U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

  

(Mark One)

 

For the Fiscal Year Ended __________________

 

 

For the transition period from March 1, 2012 to  December 31, 2012

 

Commission File Number 333-180624

 

 

Brazil Minerals, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada		39-2078861
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

 

324 South Beverly Drive, Suite 118

Beverly Hills, California 90212

(Address of principal executive offices)

 

Issuer’s telephone number, including area code:  (213) 590-2500

 

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

 

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

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ¨  No þ 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨  No þ 

 

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 þ  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   þ  No 

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K þ 

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (as defined in Rule 12b-2 of the Exchange Act). Check one:

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) .     Yes  ¨     No  þ 

 

As of March 25, 2013, the aggregate market value of the shares of the registrant’s common stock held by non-affiliates (based upon the closing stock price of $.69 on such date as reported on otcmarkets.com) was approximately $23,505,759. Shares of the Registrant’s common stock held by each executive officer and director and by each person who owns 10 percent or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates of the Registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes. No market value for the registrant’s common stock as of the last day of the registrant’s second fiscal quarter has been computed because no active trading market had been established as of such date.

 

As of March 28, 2013, there were outstanding 69,963,463 shares of the registrant’s common stock, $.001 par value.

 

Documents incorporated by reference: None.

 

 

 

FORWARD LOOKING STATEMENTS

 

            This Annual Report contains forward-looking statements. Forward-looking statements for Brazil Minerals, Inc. reflect current expectations, as of the date of this Annual Report, and involve certain risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors. Factors that could cause future results to materially differ from the recent results or those projected in forward-looking statements include: unprofitable efforts resulting not only from the failure to discover mineral deposits but also from finding mineral deposits that, though present, are insufficient in quantity and quality to return a profit from production; market fluctuations; government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection; competition; the loss of services of key personnel; unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of infrastructure as well as general economic conditions.

 

 

PART I

 

Item 1. Description of Business.

 

            Brazil Minerals, Inc. (formerly called Flux Technologies, Corp. and hereafter referred to as the “Company”) was incorporated under the laws of the State of Nevada on December 15, 2011. From inception until December 2012, the Company’s operations were limited to the development of a business plan, the completion of sales of our common stock, discussing offers by the Company of 3D animation services with potential customers, and the signing and  performance of a service agreement with one company.

 

            Immediately after the transactions discussed below, the Company discontinued its 3D animation services business and entered the business of producing raw diamonds in one property and exploring for gold in another, with both properties located in the Federative Republic of Brazil (“Brazil”), the largest country in Latin America . The Company’s local execution is led by an experienced team of Brazilians and the Company’s management team has expertise in mining operations, regulations, commercialization, business development, and financing.

 

Recent Transactions

 

On December 18, 2012, the Company, Iryna Antaniuk, the then sole director and sole officer of the Company (“Antaniuk”), and Brazil Mining, Inc., a Delaware corporation (“Brazil Mining”) entered into, and on December 19, 2012 they consummated, an Acquisition Agreement (the “Acquisition Agreement”). Pursuant to the Acquisition Agreement, (a) 3,000,000 shares of Common Stock held by Antaniuk were cancelled and retired, (b) Brazil Mining paid to the Company $25,000, (c) the Company used the $25,000 payment from Brazil Mining to pay and satisfy all of the Company’s liabilities and (d) the Company’s sole officer and director prior to the signing of the Agreement resigned and Marc Fogassa was elected as a director of the Company.  

 

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On December 19, 2012, the Company consummated Subscription Agreements with 37 investors pursuant to which the Company issued and sold to the investors for $33.333 per share an aggregate of 60,002 shares of the Company’s Common Stock for an aggregate purchase price of $2,000,006.66. Such Common Stock was issued in accordance with an exemption from the registration requirements of the Securities Act of 1933 as amended (the “Securities Act”), under Section 4(2) of the Securities Act by virtue of compliance with the provisions of Regulation D under the Securities Act.

  

As contemplated by the Subscription Agreements, on December 18, 2012, the Company amended its Articles of Incorporation to authorize 10,000,000 shares of a class of “blank check” preferred stock and filed a Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock. One share of Series A Convertible Preferred Stock (“Series A Stock”) was designated and issued for $1.00 to Marc Fogassa, who was elected on such date as a director and as the Chief Executive Officer of the Company. The Certificate of Designations of the Series A Stock, among other things, provides that, for so long as Series A Stock is issued and outstanding, the holders of Series A Stock shall vote together as a single class with the holders of the Common Stock, and the holders of any other class or series of shares entitled to vote with the Common Stock, with the holders of Series A Preferred Stock being entitled to 51% of the total votes on all such matters regardless of the actual number of shares of Series A Preferred Stock then outstanding, and the holders of Common Stock and any other shares entitled to vote being entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power.

 

In connection with the Acquisition Agreement, the Company entered into and consummated a Contribution Agreement with Brazil Mining (the “Contribution Agreement”) pursuant to which Brazil Mining contributed to the Company by way of an Assignment of Mineral Rights, certain mineral exploration rights on an approximately 10,000 hectare property located in the municipality of Borba, State of Amazonas, Brazil. Brazil Mining also entered into an Option Agreement with the Company pursuant to which Brazil Mining granted to the Company an option to purchase for $800,000 a 20% share of the monthly diamond production that Brazil Mining actually receives in respect of Brazil Mining’s anticipated acquisition of a 55% equity interest in a Brazilian entity (the “Option Agreement”). Pursuant to the Contribution Agreement, the Company issued to Brazil Mining an aggregate of 1,073,511 shares of the Company’s Common Stock, par value $.001 per share, constituting 51% of the issued and outstanding shares of Common Stock of the Company giving effect to all of the transactions consummated on December 19, 2012.

.

On January 2, 2013, the Company exercised the option granted to the Company pursuant to the Option Agreement. Brazil Mining has the right to redeem the Company’s 20% share for a consideration and upon the occurrence of certain events specified in the Option Agreement.

 

On January 24, 2013, the Company filed with the Secretary of State of the State of Nevada a Certificate of Amendment to the Articles of Incorporation of the Company to increase the number of authorized shares of its Common Stock from 75 million to 150 million shares.

 

 

            The Company declared a 33.333-1 stock dividend payable to holders of record of the Company’s Common Stock as of January 22, 2013. The payment date for the dividend was January 25, 2013.

 

            On March 23, 2013, the Company and Brazil Mining entered into an Exchange Agreement (the “Exchange Agreement”) pursuant to which Brazil Mining has agreed to sell to a 99.99% owned Brazilian subsidiary of the Company (“BMIX Subsidiary”), the rights to all profits, losses and appreciation or depreciation and all other economic and voting interests of any kind in Brazil Mining’s 55% equity interest in Mineração Duas Barras Ltda., a Brazilian company (“Duas Barras”) in exchange for the issuance to Brazil Mining of 1,000,000 shares of the Company’s Common Stock. Brazil Mining also agreed that if the Exchange Agreement is consummated, Brazil Mining will in accordance with the applicable laws and regulations of Brazil and state and municipal codes, perform all that is necessary to transfer to BMIX Subsidiary the record title ownership of the 55% interest in Duas Barras upon the Company’s request.

 

Mineral Rights

 

            As of March 29, 2013 the Company had the following described interests in mineral properties:

 

Duas Barras

 

On January 2, 2013, the Company exercised an option to purchase for $800,000 a 20% share of the monthly diamond production that Brazil Mining actually receives in respect of Brazil Mining’s 55% equity interest in Duas Barras. Duas Barras owns the mining right called “Portaria de Lavra” (mining concession) number 265, published in Brazil’s Official Federal Gazette on August 25th, 2006, and awarded by DNPM (“ Departamento Nacional de Produção Mineral”, the National Mining Department, a Brazilian federal government entity) with respect to DNPM Process number 806.569/1977. The mining concession area is 170.89 hectares or approximately 422 acres. “Portaria de Lavra” is the highest level of mining right achievable; this mining concession permits mining of diamond and gold in the property. In addition to the “Portaria de Lavra”, Duas Barras has current operating and environmental licenses issued by state authorities to operate its plant. The main office of Duas Barras is located at Fazenda Duas Barras, in the municipality of Olhos D’Agua, state of Minas Gerais, CEP 39398-000, Brazil. The CNPJ (Brazilian corporate tax identification) number of Duas Barras is 07.950.123/0001-32.

 

The Duas Barras mining concession with its diamond and gold processing plant is located on the left bank of the Jequitinhonha River in the state of Minas Gerais, Brazil, approximately 250 kilometers north of Belo Horizonte, the state capital. The diamond processing plant at Duas Barras is accessible by dirt road which connects to asphalt highways. A major city, Montes Claros, the regional hub for northern Minas Gerais, with a population of over 400,000 people and a busy regional airport, is located within an hour and a half drive of Duas Barras. The Jequitinhonha River is a well-known area for diamond and gold production; it has hosted alluvial mining operations on all scales since the 18 ^th century.

 

 

  

The Duas Barras diamond and gold processing plant was built by the previous owner of the mining concession, a Canadian listed company called Vaaldiam Resources Ltd. (“Vaaldiam”). Kenneth Johnson, the past president of Vaaldiam do Brasil Ltda., the Brazilian arm of Vaaldiam, is a member of the Board of Advisors of Brazil Mining, a shareholder of the Company. To the best of the Company’s knowledge, the diamond and gold processing plant at Duas Barras is the largest such type of alluvial recovery plant in Latin America. To the best of the Company’s knowledge, the cost of construction was approximately $2.5 million.

 

The Company has not performed any geological studies in Duas Barras. The Company has relied on the report entitled “Technical Report Duas Barras Diamond Project, Brazil, Presenting Details of Diamond Resources Compliant with Canadian National Instrument 43-101” (henceforth simply “Duas Barras NI 43-101”), issued by Qualified Person and Professional Geologist Paul J. Daigle, Senior Project Geologist at Vaaldiam, on March 30th, 2007. The Duas Barras NI 43-101 contains in its page 9 the following table of resources:

 

 

 

            The Company does not anticipate performing any geological work to confirm or deny the data above. The complete report is on file with Canada’s securities commission at www.sedar.com by searching under “Vaaldiam” and thereafter navigating to the entry entitled “Technical Report (NI 43-101)-English dated April 12, 2007.”

 

During the first quarter of 2013, one of the three main generators of the Duas Barras plant needed repairs and the plant stopped production for approximately one month. The generator has been fully repaired by Cummins, its manufacturer, and is working as of the date of this Annual Report. Additionally, being that December to March is the season of high rains, alluvial mining operations in the State of Minas Gerais (where Duas Barras is located) normally stop production during which period equipment is refurbished and gravel fronts are prepared for processing during the dry season. That was the focus of our efforts this quarter as well. During the first quarter, Duas Barras purchased a large used dredge, transported and has started to reassemble it. The dredge shall be deployed in one of the most promising locations within the mining concession. We expect Duas Barras to start using this dredge in the later part of the second quarter of 2013.

 

On March 23, 2013, the Company and Brazil Mining entered into the Exchange Agreement pursuant to which Brazil Mining has agreed to sell to BMIX subsidiary of the Company, the rights to all profits, losses and appreciation or depreciation and all other economic and voting interests of any kind in Brazil Mining’s 55% equity interest in Duas Barras in exchange for the issuance to Brazil Mining of 1,000,000 shares of the Company’s Common Stock.

 

Exploration Rights on Borba Property

 

            On December 19, 2012, pursuant to an Assignment of Mineral Rights, the Company acquired mineral exploration rights on a property located in the municipality of Borba, State of Amazonas, Brazil.

 

The Borba Project is based on the process DNPM 880.239/2009; the mineral rights cover an area of 9,999.11 hectares (approximately 24,708 acres). The geographical coordinates of the Borba Project are latitude of -06°30'00''657 and longitude of -59°27'52''267. Company management believes that Borba has promising indications for gold, but no formal geological studies have been conducted.

 

Map from DNPM delineating the Borba Project mineral rights area.

 

 

Superficial or near superficial gold pebbles have been found in the Borba Project area. The Company intends to enter into a focused research phase program in the higher likelihood target areas. 

 

            As of March 18, 2013, the Company had 1 full-time employee and a service agreement with Brazil Mining pursuant to which Brazil Mining performs administrative services for the Company. Brazil Mining has 5 employees engaged in different capacities.

 

            Raw Materials

 

            The Company primarily has invested in a company which is in the  business of producing raw minerals, including diamonds. The Company does not directly utilize any significant amount of raw materials. All of the raw materials needed for the Company’s business model are readily available from numerous different suppliers and at market driven prices.

 

            Seasonality 

 

            The business of the Company is seasonal. The period of high rains in the northern Minas Gerais region, from December to March, makes operations of the alluvial plant at Duas Barras inefficient. Therefore, it is customary to stop operating the plant or operating it at a much lower rate during such season.

 

            Intellectual Property

 

            The Company does not own any trademarks, service marks or patents.

 

            Competition 

 

            The Company’s existing business – diamond production – is relatively hard to penetrate due not only to regulatory and cost issues but also to lack of diamond resource areas. There are a limited number of mining locations in the world that produce diamonds or that may hold viable economic potential to do so. In Brazil, the procedures to license, explore, and eventually build a diamond processing operation could take many years and millions of dollars. The Company is aware of only two other companies in Brazil that produce alluvial diamonds in quality and quantity similar to what the Company expects to produce from Duas Barras. Therefore, the Company believes that its position as a diamond producer is quite significant. The Company believes that it has a competitive product – raw diamonds – to offer and it will be able to sell its entire production of diamonds to either domestic or foreign buyers.

 

            Diamond Sales

 

            The Company plans to focus on qualifying a few strong buyers for its production and essentially pre-selling its output, provided some parameters of size and clarity of gems are observed. The Company has set up a portal window on its website (www.brazil-minerals.com) called “Diamond Sales” that allows its qualified buyers to begin to access information about the Company’s production and special gems. Special gems would normally be diamonds that are greater than  a certain size or that are colored. Additionally, the Company has secured commitments from other smaller local diamond producers in Brazil that would like to offer their gems, including colored diamonds, online through the Diamond Sales portal. The Company will initiate such intermediation in the future and will charge a commission on such sales.  

 

 

 

Item 1A. Risk Factors.

 

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

 

Item 1B. Unresolved Staff Comments.

 

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

 

Item 2. Properties.

 

            The Company receives shareholder and other official correspondence at its headquarters location in Beverly Hills, California, which is covered by the service agreement between the Company and Brazil Mining and is on a month-to-month basis. The Company’s main operational office in Brazil is at a modern office building in the city of Belo Horizonte, the capital of the state of Minas Gerais with a population of approximately 2.5 million people. The Company sub-leases its office for $1,100 Brazilian reais (or approximately USD$550) from an affiliate on a month-to-month basis; the lessor is BM Participações Ltda., which is a 99.99% owned subsidiary of Brazil Mining. The Company utilizes an office in São Paulo, the financial center of Brazil with a population of approximately 12 million people, where consultants and secretarial staff work from, which it also sub-leases from an affiliate on a monthly basis for a cost of approximately US$150. 

 

Item 3. Legal Proceedings.

 

            We know of no material, active, pending or threatened proceeding against the Company nor are we involved as a plaintiff in any material proceeding or pending litigation.

 

Item 4. Mine Safety Disclosures.

 

            Not applicable.

 

PART II

 

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

 

            We have two classes of equity securities:  (i) Common Stock, par value $.001 per share (“Common Stock”), 69,963,463 shares of which are outstanding as of March 29, 2013, held by approximately 55 shareholders of record and (ii) Series A Convertible Preferred Stock, par value $.001 per share, (“Series A Stock”), 1 share of which is outstanding as of March 29, 2013, held by one person. Our Common Stock is quoted on the Over-the-Counter Bulletin Board ("OTCBB") under the symbol "BMIX". There is a limited public market for our common shares.   Trading in stocks quoted on the OTC Bulletin Board is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects.  We cannot assure you that there will be a market in the future for our Common Stock.

 

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            OTC Bulletin Board securities are not listed or traded on the floor of an organized national or regional stock exchange.  Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks.  OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.

 

            Prior to March 7, 2013 there were no quotations for the Common Stock. During the period from March 7, 2013 to March 28, 2013 the Common Stock has traded at prices ranging from $.60 to $1.10 per share. The last trade of the Common Stock on March 28, 2013 was at $.62 per share.

 

            The Company has not paid any cash dividends since its inception and we do not foresee declaring any cash dividends on our Common Stock in the foreseeable future. 

 

            As of December 31, 2012, the Company had no equity compensation plans under which equity securities of the Company were authorized for issuance.

 

Penny Stock Regulations

 

            The Commission has adopted regulations which generally define "penny stock" to be an equity security that has a market price of less than $5.00 per share.  Our Common Stock, when and if a trading market develops, may fall within the definition of penny stock and be subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their spouse).

 

            For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the "penny stock" rules may restrict the ability of broker-dealers to sell our Common Stock and may affect the ability of investors to sell their Common Stock in the secondary market.

 

9

 

On December 19, 2012, the Company consummated Subscription Agreements with 37 investors pursuant to which the Company issued and sold to the investors for $33.333 per share an aggregate of 60,002 shares of the Company’s Common Stock for an aggregate purchase price of $2,000,006. Such Common Stock was issued in accordance with an exemption from the registration requirements of the Securities Act under Section 4(2) of the Securities Act by virtue of compliance with the provisions of Regulation D under the Securities Act. In connection with such sales, the Company issued to the placement agent and its designees as partial compensation to the placement agent for its services in the transaction described in this paragraph 85,411 shares of Common Stock and five year warrants to purchase for $33.333 per share an aggregate of 6,000 shares of Common Stock. The warrants were also issued under an exemption provided by Section 4(2) of the Securities Act. (The number of shares of Common Stock and the purchase prices and exercise prices set forth in this paragraph have not been adjusted to give effect to the 33.333-1 stock dividend paid to holders of record of the Company’s Common Stock as of January 22, 2013.)

 

On December 19, 2012, the Company issued and sold to Marc Fogassa, the Company’s Chief Executive Officer, for $1.00 one share of the Company’s Series A Stock. The Series A was issued in accordance with an exemption from the registration requirements of the Securities Act under Section 4(2) of the Securities Act by virtue of compliance with the provisions of Regulation D under the Securities Act.

 

             

Item 6. Selected Financial Data.

 

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

 

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

 

 

Results of Operations

 

            The Company was incorporated on December 15, 2011 and changed its business plan in December 2012. No meaningful comparison of the Company’s financial condition as of December 31, 2012 and loss for the period ended December 31, 2012 can be made to any other date or period.

 

Liquidity and Capital Resources

 

            In 2012 the Company’s principal source of liquidity was from the $2,000,000 gross proceeds of a private placement of common stock in December 2012. As of December 31, 2012, the working capital of the Company was $795,727. As of December 31, 2012, the Company had accrued expenses of $67,362 and $100 indebtedness for money advanced by an officer.

 

            The Company believes that it has sufficient capital to fund its operations for at least the next twelve months. However, the Company may need additional capital to fund some or all of the purchase price for future acquisitions or investments may seek equity or debt financing for such purpose.

 

 

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Off-Balance Sheet Arrangements

 

            The Company currently has no off-balance sheet arrangements.

 

Critical accounting policies and estimates

 

            The Company’s financial instruments consist of cash and cash equivalents, loans to a related party, accrued expenses and an amount due to a director. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in the Company’s financial statements. If our estimate of the fair value is incorrect at December 31, 2012, it could negatively affect our financial position and liquidity and could result in our having understated our net loss.

 

Recent Accounting Pronouncements

 

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.  Our significant accounting policies are described in Note 1 of the financial statements. We have reviewed all recent accounting pronouncements issued to the date of the issuance of these financial statements, and we do not believe any of these pronouncements will have a material impact on the Company.

 

 

Plan of Operation

 

            Over the long term, in a number of years, the Company intends to control and operate a number of productive mines. The Company also intends to participate in a larger number of other mines as a significant partner, bringing its expertise in capital raising and global contacts to bear. In yet a larger number of other opportunities, the Company intends to be a passive participant, collecting payment, rent, royalties, dividends or other distributions from the sale or exploration of mineral areas that it acquires or licenses. We believe that this business model will significantly diversify revenues across minerals, regions, and operations, and provide an attractive means for investors to participate in the investment in the natural resources sector of Brazil. The Company believes that based on the example of other companies in  the industry it may be able to achieve a significant capitalization without the necessity of a large employee base.

 

            In order to achieve the strategic goals set about above, the Company will need to improve its capital structure over time by means of equity or debt financings. Management believes that through its contacts in the industry, the Company will be able to review a significant number of potential acquisitions of mineral properties in Brazil.

 

 

            The Company’s goal for 2013 with respect to its Duas Barras's stake is to ensure that Duas Barras provides to the Company a source of quality diamonds from which the Company can expand its beginning network of buyers. The Company has set up a page on its website called "Diamond Sales" in which registered buyers will access relevant information and photographs of production and specific gems from the Company and other affiliated sellers, from which the Company would receive a sales commission.

 

            The Company’s goal for 2013 with respect to its Borba Project is to complete an initial assessment of the viability of the area for a drilling program and, if warranted, to embark upon such drilling program in the future. The results of this drilling program would dictate the next phase of business development for this project, as to whether the Company would raise capital to study it further and take it all the way to a producing mine on its own, or to partner along the way.

  

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

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

 

Item 8. Financial Statements and Supplementary Data.

 

            Our financial statements, including the notes thereto, together with the report from our independent registered public accounting firm are presented beginning at page F-1.

 

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

 

            None . 

 

Item 9A. Controls and Procedures.

(a)  Evaluation of Disclosure Controls and Procedures  

The Company’s management, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, has evaluated the design, operation, and effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of December 31, 2012. On the basis of that evaluation, management concluded that the Company’s disclosure controls and procedures are designed, and are effective, to provide reasonable assurance that the information required to be disclosed in reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Commission, and that such information is accumulated and communicated to management, including its Principal Executive Officer and Principal Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

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

            Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  The Company’s internal control system is designed to provide reasonable assurance to management and to the Company’s Board of Directors regarding the preparation and fair presentation of published financial statements. Under the supervision and with the participation of management, including the Company’s Principal Executive Officer and Principal Financial Officer, management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on management’s evaluation under the framework in Internal Control—Integrated Framework, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2012.

            This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Since the Company is a non-accelerated filer, management’s report is not subject to attestation by the Company's registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002. As a result, this Annual Report contains only management’s report on internal controls.

(c)   Changes in Internal Control over Financial Reporting

            There were no changes in the Company’s internal control over financial reporting that occurred in the fourth quarter of 2012 that materially affected, or would be reasonably likely to materially affect, the Company’s internal control over financial reporting.

(d)   Limitations of the Effectiveness of Internal Controls

The effectiveness of the Company’s system of disclosure controls and procedures and internal control over financial reporting is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating the control system, the assumptions used in identifying the likelihood of future events, and the inability to eliminate fraud and misconduct completely. As a result, there can be no assurance that the Company’s disclosure controls and procedures and internal control over financial reporting will detect all errors or fraud. However, the Company’s control systems have been designed to provide reasonable assurance of achieving their objectives, and the Company’s Principal Executive Officer and Principal Financial Officer have concluded that the Company’s disclosure controls and procedures and internal control over financial reporting are effective at the reasonable assurance level.

Item 9B. Other Information.

            None. 

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