respect to which we has received a written request for inclusion therein subject to any limitations on the number of shares that may be registered for resale that may be imposed by law, including positions of the staff of the SEC. In connection with each Piggyback Registration, all of the expenses incurred in compliance with the aforesaid, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of our counsel and our blue sky fees and expenses will be paid by us and Brazil Minerals shall pay all of the underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all fees and disbursements of counsel for Brazil Minerals attributable to the sale of its securities pursuant to the Piggyback Registration.

 

The Registration Rights Agreement is hereby incorporated by reference to Exhibit 10.2 in our F-1. 

 

 -35-

Item 10.D. Exchange Controls

 

Brazilian Laws n. 4.131, of September 03, 1962, and n. 11.371, of November 28, 2006, as amended, regulate foreign investments in Brazil, requiring that foreign investments in Brazil be registered with Brazil’s Central Bank (the equivalent to the U.S. Federal Reserve) to enable foreign remittance of profits and/or interest on equity, and repatriation of foreign capital invested in Brazil.

 

The Brazilian legislation allows the investment in the capital market by individuals or legal entities, by means of the acquisition of shares and other securities. These investments, designated "portfolio investments", when performed by non-residents, are subject to registration with the Brazilian Central Bank and Brazilian Securities Commissions ("CVM"), and according to the Resolution n. 4.373, of September 29, 2014 of the Brazil Monetary Council ("CMN") can be made through Depositary Receipts, with the investor represented by institution authorized to work by Brazil’s Central Bank.

 

The non-resident investors must indicate one or more attorneys-in-fact in Brazil, which should be institution authorized to work by Central Bank and will be responsible mainly for the provision of information and for the registrations with the Central Bank and the CVM. The registration of the portfolio investments with the Central Bank's electronic system constitutes an obligatory requirement for remittances abroad as distribution of profits and/or interest on equity, and repatriation of the capital invested. Such remittances may be made by means of a foreign exchange contract between the Brazilian company remitting the funds and a Brazilian commercial bank duly authorized to operate in the foreign exchange market (Depositary Receipts). Such foreign exchange contract reflects the exchange of Brazilian currency into foreign currency, at the rate agreed with the Brazilian commercial bank.

 

Under current Brazilian legislation, the federal government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil's balance of payments. For approximately six months in 1989 and early 1990, the federal government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors, in order to conserve Brazil's foreign currency reserves. These amounts were subsequently released in accordance with federal government directives. There can be no assurance that the federal government will not impose similar restrictions on foreign repatriations in the future.

 

The likelihood of the imposition of such restrictions by the Brazilian government may be affected by, among other factors, the extent of Brazil's foreign currency reserves, the availability of sufficient foreign currency on the date a payment is due, the size of Brazil's debt service burden relative to the economy as a whole, Brazil's policy towards the International Monetary Fund and political constraints to which Brazil may be subject.

 

 -36-

Item 10.E. Taxation

 

Investors should consult their own tax advisor regarding the specific tax consequences of owning and disposing of our common stock, including eligibility for the benefits of any treaty for the avoidance of double taxation, the applicability or effect of any special rules to which they may be subject, and the effect of any state, local, or other tax laws.

 

Marshall Islands Tax Considerations

 

The following is applicable only to persons who are not citizens of and do not reside in, maintain offices in or engage in business, transactions or operations in the Marshall Islands.

 

Because we do not, and we do not expect that we or any of our future subsidiaries will, conduct business, transactions or operations in the Marshall Islands, and because we anticipate that all documentation related to any offerings of our securities will be executed outside of the Marshall Islands, under current Marshall Islands law our shareholders will not be subject to Marshall Islands taxation or withholding tax on our distributions. In addition, our shareholders will not be subject to Marshall Islands stamp, capital gains or other taxes on the purchase, ownership or disposition of our common shares, and our shareholders will not be required by the Marshall Islands to file a tax return related to our common shares.

 

Item 10.F. Dividends and Paying Agents.

 

Not required.

 

Item 10.G. Statement by Experts.

 

Not required

 

Item 10.H. Documents on Display.

 

We are subject to the informational requirements of the Exchange Act applicable to foreign private issuers and, in accordance with these requirements, we file reports with the SEC. As a foreign private issuer, we are exempt from the rules under the Exchange Act relating to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the Securities and Exchange Commission as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

 

You may read and copy any documents that we file with the SEC, including this Report and the related exhibits, without charge at the Securities and Exchange Commission's public reference room at 100 F Street, N.W., Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing to the public reference room of the Commission at 100 F Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference room. In addition, the documents incorporated by reference into this Report are publicly available through the web site maintained by the Securities and Exchange Commission at www.sec.gov.

 

 -37-

Item 10.I. Subsidiary Information.

 

Not applicable.

 

Item 11. Quantitative and Qualitative Disclosure about Market Risk.

 

Foreign Exchange Risk

 

We are subject to risk brought about by the possibility of a significant change in the rate of exchange of the U.S. Dollar for the Brazilian Real.

 

Interest Rate Risk

 

None; as of April 27, 2020, we had no fixed or floating rate indebtedness.

 

Item 12. Description of Securities Other than Equity Securities.

 

Not applicable.

 

PART II

 

Item 13. Defaults, Dividend Arrearages and Delinquencies

 

None material

 

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.

 

Not applicable.

 

Item 15. Controls and Procedures. Disclosure Controls And Procedures

 

Our management 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 December 31, 2019. On the basis of that evaluation, management concluded that our 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 SEC, and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure.

 

 -38-

Management's Report On Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.

 

Our internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and financial officer and effected by our Board of Directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Our management performed an assessment of the effectiveness of our internal control over financial reporting at December 31, 2019, utilizing the criteria described in the "Internal Control — Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. The objective of this assessment was to determine whether our internal control over financial reporting was effective at December 31, 2019.

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting at December 31, 2019, we did not identify material weaknesses.

 

Based on our assessment, and because of the lack of any material weakness as described above, we have concluded that our internal control over financial reporting was effective at December 31, 2019.

 

Management's Remediation Plan In Internal Controls

 

We will continue to monitor the effectiveness of our internal controls over financial reporting and to make any changes that our management deems appropriate

 

Changes In Internal Control Over Financial Reporting

 

Management does not believe that there have been any other changes in our internal control over financial reporting during the year ended December 31, 2019, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 16. Reserved

 

Item 16A. Audit Committee Financial Expert

 

Our Board of Directors currently acts as our audit committee. We do not currently have an independent member of our Board of Directors who qualifies as an "audit committee financial expert" as such term is usually defined.

 

 -39-

Item 16B. Code of Ethics.

 

Our Board of Directors plans to adopt in 2020 a code of ethics to apply to all of our directors, officers, and employees.

 

Item 16C. Principal Accountant Fees and Services.

 

BF Borgers CPA PC has served as our independent auditors for our financial statements as of December 31, 2019 and for the year ended December 31, 2019. This firm billed the following fees to us for professional services related to such date and periods:

  

Audit Fees $8,100 
Audit-Related Fees  —   
Tax Fees  —   
All Other Fees  —   
Total $8,100 

 

BF Borgers CPA PC also served as our independent auditors for our financial statements as of December 31, 2018 and for the year ended December 31, 2018. This firm billed $8,100 in audit fees for professional services related to such date and periods. 

 

"Audit Fees" are the aggregate fees billed for the audit of our annual financial statements. This category also includes services that generally the independent accountant provides, such as consents and assistance with and review of documents filed with the SEC.

 

 "Audit-Related Fees" are the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit and are not reported under Audit Fees. These fees include mainly accounting consultations regarding the accounting treatment of matters that occur in the regular course of business, implications of new accounting pronouncements and other accounting issues that occur from time to time.

 

 "Tax Fees" are the aggregate fees billed for professional services rendered for tax compliance, tax advice, other than in connection with the audit. Tax compliance involves preparation of original and amended tax returns, tax planning and tax advice.

 

"All Other Fees" are the aggregate fees billed for products and services, other than the services reported on the preceding lines. 

 

All of the audit and non-audit services to us were pre-approved by our Board of Directors.

 

Item 16D. Exemptions from the Listing Standards for Audit Committees.

 

Not applicable.

 

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

 

None.

 

Item 16F. Change in Registrant's Certifying Accountant.

 

Not applicable.

 

Item 16G. Corporate Governance.

 

Not applicable.

 

Item 16H. Mine Safety Disclosure.

 

Not applicable.

  

 -40-

PART III

 

Item 17. Financial Statements.

 

We have responded to Item 18 in lieu of this item.

 

Item 18. Financial Statements.

 

The financial statements required by this item are found at the end of this annual report, beginning on page F-1.

 

Item 19. Exhibits.

 

Exhibit Number  Description of Exhibit 
   
12.1 Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act").*
   
12.2 Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act.*
   
13.1 Certification Pursuant to Section 906 of Sarbanes-Oxley Act.

 

*Filed herewith.

  

 -41-

SIGNATURES

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 

 

 JUPITER GOLD CORPORATION
            (Registrant)
  
   /s/ Marc Fogassa
 By: Marc Fogassa
 Title: Chief Executive Officer
  
Date: April 30, 2020 

 

 -42-

JUPITER GOLD CORPORATION

 

FINANCIAL STATEMENTS 

  

F-1

Report of Independent Registered Public Accounting Firm

  

To the shareholders and the board of directors of Jupiter Gold Corporation

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Jupiter Gold Corporation and its subsidiaries (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive loss, stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2019 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States.

 

Going Concern Uncertainty

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company's significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/S/ BF Borgers CPA PC

 

We have served as the Company's auditor since 2016.

Lakewood, Colorado

April 30, 2020

 

F-2

JUPITER GOLD CORPORATION

CONSOLIDATED BALANCE SHEETS

 

  December 31, December 31,
  2019 2018
     
ASSETS    
Current assets:    
Cash and cash equivalents $58,498  $1,277 
Deposits and advances  3,699   3,662 
Related party receivables  94,575   172,095 
Total current assets  156,772   177,034 
Property and equipment, net  90,529   98,620 
Intangible assets, net  2,044   2,044 
Total assets $249,345  $277,698 
         
LIABILITIES AND STOCKHOLDERS' DEFICIT        
Current liabilities:        
Accounts payable and accrued expenses $17,618  $10,454 
Total current liabilities  17,618   10,454 
Total liabilities  17,618   10,454 
         
Commitments and contingencies (Note 4)  —     —   
         
Stockholders' equity (deficit):        
Series A preferred stock, $0.001 par value. 1 share issued and outstanding  —     —   
Common stock, $0.001 par value. 40,000,000 shares authorized; 4,890,424 and 4,634,599 shares issued and outstanding as of December 31, 2019 and 2018, respectively  4,890   4,635 
Additional paid-in capital  1,702,636   1,431,796 
Accumulated other comprehensive loss  16,398   10,682 
Accumulated deficit  (1,492,197)  (1,179,869)
Total stockholders' equity (deficit)  231,727   267,244 
Total liabilities and stockholders' equity (deficit) $249,345  $277,698 

  

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

 

F-3

JUPITER GOLD CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

  Year Ended December 31, Year Ended December 31, Year Ended December 31,
  2019 2018 2017
       
Revenue $—    $8,525  $—   
Cost of revenue  —     —     —   
Gross margin  —     8,525   —   
Operating expenses:            
Professional fees  22,518   11,410   8,053 
General and administrative  149,371   194,561   64,645 
Stock based compensation  116,095   204,319   363,443 
Total operating expenses  287,984   410,290   436,141 
Loss from operations  (287,984)  (401,765)  (436,141)
Other expense (income):            
Other expense (income)  24,344   —     1,494 
Total other expense (income)  24,344   —     1,494 
Loss before provision for income taxes  (312,328)  (401,765)  (437,635)
Provision for income taxes  —     —     —   
Net loss $(312,328) $(401,765) $(437,635)
             
Basic and diluted loss per share            
Net loss per share $(0.07) $(0.09) $(0.11)
             
Weighted-average number of common shares outstanding:            
Basic and diluted  4,714,866   4,313,048   4,091,266 
             
Comprehensive loss:            
Net loss $(312,328) $(401,765) $(437,635)
Foreign currency translation adjustment  5,716   9,455   1,486 
Comprehensive loss  (306,612)  (392,310)  (436,149)

 

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

 

F-4

 JUPITER GOLD CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

 

  Series A Preferred Stock Common Stock Additional Paid-in Accumulated
Other Comprehensive
 Accumulated Total Stockholders' Equity
  Shares Value Shares Value Capital Loss Deficit (Deficit)
                 
Balance, December 31, 2016  1  $—     4,000,000  $4,000  $302,002  $(259) $(340,469) $(34,726)
                                 
Issuance of common stock in connection with sales made under private offerings  —     —     250,100   250   249,850   —     —     250,100 
                                 
Issuance of common stock in exchange for consulting, professional and other services  —     —     3,167   3   3,164   —     —     3,167 
                                 
Issuance of common stock in connection with property and equipment acquired from a related party  —     —     176,332   177   179,223   —     —     179,400 
                                 
Stock based compensation  —     —     —     —     363,443   —     —     363,443 
                                 
Adjustment for change in foreign currency translation  —     —     —     —     —     1,486   —     1,486 
                                 
Net income (loss)  —     —     —     —     —     —     (437,635)  (437,635)
                                 
Balance, December 31, 2017  1  $—     4,429,599  $4,430  $1,097,682  $1,227  $(778,104) $325,235 
                                 
Issuance of common stock in connection with sales made under private offerings  —     —     5,000   5   4,995   —     —     5,000 
                                 
Issuance of common stock in exchange for consulting, professional and other services  —     —     200,000   200   124,800   —     —     125,000 
                                 
Stock based compensation  —     —     —     —     204,319   —     —     204,319 
                                 
Change in foreign currency translation  —     —     —     —     —     9,455   —     9,455 
                                 
Net income (loss)  —     —     —     —     —     —     (401,765)  (401,765)
                                 
Balance, December 31, 2018  1  $—     4,634,599  $4,635  $1,431,796  $10,682  $(1,179,869) $267,244 
                                 
Issuance of common stock in connection with sales made under private offerings  —     —     250,333   250   149,750   —     —     150,000 
                                 
Issuance of common stock in exchange for consulting, professional and other services  —     —     5,492   5   4,995   —     —     5,000 
                                 
Stock based compensation  —     —     —     —     116,095   —     —     116,095 
                                 
Change in foreign currency translation  —     —     —     —     —     5,716   —     5,716 
                                 
Net income (loss)  —     —     —     —     —     —     (312,328)  (312,328)
                                 
Balance, December 31, 2019  1  $—     4,890,424  $4,890  $1,702,636  $16,398  $(1,492,197) $231,727 

 

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

 

F-5

  JUPITER GOLD CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

  Year Ended December 31, Year Ended December 31, Year Ended December 31,
  2019 2018 2017
       
Cash flows from operating activities of continuing operations:            
Net loss $(312,328) $(401,765) $(437,635)
Adjustments to reconcile net loss to cash used in operating activities:            
Stock based compensation and payment for services  121,095   329,319   365,243 
Depreciation and amortization  24,654   17,978   7,736 
Changes in operating assets and liabilities:            
Deposits and advances  (182)  —     (4,445)
Accounts payable and accrued expenses  7,511   (4,167)  4,304 
Related party payables  86,732   (24,354)  (101,433)
Net cash provided by (used in) operating activities  (72,518)  (82,989)  (166,230)
             
Cash flows from investing activities:            
Acquisition of property and equipment  (20,254)  (803)  (6,552)
Net cash provided by (used in) investing activities  (20,254)  (803)  (6,552)
             
Cash flows from financing activities:            
Net proceeds from sale of common stock  150,000   5,000   250,100 
Net cash provided by (used in) financing activities  150,000   5,000   250,100 
             
Effect of exchange rates on cash and cash equivalents  (7)  (284)  (37)
Net increase (decrease) in cash and cash equivalents  57,221  (79,076)  77,281 
Cash and cash equivalents at beginning of period  1,277   80,353   3,072 
Cash and cash equivalents at end of period $58,498  $1,277  $80,353 
             
Supplemental disclosure of cash flow information:            
Cash paid for interest $—    $—    $—   
Cash paid for income taxes $—    $—    $—   
             
Supplemental disclosure of non-cash investing and financing activities:            
Acquisition of capital assets in exchange for common stock $—    $—    $130,594 
Shares issued in lieu of cash for accounts payable $—    $—    $1,367 

 

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

 

F-6

JUPITER GOLD CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

Organization and Description of Business

 

On July 27, 2016, Jupiter Gold Corporation ("Jupiter Gold" or the "Company") was incorporated under the laws of the Republic of the Marshall Islands. Concurrently, Brazil Minerals, Inc. ("Brazil Minerals"), a U.S. corporation, exchanged its 99.99% ownership in Mineração Jupiter Ltda ("MJL"), a Brazilian company, for 4,000,000 shares of Jupiter Gold's common stock. Brazil Minerals held an approximate 35.4% interest in the Company as of December 31, 2019.

 

The Company has 100%-ownership to several gold projects in development and in exploratory stages aggregating over154,000 acres in Brazil. It alsoowns a modular gold recovery plant. The Company trades on the OTC Markets (Pink Open Market) under the symbol JUPGF.

 

Basis of Presentation

 

The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles ("GAAP") of the United States of America and are expressed in United States dollars. For the years ended December 31, 2019, 2018 and 2017, the consolidated financial statements include the accounts of the Company and its 99.99% owned subsidiary, Mineração Jupiter Ltda.

 

All material intercompany accounts and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP 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.

 

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 since its inception, and has not yet generated material revenues from the sale of its 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 year ended December 31, 2019, the Company funded operations primarily through the sale of equity securities. Management plans to fund its capital requirements and ongoing operations from the sale of gold and minerals recovered from mining areas that the Company expects will become operational during 2020. Management intends to cover any operating losses by selling its equity securities and obtaining debt financing. There can be no assurance the Company will be successful in these efforts.

 

F-7

JUPITER GOLD CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

Fair Value of Financial Instruments

 

Jupiter Gold 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 Jupiter Gold. Unobservable inputs are inputs that reflect Jupiter Gold'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 December 31, 2019, Jupiter Gold did not have any level 2 or 3 assets or liabilities. 

 

Jupiter Gold's financial instruments consist of cash and cash equivalents, accounts payable, and accrued expenses. 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. Funds held in Brazilian banks are insured up to 250,000 Brazilian Real (approximately $62,024 based on the December 31, 2019 exchange rate).

 

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 ten years; vehicles are depreciated over an estimated life of five years; and computer and other office equipment over an estimated useful life of three years.

 

F-8

JUPITER GOLD CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

Right of Use Assets and Lease Liabilities

 

In February 2016, the FASB issued ASU No. 2016-02, "Leases" (ASC 842). The standard requires lessees to recognize almost all leases on the balance sheet as a ROU asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company beginning January 1, 2019. The Company adopted ASC 842 using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company elected the package of practical expedients permitted under the standard, which also allowed the Company to carry forward historical lease classifications. The Company also elected the practical expedient related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities.

 

Under ASC 842, the Company determines if an arrangement is a lease at inception. Right-of-Use ("ROU") assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company's leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

 

The adoption did not impact the Company's beginning retained earnings, or prior year consolidated statements of income and statements of cash flows as the Company does not have any operating leases that are material in term or expense.

 

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. 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. The Company did not recognize any impairment losses related to mineral properties held during the years ended December 31, 2019, 2018 and 2017.

 

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 rights held by MJL and hold a recorded value of $2,044, the cost of fees paid to the Brazilian national mining department. These rights are held in perpetuity provided the Company remains in compliance with various government regulations and industry requirements.

 

Impairment of Long-Lived Assets

 

For long-lived assets, such as property and equipment and intangible assets subject to amortization, Jupiter Gold 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, Jupiter Gold 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. 

 

F-9

JUPITER GOLD CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

Revenue Recognition

 

The Company generates revenue from the sale of gold and other minerals excavated from its modular gold recovery plant located in a mining concession in Brazil.

 

On January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"), using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. The consolidated financial statements were not materially impacted as a result of the application of Topic 606 compared to Topic 605.

 

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

 

 ·Step 1: Identify the contract with the customer
 ·Step 2: Identify the performance obligations in the contract
 ·Step 3: Determine the transaction price
 ·Step 4: Allocate the transaction price to the performance obligations in the contract
 ·Step 5: Recognize revenue when the company satisfies a performance obligation

  

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606's definition of a "distinct" good or service (or bundle of goods or services) if both of the following criteria are met:

 

 ·The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer
 ·The entity's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract

 

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

 

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

 

 ·Variable consideration
 ·Constraining estimates of variable consideration
 ·The existence of a significant financing component in the contract
 ·Noncash consideration
 ·Consideration payable to a customer

 

F-10

JUPITER GOLD CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

 

The transaction price is allocated to each performance obligation on a relative standalone selling price basis.

 

The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

 

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.

 

The Company utilizes 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.

 

On June 20, 2018, the FASB issued ASU 2018-07 which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. Equity classified share-based payments for employees are fixed at the time of grant. Equity-classified nonemployee share-based payment awards are measured at the grant date of the award which is the same as share-based payments for employees. The Company adopted the requirements of the new rule as of January 1, 2019, the effective date of the new guidance.

 

Foreign Currency

 

Jupiter Gold's subsidiary, MJL, uses its local currency as its 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.

 

Basic Earnings (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 December 31, 2019, the Company's potentially dilutive securities relate to common stock issuable in connection with options. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

 

F-11

JUPITER GOLD CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

Recent Accounting Pronouncements

 

In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations. The Company is in the process of determining the effects adoption will have on its consolidated financial statements

 

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 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

 

Property and Equipment, Net

 

The following table sets forth the components of the Company's property and equipment at December 31, 2019 and December 31, 2018:

 

  December 31, 2019 December 31, 2018
  Cost Accumulated Depreciation Net Book
Value
 Cost Accumulated Depreciation Net Book
Value
             
Computers and office equipment $1,405   (0) $1,405  $803   (0) $803 
Machinery and equipment  139,667   (66,704)  72,963   145,287   (54,860)  90,427 
Vehicles  54,803   (38,642)  16,161   11,614   (4,224)  7,390 
Total fixed assets $195,875  $(105,346) $90,529  $157,704  $(59,084) $98,620 

 

For the years ended December 31, 2019, 2018 and 2017, the Company recorded depreciation expense of $24,654, $17,978 and $7,736, respectively.

 

Related Party Receivables

 

As of December 31, 2019, related party receivables totaled $94,575. This amount was comprised of the following components, (i) $3,787 is owed from a Brazil Minerals subsidiary to MJL for expenses paid on behalf of such subsidiary and (ii) $90,788 is owed from Brazil Minerals for short term loans made and expenses paid by Jupiter Gold and MJL.

 

As of December 31, 2018, related party receivables totaled $172,095. This amount was comprised of the following components, (i) $78,242 is owed from a Brazil Minerals subsidiary to MJL for expenses paid on behalf of such subsidiary and (ii) $93,853 is owed from Brazil Minerals for short term loans made and expenses paid by Jupiter Gold and MJL.

 

F-12

JUPITER GOLD CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 3 – STOCKHOLDERS' DEFICIT

 

Issued and Authorized

 

As of December 31, 2019, Jupiter Gold had 4,890,424 shares of its common stock and 1 share of its preferred stock issued and outstanding. As of December 31, 2019, Jupiter Gold had 40,000,000common shares and 10,000,000 preferred shares authorized.

 

Common Stock

 

During the year ended December 31, 2019, Jupiter Gold issued and sold 250,333 shares of common stock for cash proceeds of $150,000. Additionally, the Company issued 5,492 shares of its common stock in exchange for fees and services totaling $5,000, or an average price of $0.91 per share which approximated fair market value.

 

During the year ended December 31, 2018, Jupiter Gold issued and sold 5,000 shares of common stock for cash proceeds of $5,000. Additionally, the Company issued 200,000 shares of its common stock in exchange for fees and services totaling $125,000, or an average price of $0.63 per share which approximated fair market value.

 

During the year ended December 31, 2017, Jupiter Gold issued and sold 250,100 shares of common stock for cash proceeds of $250,100. On September 29, 2017, Jupiter Gold agreed to issue 176,332 shares of common stock on behalf of MJL to purchase various capital assets valued at approximately $175,000 (or 554,000 Brazilian Reais) from BMIX Participações Ltda., a related party. On September 18, 2017, the Company issued 1,367 shares of common stock with a fair value of $1,367 in satisfaction of certain accounts payable and 1,800 shares of common stock with a fair value of $1,800 to consultants and other professionals in lieu of cash payments.

 

Preferred A Stock

 

Jupiter Gold has issued to one of its directors one share of a Series A Convertible Preferred Stock ("Preferred A Stock"). The Certificate of Designations, Preferences and Rights of Preferred A Stock provides that for so long as it is issued and outstanding, its holders shall vote together as a single class with the holders of the Company's common stock, with the holders of Preferred A Stock being entitled to 51% of the total votes on all such matters regardless of the actual number of shares of Preferred 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.

 

Options

 

During the year ended December 31, 2019, the Company granted to directors as contractual compensation options to purchase an aggregate of 360,000 shares of its common stock. The options were valued at $116,095 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 ($0.275 to $1.125), a strike price of $1.00, expected dividend yield of 0%, historical volatility of 63.08%, risk-free interest rate of 1.39% to 2.56%, and an expected term of five years.

 

F-13

JUPITER GOLD CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 3 – STOCKHOLDERS' DEFICIT (Continued)

 

During the year ended December 31, 2018, the Company granted to directors as contractual compensation options to purchase an aggregate of 365,000 shares of its common stock. The options were valued at $204,319 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 ($1.00 to $1.13), a strike price of $1.00, expected dividend yield of 0%, historical volatility of 63.08%, risk-free interest rate of 2.25% to 2.94%, and an expected term of five years.

 

During the year ended December 31, 2017, the Company granted to directors as contractual compensation options to purchase an aggregate of 670,000 shares of its common stock. The options were valued at $363,443 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 ($1.00), the strike price ($1.25 or $1.00 according to the specific issuance), expected dividend yield of 0%, historical volatility of 63.08%, risk-free interest rate of 1.93%, and an expected term of five years.

 

With the untimely death of director Paul Durand on December 18, 2017, the 110,000 options awarded to him were forfeited effective as of December 31, 2017.

 

The following table reflects all outstanding and exercisable options at December 31, 2019. All stock options are exercisable for a period of five years from the date of issuance.

 

  Number of Options Outstanding  Weighted Average Exercise Price  Remaining Contractual Life (Years) 
Balance, December 31, 2017  1,170,000  $1.10   4.27 
Issued  365,000   1.00   4.46 
Exercised  (–)      
Forfeited  (–)      
Balance, December 31, 2018  1,535,000  $1.10   3.55 
Issued  360,000   1.00   4.46 
Exercised  (–)      
Forfeited  (–)      
Balance, December 31, 2019  1,895,000  $1.06   2.92 

 

The remaining contractual life of the options outstanding as of December 31, 2019 ranges from 1.67 to 4.92 years.

 

F-14

JUPITER GOLD CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 4 – COMMITMENTS AND CONTINGENCIES

 

Service Agreement

 

Jupiter Gold had a contractual agreement with Brazil Minerals by which it used that company's infrastructure in Brazil, including office and some personnel time, for $2,500 monthly. This agreement was terminated effective April 1, 2017. All amounts under this agreement were paid as of December 31, 2017.

 

Commencing November 1, 2017, Jupiter Gold established a similar cost sharing arrangement with Brazil Minerals whereby it agreed to pay $1,250 per month for support services including facilities and personnel.

 

Loans

 

Jupiter Gold and MJL have, from time to time, received loans from Brazil Minerals and its subsidiaries. These loans, when made, bear no interest and are payable on demand.

 

Monthly Honorarium

 

MJL pays as honorarium to its administrator, Jupiter Gold's Chief Executive Officer, the minimum monthly salary as set annually by the Brazilian government. The minimum monthly salary was approximately $252 (or 998 Brazilian Reais) during 2019, $246 (or 954 Brazilian Reais) during 2018, and $283 (or 937 Brazilian Reais) during 2017.

 

NOTE 5 – SUBSEQUENT EVENTS

 

In light of the SEC's Division of Corporate Finance Disclosure Guidance Topic Number 9, dated March 25, 2020, on the impact of COVID-19, the Company notes the following as of April 27, 2020:

 

 ·The Company has not had any reports of COVID-19 among its workforce;

 

 ·The Company has been able to continue to advance its Alpha Project with minimal disruption;

 

 ·

Some exploratory research of other projects has been delayed because of certain key personnel not being able to travel;

 

 ·

In 2020, the Company has received gross proceeds of $275,000 from the sale and issuance of securities to support ongoing operations and in particular its Alpha Project.

 

In accordance with FASB ASC 855-10 Subsequent Events, the Company has analyzed its operations subsequent to December 31, 2019 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.

 

F-15