Atlas Lithium Corp

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

Organization and Description of Business

Atlas Lithium Corporation (together with its subsidiaries “Atlas Lithium.” the “Company”, “the Registrant”, “we”, “us”, or “our”) was incorporated under the laws of the State of Nevada, on December 15, 2011. The Company changed its management and business on December 18, 2012, to focus on mineral exploration in Brazil.

Basis of Presentation and Principles of Consolidation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are expressed in United States dollars. For the period ended March 31, 2024, the consolidated financial statements include the accounts of the Company; its 99.9% owned subsidiary, Atlas Litio Brasil Ltda. (“Atlas Brasil”); its 58.71% equity interest in Apollo Resources Corporation (“Apollo Resources”) and its subsidiaries Mineração Apollo, Ltda., Mineração Duas Barras Ltda. (“MDB”) and RST Recursos Minerais Ltda. (“RST”); and its 27.42% equity interest in Jupiter Gold Corporation (“Jupiter Gold”), which includes the accounts of Jupiter Gold’s subsidiary, Mineração Jupiter Ltda. The Company has concluded that Apollo Resources, Jupiter Gold and their subsidiaries are variable interest entities (“VIE”) in accordance with applicable accounting standards and guidance. As such, the accounts and results of Apollo Resources, Jupiter Gold and their subsidiaries have been included in the Company’s consolidated financial statements.

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

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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.

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.

NOTE 2 –COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

Property and Equipment

The following table sets forth the components of the Company’s property and equipment at March 31, 2024 and December 31, 2023:

Intangible Assets

Intangible assets consist of mining rights which are not amortized as the mining rights are perpetual. The carrying value of these mineral rights as of March 31, 2024 and at December 31, 2023 was $7,498,608 and $7,115,644, respectively.

The Company previously reported it was acquiring five mineral rights totaling 1,090.88 hectares pursuant to a mineral rights purchase agreement entered into on January 19, 2023 (the “Acquisition Agreement”). After a period of preliminary assessment, the Company and the counterparty to the agreement agreed to revise the terms of the acquisition, following which the Company ultimately consummated the acquisition of only one mineral right totaling 45.77 hectares. The mineral right is located in the municipalities of Araçuaí and Itinga, in a region known as “Lithium Valley” in the state of Minas Gerais in Brazil. The Company’s obligations under the Acquisition Agreement as revised are:

As of March 31, 2024, there are no outstanding commitments related to this transaction.

Accounts Payable and Accrued Liabilities

Leases

Finance Leases

For the reporting period ended March 31, 2024, no financial leases meeting the criteria outlined in ASC 842 have been identified.

Operating Leases

Right of use (“ROU”) assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. When the rate implicit to the lease cannot be readily determined, we utilize our incremental borrowing rate in determining the present value of the future lease payments. The ROU asset includes any lease payments made and lease incentives received prior to the commencement date. Operating lease ROU assets also include any cumulative prepaid or accrued rent when the lease payments are uneven throughout the lease term. The ROU assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The ROU and lease liabilities are primarily related to commercial offices with third parties.

The lease agreements have terms between 2 to 4 years and the liability was measured at the present value of the lease payments discounted using interest rates with a weighted average rate of 6.5% which was determined to be the Company’s incremental borrowing rate. The continuity of the lease liabilities is presented in the table below:

The maturity of the lease liabilities (contractual undiscounted cash flows) is presented in the table below:

Convertible Debt

On November 7, 2023, the Company entered into a convertible note purchase agreement (the “November 7, 2023 Convertible Note Agreement”) with Mr. Martin Rowley (“Mr. Rowley”) and other investors to raise up to $20,000,000 through the issuance of convertible promissory notes. On November 7, 2023, the Company issued $10,000,000 in convertible promissory notes under the terms of the November 7, 2023 Convertible Note Agreement, and through March 31, 2024 there were no other purchases and sales of the convertible promissory notes pursuant to the November 7, 2023 Convertible Note Agreement. The notes have the following key terms:

In the three months ended March 31, 2024, the Company recorded $164,024 in interest expense and $25,903 in accretion expense in the consolidated statement of operations and comprehensive loss ($nil and $nil, for the three months ended March 31, 2023).

Derivative Liabilities

a) Derivative liability – embedded conversion feature on convertible debt

On November 7, 2023, the Company issued convertible promissory notes to Mr. Rowley and other investors. In accordance with FASB ASC 815, the conversion feature of the convertible debt was determined to be an embedded derivative. As such, it was bifurcated from the host debt liability and was recognized as a derivative liability in the consolidated statement of financial position. The derivative liability is measured at fair value through profit or loss.

At December 31, 2023, the fair value of the embedded conversion feature was determined to be $486,304 using a Black-Scholes collar option pricing model with the following assumptions:

At March 31, 2024, the fair value of the embedded conversion feature was determined to be $298,815 using a Black-Scholes collar option pricing model with the following assumptions:

In the Black-Scholes collar option pricing models, the expected volatilities were based on historical volatilities of the securities of the Company and its trading peers, and the risk-free interest rates were determined based on the prevailing rates at the grant date for U.S. Treasury Bonds with a term equal to the expected term of the instrument being valued.

In the three months ended March 31, 2024, the Company recognized a $187,489 gain on changes in fair value of financial instruments in the consolidated statement of operations and comprehensive loss ($nil, in the three months ended March 31, 2023).

b) Derivative liability – other stock incentives

As of March 31, 2024, the Company there were stock-based incentives outstanding held by one of the Company’s executive officers that provide for the issuance of up to a remaining maximum of 1.0% of the Company’s Common Stock outstanding, in five equal tranches of 0.2% of the Company’s Common Stock outstanding, with an expiry date of December 31, 2026 and market vesting conditions as follows:

In accordance with FASB ASC 815, these RSU awards were classified as a liability, measured at fair value through profit or loss, and compensation expense is recognized over the expected term.

As af March 31, 2024, Tranche 3, Tranche 4, Tranche 5, Tranche 6 and Tranche 7 remain outstanding and unvested, and the total fair value of these restricted stock awards outstanding was $1,550,576, as measured using a Monte Carlo Simulation with the following ranges of assumptions: the Company’s stock price on the March 31, 2024 measurement date, expected dividend yield of 0%, expected volatility between 72.3% and 89.3%, risk-free interest rate between a range of 4.79% to 5.41%, and an expected term between 3 months and 12 months. The expected volatilities were based on historical volatilities of the securities of the Company and its trading peers, and the risk-free interest rates were determined based on the prevailing rates at the grant date for U.S. Treasury Bonds with a term equal to the expected term of the award being valued.

NOTE 3 –DEFERRED CONSIDERATION FROM ROYALTIES SOLD

On May 2, 2023, the Company and Atlas Litio Brasil Ltda. (the “Company Subsidiary”), entered into a Royalty Purchase Agreement (the “Purchase Agreement”) with Lithium Royalty Corp., a Canadian company listed on the Toronto Stock Exchange (“LRC”). The transaction contemplated under the Purchase Agreement closed simultaneously on May 2, 2023, whereby the Company Subsidiary sold to LRC in consideration for $20,000,000 in cash, a royalty interest equaling 3% of the gross revenue (the “Royalty”) to be received by the Company Subsidiary from the sale of products from certain 19 mineral rights and properties that are located in Brazil and held by the Company Subsidiary.

On the same day, the Company Subsidiary and LRC entered into a Gross Revenue Royalty Agreement (the “Royalty Agreement”) pursuant to which the Company Subsidiary granted LRC the Royalty and undertook to calculate and make royalty payments on a quarterly basis commencing from the first receipt of the sales proceeds with respect to the products from the Property. The Royalty Agreement contains other customary terms, including but not limited to, the scope of the gross revenue, the Company Subsidiary’s right to determine operations, and LRC’s information and audit rights. Under the Royalty Agreement, the Company Subsidiary also granted LRC an option to purchase additional royalty interests with respect to certain additional Brazilian mineral rights and properties on the same terms and conditions as the Royalty, at a total purchase price of $5,000,000.

NOTE 4 –OTHER NONCURRENT LIABILITIES

Other noncurrent liabilities are comprised solely of social contributions and other employee-related costs at our operating subsidiaries located in Brazil. The balance of these employee related costs as of March 31, 2024, and December 31, 2023, amounted to $27,306 and $58,579, respectively.

NOTE 5 –STOCKHOLDERS’ EQUITY

Authorized Stock and Amendments

On July 18, 2022, the board of directors of the Company (the “Board of Directors” or “Board”) approved a reverse stock split of the Company’s issued and outstanding shares of common stock at a ratio of 1-for-750 without affecting the number of shares of authorized common stock (the “Originally Intended Reverse Stock Split”). The holder of the majority voting power of our voting stock (the “Majority Stockholder”) approved the Originally Intended Reverse Stock Split by written consent on July 18, 2022, in lieu of a meeting of stockholders as permitted under the Nevada Revised Statute (“NRS”) Section 78.320(2) and the company’s bylaws, as then amended (the “Bylaws”).

On December 20, 2022, the Company made the appropriate filings with the Secretary of State of the State of Nevada (“SOS”) that were intended to effect the Originally Intended Reverse Stock Split (the “Original Articles Amendment”). In April 2023, the Board of Directors determined that due to an error, the Original Articles Amendment was a nullity and that it would be in the best interest of the Company to take corrective action to remedy the inaccuracy and to file the documents that would have been necessary to effectuate a 1-for-750 reverse stock split of the issued and outstanding common stock with a corresponding split of the authorized common stock (the “Rectified Reverse Stock Split”) and then immediately thereafter increase the number of shares of authorized common stock back to the number it was prior to the Rectified Reverse Stock Split as of December 20, 2022.

On April 21, 2023, the Board authorized and approved the necessary documents and filings with the SOS to decrease the number of the Company’s issued and outstanding shares of common stock and correspondingly decrease the number of authorized shares of common stock, each at a ratio of 1-for-750, retroactively effective as of December 20, 2022, without a vote of the stockholders, as pursuant to the NRS, no stockholder approval was required. Also on April 21, 2023, the Board and the Majority Stockholder approved an Authorized Capital Increase Amendment to increase the authorized number of shares of common stock from 5,333,334 shares to 4,000,000,000 shares retroactively as of December 20, 2022, in accordance with the Board’s and stockholders’ original intent in effecting the Originally Intended Reverse Stock Split.

NOTE 5 – STOCKHOLDERS’ EQUITY

Further, the Board of Directors determined that it was advisable and in the best interests of the Company to amend and restate the Company’s articles of incorporation to decrease the number of shares of authorized common stock to two hundred million (200,000,000) and to amend certain other provisions in the Company’s articles (the “Amended and Restated Articles”). The Board of Directors and the Majority Stockholder determined to decrease the number of shares of authorized common stock to reduce the number of shares available for issuance given the negative perception the dilutive effect of having such a large number of shares available for issuance may have on any potential future efforts to attract additional financing. On April 21, 2023, the Board and the Majority Stockholder approved the Amended and Restated Articles. On May 25, 2023, the Company made the appropriate filings with the SOS to effect the changes as described above.

On May 25, 2023, the Company also filed with the SOS a Certificate of Withdrawal of Designation of the Series B Convertible Preferred Stock and a Certificate of Withdrawal of Designation of the Series C Convertible Preferred which were effective as of May 25, 2023.

As of December 31, 2023 and March 31, 2024, the Company had 200,000,000 authorized shares of common stock, with a par value of $0.001 per share.

Series A Preferred Stock

On December 18, 2012, the Company filed with the SOS a Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock (“Series A Stock”) to designate one share of a new series of preferred stock. The Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock 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 Company’s common stock, with the holders of Series A Stock being entitled to 51% of the total votes on all such matters regardless of the actual number of shares of Series 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. The one outstanding share of our Series A Stock has been held by our Chief Executive Officer and Chairman, Mr. Marc Fogassa since December 18, 2012.

Series D Preferred Stock

On September 16, 2021, the Company filed with the SOS a Certificate of Designations, Preferences and Rights of Series D Convertible Preferred Stock (“Series D Stock”) to designate 1,000,000 shares of a new series of preferred stock. The Certificate of Designations, Preferences and Rights of Series D Convertible Preferred Stock (the “Series D COD”) provides that for so long as Series D Stock is issued and outstanding, the holders of Series D Stock shall have no voting power until such time as the Series D Stock is converted into shares of common stock. Pursuant to the Series D COD one share of Series D Stock is convertible into 10,000 shares of common stock and may be converted at any time at the election of the holder. Giving effect to the Reverse Stock Split discussed above, each share of Series D Stock is effectively convertible into 13 and 1/3 shares of common stock. Holders of the Series D Stock are not entitled to any liquidation preference over the holders of common stock and are entitled to any dividends or distributions declared by the Company on a pro rata basis. There were no shares of Series D Stock outstanding as of March 31, 2024 or December 31, 2023.

Three Months Ended March 31, 2023 Transactions

On January 9, 2023, the Company entered into an underwriting agreement (with EF Hutton, division of Benchmark Investments, LLC, as representative of the underwriters named therein (the “Representative”), pursuant to which the Company agreed to sell an aggregate of 675,000 shares of the Company’s common stock, par value $0.001 (“Common Stock”), to the Representative, at a public offering price of $6.00 per share in a firm commitment public offering (the “Offering”). The Company also granted the Representative a 45-day option to purchase up to 101,250 additional shares of the Company’s Common Stock upon the same terms and conditions for the purpose of covering any over-allotments in connection with the Offering (the “Over-Allotment Option”). On January 11, 2023, the Representative delivered its notice to exercise the Over-Allotment Option in full.

The shares of Common Stock were offered by the Company pursuant to a registration statement on Form S-1, as amended (File No. 333-262399), which was declared effective on January 9, 2023. The Offering closed on January 12, 2023 (the “Closing”).

In connection with the Closing, the Company issued to the Representative, and/or its permitted designees, as a portion of the underwriting compensation payable to the Representative, warrants to purchase an aggregate of 33,750 shares of Common Stock, equal to 5% of the number of shares of Common Stock sold in the Offering (excluding the Over-Allotment Option), at an exercise price of $7.50, equal to 125% of the per share offering price of $6.00 (the “Representative’s Warrants”). The Representative’s Warrants are exercisable for a period of five years from the effective date of the Registration Statement, and were subject to a mandatory lock-up for 180 days from the commencement of sales in the Offering. Aggregate gross proceeds from the Offering were $4,657,500.

On January 30, 2023, the Company entered into a Securities Purchase Agreement with two investors, pursuant to which the Company agreed to issue and sell to the investors in a Regulation S private placement an aggregate of 640,000 restricted shares of the Company’s Common Stock for a purchase price of $6.25 per share, for total gross proceeds of $4,000,000. The transaction closed on February 1, 2023.

On February 1, 2023, the Company acquired one mineral right totaling 45.77 hectares located in the municipalities of Araçuaí and Itinga, in a region known as “Lithium Valley” in the state of Minas Gerais in Brazil. The purchase consideration paid totaled $1,150,000 including $400,000 paid in cash on January 19, 2023 and $750,000 paid in restricted shares of Common Stock of the Company on February 1, 2023.

Additionally, during the three months ended March 31, 2023, the Company sold an aggregate of 91,500 shares of Common Stock to Triton Funds, LP (“Triton”) for total gross proceeds of $831,834 pursuant to a Common Stock Purchase Agreement (the “CSPA”) entered into between the Company and Triton, dated February 26, 2021. Pursuant to the CSPA, Triton agreed to invest up to $2,500,000 in the Company in the form of Common Stock purchases, and the Company may, in its sole discretion, and subject to the satisfaction of certain conditions, deliver purchase notices to Triton which states the dollar amount of shares which the Company intends to sell to Triton.

Three Months Ended March 31, 2024 Transactions

During the three months ended March 31, 2024, the Company issued 6,000 shares of Common Stock in settlement of restricted stock units that vested in the period.

Common Stock Options

During the three months ended March 31, 2024 and 2023, the Company granted options to purchase common stock to officers, consultants and non-management directors. The options were valued using the Black-Scholes option pricing model with the following ranges of assumptions:

Changes in common stock options for the three months ended March 31, 2024 and 2023 were as follows:

During three months ended March 31, 2024, the Company recorded $3,315,822 in stock-based compensation expense from common stock options in the consolidated statements of operations and comprehensive loss ($121,925, during the three months ended March 31, 2023).

Series D Preferred Stock Options

As at and for the three months ended March 31, 2024, the Company had no Series D preferred stock options outstanding and no shares of Series D Stock outstanding. During the three months ended March 31, 2023, the Company granted options to purchase series D stock to directors of the Company. All Series D preferred stock options granted vested immediately at the grant date and were exercisable for a period of ten years from the date of issuance. The options were valued using the Black-Scholes option pricing model with the following ranges of assumptions:

Changes in Series D preferred stock options for the three months ended March 31, 2023 were as follows:

During the three months ended March 31, 2024, the Company recorded $nil in stock-based compensation expense from Series D preferred stock options in the consolidated statements of operations and comprehensive loss ($267,359, during the three months ended March 31, 2023).

Common Stock Purchase Warrants

Stock purchase warrants are accounted for as equity in accordance with ASC 480,Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity.

During the three months ended March 31, 2024, the Company did not issue any common stock purchase warrants. During the three months ended March 31, 2023, the Company issued common stock purchase warrants to investors, finders and brokers in connection with the Company’s equity financings. All warrants vest within 180 days from issuance and are exercisable for a period of one to five years from the date of issuance. The common stock purchase warrants were valued using the Black-Scholes option pricing model with the following ranges of assumptions:

Changes in common stock purchase warrants for the three months ended March 31, 2024 and March 31, 2023 were as follows:

During the three months ended March 31, 2024, the Company recorded $nil in share issuance costs in the consolidated statement of changes in equity as a result of the Company’s common stock purchase warrants issued ($147,848, during the three months ended March 31, 2023).

Restricted Stock Units (“RSUs”)

Restricted stock units (“RSUs”) are granted by the Company to its officers, consultants and directors of the Company as a form of stock-based compensation. The RSUs are granted with varying immediate-vesting, time-vesting, performance-vesting, and market-vesting conditions as tailored to each recipient. Each RSU represents the right to receive one share of the Company’s Common Stock immediately upon vesting.

Changes in RSUs for the three months ended March 31, 2024 and March 31, 2023 were as follows:

During the three months ended March 31, 2024, the Company recorded $2,891,703 in stock-based compensation expense from the Company’s RSU activity in the period ($363,739 during the three months ended March 31, 2023). As of March 31, 2024, there were 891,109 RSUs outstanding and rights to receive 138,908 shares of common stock as a result of RSU vesting(December 31, 2023:924,364 RSUs outstanding and rights to receive 115,653 shares of common stock as a result of RSU vesting).

Other stock incentives measured at fair value through profit or loss

As of March 31, 2024, the Company had certain other stock incentives outstanding pursuant to an officer’s employment agreement, as further disclosed in the ‘Derivative liabilities’ section above. These were designated as liability-classified awards and are measured at fair value through profit or loss. During the three months ended March 31, 2024, the Company recorded $508,172 in stock-based compensation expense from the Company’s other stock incentive activity in the period ($nil, during the three months ended March 31, 2023). As of March 31, 2024, the Company had 127,695 shares subject to issuance under these other stock incentives and a $1,021,929 derivative liability recognized (December 31, 2023:127,635 shares subject to issuance and a $513,757 derivative liability recognized).

NOTE 6 –COMMITMENTS AND CONTINGENCIES

Rental Commitment

The following table summarizes certain of Atlas’s contractual obligations at March 31, 2024 (in thousands):

Please see commitments related to Leases in Note 2.

NOTE 7 –RELATED PARTY TRANSACTIONS

Related party transactions are recorded at the exchange amount transacted as agreed between the Company and the related party. All the related party transactions have been reviewed and approved by the board of directors.

The Company’s related parties include:

Technical Services Agreement: In July 2023, the Company entered into a technical service agreement with RTEK pursuant to which RTEK provides mining engineering, planning and business development services.

NOTE 7 – RELATED PARTY TRANSACTIONS (CONTINUED)

Convertible Note Purchase Agreement: In November 2023, the Company entered into a Convertible Note Purchase Agreement with Martin Rowley relating to the issuance to Martin Rowley along with other experienced lithium investors of convertible promissory notes with an aggregate total principal amount of $10.0 million, accruing interest at a rate of 6.5% per annum. Pursuant to the agreement, Mr. Rowley, through Jaeger, purchased an aggregate of $2.0 million of the Notes. The Notes will mature in November 2026.

Offtake and Sales Agreements: In December 2023 the Company entered into Offtake and Sales Agreements with each of Sichuan Yahua Industrial Group Co., Ltd. and Sheng Wei Zhi Yuan International Limited, a subsidiary of Shenzhen Chengxin Lithium Group Co., Ltd., pursuant to which the Company agreed, for a period of five (5) years, to sell to each buyer 60,000 dry metric tonnes of lithium concentrate (the “Product”) per year, subject to the Company’s authority to increase or decrease such quantity by up to ten percent (10%) each year. Each of the buyers agreed to pre-pay to the Company $20.0 million (each, a “Pre-Payment Amount”) for future deliveries of the Product after the Company obtains customary licenses. Each Pre-Payment Amount will be used to offset against such buyer’s future payment obligations for the Product.

The related parties outstanding amounts and expenses as of March 31, 2024 and December 31, 2023 are shown below:

In the course of preparing consolidated financial statements, we eliminate the effects of various transactions conducted between Atlas and its subsidiaries and among the subsidiaries.

Jupiter Gold Corporation

During the three months ended March 31, 2024, Jupiter Gold granted options to purchase an aggregate of 105,000 shares of its common stock to Marc Fogassa, the Chairman and CEO of the Company, at prices ranging between $0.01 to $1.00 per share. The options were valued at $20,000 and recorded to stock-based compensation. The options were valued using the Black-Scholes option pricing model with the following average assumptions: Jupiter Gold stock price on the date of the grant ($0.74 to $0.90), an illiquidity discount of 75%, expected dividend yield of 0%, historical volatility calculated between 255% and 311%, risk-free interest rate between a range of 3.88% to 4.19%, and an expected term between 5 and 10 years. As of March 31, 2024, an aggregate 1,315,000 Jupiter Gold common stock options were outstanding with a weighted average life of 8.06 years at a weighted average exercise price of $0.051 and an aggregated intrinsic value of $982,674.

NOTE 7 – RELATED PARTY TRANSACTIONS (CONTINUED)

During the three months ended March 31, 2023, Jupiter Gold granted options to purchase an aggregate of 105,000 shares of its common stock to Marc Fogassa at prices ranging between $0.01 to $1.00 per share. The options were valued at $30,011 and recorded to stock-based compensation. The options were valued using the Black-Scholes option pricing model with the following average assumptions: Jupiter Gold stock price on the date of the grant ($1.00 to $1.49), an illiquidity discount of 75%, expected dividend yield of 0%, historical volatility calculated at 224%, risk-free interest rate between a range of 3.40% to 4.26%, and an expected term between 5 and 10 years. During the three months ended March 31, 2023, Marc Fogassa exercised a total 90,000 options at a $1.00 weighted average exercise price. These exercises were paid for with 67,212 options conceded in cashless exercises. As a result of the options exercised, the Company issued 22,778 shares of the Jupiter Gold’s common stock to Marc Fogassa. As of March 31, 2023, an aggregate 1,920,000 Jupiter Gold common stock options were outstanding with a weighted average life of 8.72 years at a weighted average exercise price of $0.01 and an aggregated intrinsic value of $1,332,000.

Apollo Resource Corporation

During the three months ended March 31, 2024, Apollo Resources granted options to purchase an aggregate of 45,000 shares of its common stock to Marc Fogassa at a price of $0.01 per share. The options were valued at $67,196 and recorded to stock-based compensation. The options were valued using the Black-Scholes option pricing model with the following average assumptions: Apollo Resource stock price on the date of the grant ($6.00), an illiquidity discount of 75%, expected dividend yield of 0%, historical volatility calculated between 16.61% and 17.41%, risk-free interest rate between a range of 3.88% to 4.19%, and an expected term of 10 years. As of March 31, 2024, an aggregate 450,000 Apollo Resources common stock options were outstanding with a weighted average life of 8.71 years at a weighted average exercise price of $0.01 and an aggregated intrinsic value of $2,695,500.

During the three months ended March 31, 2023, Apollo Resources granted options to purchase an aggregate of 45,000 shares of its common stock to Marc Fogassa at a price of $0.01 per share. The options were valued at $55,944 and recorded to stock-based compensation. The options were valued using the Black-Scholes option pricing model with the following average assumptions: Apollo Resource stock price on the date of the grant ($5.00), an illiquidity discount of 75%, expected dividend yield of 0%, historical volatility calculated at 58%, risk-free interest rate between a range of 3.40% to 4.00%, and an expected term of 10 years. As of March 31, 2023, an aggregate 270,000 Apollo Resources common stock options were outstanding with a weighted average life of 9.92 years at a weighted average exercise price of $0.01 and an aggregated intrinsic value of $1,347,300.

NOTE 8 –RISKS AND UNCERTAINTIES

Currency Risk

The Company operates primarily in Brazil which exposes it to currency risks. The Company’s business activities may generate intercompany receivables or payables that are in a currency other than the functional currency of the company. Changes in exchange rates from the time the activity occurs to the time payments are made may result in the Company receiving either more or less in local currency than the local currency equivalent at the time of the original activity.

The Company’s consolidated financial statements are denominated in U.S. dollars. Accordingly, changes in exchange rates between the applicable foreign currency and the U.S. dollar affect the translation of each foreign subsidiary’s financial results into U.S. dollars for purposes of reporting in the consolidated financial statements. The Company’s foreign subsidiaries translate their financial results from the local currency into U.S. dollars in the following manner: (a) income statement accounts are translated at average exchange rates for the period; (b) balance sheet asset and liability accounts are translated at end of period exchange rates; and (c) equity accounts are translated at historical exchange rates. Translation in this manner affects the shareholders’ equity account referred to as the foreign currency translation adjustment account. This account exists only in the foreign subsidiaries’ U.S. dollar balance sheets and is necessary to keep the foreign subsidiaries’ balance sheets in agreement.

NOTE 9 –SUBSEQUENT EVENTS

Registered Offering

On March 28, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”), with an accredited investor (the “Investor”), pursuant to which the Company agreed to sell and issue an aggregate of 1,871,250 shares of its Common Stock in a registered direct offering (the “Registered Offering”) at a purchase price of $16.0321 per share. The Purchase Agreement contains customary representations and warranties, covenants and indemnification rights and obligations of the Company and the Investor. The closing occurred on April 4, 2024.

The gross proceeds from the Registered Offering were $30.0 million before deducting related offering expenses. The Company intends to use the net proceeds from the Registered Offering primarily for general corporate purposes, including the development and commercialization of our products, general and administrative expenses, and working capital and capital expenditures.

Offtake Agreement

In connection with the closing of the Registered Offering, our subsidiary Atlas Lítio Brasil Ltda. (hereinafter “Atlas Brazil”) and the Investor entered into an Offtake and Sales Agreement, pursuant to which Atlas Brazil agreed to sell and deliver to the Investor, and the Investor agreed to purchase and take delivery of,(i) the spot quantity of fifteen thousand (15,000) dry metric tons of Atlas Brazil’s product, and, subject to the fulfillment of certain conditions precedent, (ii) up to sixty thousand (60,000) dry metric tons of Atlas Brazil’s product for each year, up to a total of three hundred thousand (300,000) dry metric tons.