Atlas Lithium Corp

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), consistent in all material respects with those applied in our 2024 Form 10-K, and are expressed in United States dollars. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our 2024 Form 10-K. For the period ended March 31, 2025 the condensed consolidated financial statements include the accounts of the Company; (i) its 100% owned subsidiary Atlas Lithium Limited and its subsidiary Atlas Litio Brasil Ltda (“Atlas Brazil”); (ii) its 100% owned subsidiary Athena Mineral Resources Corporation and its subsidiary Athena Litio Ltda; (iii) its 100% owned subsidiary Brazil Mineral Resources Corporation and its subsidiary Atlas Recursos Minerais; (iv) its 30.51% equity interest in Atlas Critical Minerals Corporation (“Atlas Critical Minerals”) and its subsidiaries Mineração Apollo Ltda., Mineração Duas Barras Ltda. (“MDB”), RST Recursos Minerais Ltda. (“RST”) and Mineração Jupiter Ltda. We have concluded that Atlas Critical Minerals and its subsidiaries are variable interest entities (“VIE”) in accordance with applicable accounting standards and guidance. As such, the accounts and results of Atlas Critical Minerals and their subsidiaries have been included in our condensed 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

Inventories

Inventories as of March 31, 2025, and December 31, 2024, are comprised of the following:

Inventory in transit consists primarily of feedstock intended for use in the Company’s production processes related to lithium operations.

Quartzite inventories include blocks and slabs produced through the cutting and polishing of natural quartzite. Both blocks and slabs are actively sold in the market and are therefore classified as finished goods.

Inventories are measured at the lower of cost or net realizable value (NRV). As of March 31, 2025, an inventory write-down of $65,556 was recorded to adjust the carrying value of certain quartzite blocks to their estimated NRV. The NRV adjustment was recognized in the condensed consolidated statements of operations under cost of revenue for the three-month period ended March 31, 2025.

Property and Equipment

The following table sets forth the components of the Company’s property and equipment as of March 31, 2025 and December 31, 2024:

Exploration costs such as drilling, development and related costs are either classified as exploration and charged to operations as incurred, or capitalized, such as to assist with mine planning within a reserve area. Whether to capitalize an exploration cost or incur an expense also depends on whether the drilling or development costs relate to an ore body that has been determined to be commercially mineable and whether the expenditure relates to a probable future benefit to be generated singly or in combination with other assets. The basis of the mineral interest is amortized on a units-of-production basis.

Intangible Assets

Intangible assets consist of the cost of software (implementation of SAP enterprise resource planning software, as well as other software). The carrying value of these intangible assets as of March 31, 2025 and December 31, 2024 were $377,145 and $399,773, respectively.

Accounts Payable and Accrued Expenses

Leases

Finance Leases

For the reporting period ended March 31, 2025, 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 two tofive years and the liability was measured at the present value of the lease payments discounted using interest rates with a 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 “Convertible Note Purchase Agreement”) with Jaeger Investments Pty Ltd, an entity controlled by Mr. Martin Rowley, and other investors to raise up to $20,000,000 in proceeds through the issuance of convertible promissory notes with the following key terms:

On November 7, 2023, we issued $10,000,000 in convertible promissory notes under the terms of the November 7, 2023, Convertible Note Purchase Agreement, and there were no other purchases and sales of the convertible promissory notes pursuant to the November 7, 2023 Convertible Note Purchase Agreement. On the date of issuance, we received $10,000,000 in cash proceeds and recorded (i) a $9,688,305 convertible debt liability and (ii) a $311,695 conversion feature derivative liability in our consolidated statement of financial position, as further disclosed below. In the three months ended March 31, 2025, the Company recorded $160,274 in interest expense and $25,619 in accretion expense in the condensed consolidated statement of operations and comprehensive loss ($164,024 and $25,903, in the three months ended March 31, 2024).

Derivative Liabilities

a) Derivative liability – embedded conversion feature on convertible debt

On November 7, 2023, the Company issued convertible promissory notes to Jaeger Investments Pty Ltd 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 balance sheets. The derivative liability is measured at fair value through profit or loss.

At December 31, 2024, the fair value of the embedded conversion feature was determined to be $66,310 using a Black-Scholes collar option pricing model with the following assumptions:

At March 31, 2025, the fair value of the embedded conversion feature was determined to be $24,677 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, 2025, the Company recognized a $41,633 gain on changes in fair value of financial instruments in the condensed consolidated statement of operations and comprehensive loss ($187,489, in the three months ended March 31, 2024).

b) Derivative liability – other stock incentives

The employment agreement of Igor Tkachenko, a Vice President of the Company, dated September 30, 2023, provides for the issuance of shares of the Company’s common stock based on us achieving certain market capitalization milestones. As of March 31, 2025, the Company’s obligations under this employment agreement contemplates the issuance of additional shares of the Company’s common stock in five tranches, each representing 0.2% of the Company’s common stock outstanding at the time of vesting, 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 at December 31, 2024, Tranche 3, Tranche 4, Tranche 5, Tranche 6 and Tranche 7 remain outstanding and unvested, and the total fair value of these outstanding rights to receive restricted stock was $315,189, as measured using a Monte Carlo Simulation with the following ranges of assumptions: the Company’s stock price on the December 31, 2024 measurement date, expected dividend yield of 0%, expected volatility between 71.2% and 82.3%, risk-free interest rate between a range of 5.09% to 5.48%, and an expected term of 2.5 years. 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.

As at March 31, 2025, Tranche 3, Tranche 4, Tranche 5, Tranche 6 and Tranche 7 remain outstanding and unvested, and the total fair value of these outstanding rights to received restricted stock was $87,479, as measured using a Monte Carlo Simulation with the following ranges of assumptions: the Company’s stock price on the March 31, 2025 measurement date, expected dividend yield of 0%, expected volatility between 63,5% and 81.8%, risk-free interest rate between a range of 3.89% to 4.62%, and an expected term of 3 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.

c) Derivative liability - Non-Deliverable Forward

Atlas Brazil, a subsidiary of Atlas Lithium, is exposed to foreign-currency exchange-rate fluctuations in the normal course of business because a portion of its expenses are paid in Brazilian reais (BRL). To mitigate this exposure, Atlas Brazil utilizes non-deliverable forward foreign-exchange contracts (“NDFs”), which are designed to offset changes in cash flow attributable to currency exchange movements.

The Company applies hedge accounting in accordance with U.S. GAAP (ASC 815). As a result, these derivative instruments are designated and qualify as cash flow hedges, with the entire gain or loss on the derivative initially recorded in Other Comprehensive Income (OCI). These amounts remain deferred in OCI and are subsequently reclassified into earnings in the same income statement line item as the hedged item when it affects earnings.

Atlas Lithium actively monitors the derivative portfolio of its subsidiary monthly to assess financial results and cash flow implications. These contracts are used strictly for risk management purposes, and neither Atlas Brazil nor Atlas Lithium engage in speculative foreign-exchange transactions. Additionally, these contracts do not contain any credit-risk-related contingent features.

As of March 31, 2025, the fair value of outstanding NDF contracts was recorded as Derivative assets on the balance sheet.

For the period ended March 31, 2025:

The following table summarizes the non-deliverable forward foreign exchange contracts that remain open as of March 31, 2025:

NOTE 3 –DEFERRED OTHER INCOME

On May 2, 2023, the Company and Atlas Brazil 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 Atlas Brazil 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 Atlas Brazil from the sale of products from certain 19 mineral rights and properties that are located in Brazil and held by Atlas Brazil.

On the same day, Atlas Brazil and LRC entered into a Gross Revenue Royalty Agreement (the “Royalty Agreement”) pursuant to which Atlas Brazil 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, Atlas Brazil’s right to determine operations, and LRC’s information and audit rights. Under the Royalty Agreement, Atlas Brazil 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 of tax refinancing programs at our operating subsidiaries located in Brazil and provision for contingencies. The balance of these non-current liabilities as of March 31, 2025, and December 31, 2024, amounted to $49,151 and $33,962, respectively.

NOTE 5 –STOCKHOLDERS’ EQUITY

Authorized Stock

As of December 31, 2024 and March 31, 2025, the Company had 200,000,000 authorized shares of common stock, with a par value of $0.001 per share.

On November 22, 2024, we entered into an At the Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”) with respect to an at the market offering program, under which we may, from time to time in our sole discretion, issue and sell through Wainwright, acting as agent, up to $25.0 million of shares of our common stock. The issuance and sale of our common stock under the ATM Agreement are made pursuant to a prospectus supplement, dated November 22, 2024, to our registration statement on Form S-3, filed with the U.S. Securities and Exchange Commission (the “SEC”) on August 25, 2023, which was declared effective on September 18, 2023.

During the three months ended March 31, 2025, we sold 1,169,751 shares under the ATM Agreement for proceeds of $6.6 million, net of commissions and fees.

Series A Preferred Stock

On December 18, 2012, we filed with the SOS a Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock (the “Series A Preferred 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 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, withthe 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 are entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power. Theone outstanding share of our Series A Preferred Stock has been held by our Chief Executive Officer and Chairman, Mr. Fogassa since December 18, 2012.

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.

Three Months Ended March 31, 2025 Transactions

During the three months ended March 31, 2025, the Company issued an aggregate of 1,484,162 shares of its Common Stock, as follows:

Common Stock Options

During the three months ended March 31, 2025 and 2024, the Company granted options to purchase common stock to officers and 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, 2025 and 2024 were as follows:

During three months ended March 31, 2025, the Company recorded $804,047 in stock-based compensation expense from common stock options in the condensed consolidated statements of operations and comprehensive loss ($3,315,822, during the three months ended March 31, 2024).

Common Stock Purchase Warrants

Common 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, 2025, the Company issued common stock purchase warrants to certain investors in connection with the Company’s equity financings. 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, 2025 were as follows:

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, 2025, the Company recorded the following as a result of the common stock purchase warrant activity: $200,981 in stock-based compensation expense in the condensed consolidated statements of operations and comprehensive loss ($nil, during the three months ended March 31, 2024)

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, 2025 and March 31, 2024 were as follows:

During the three months ended March 31, 2025, the Company recorded $2,896,938 in stock-based compensation expense from the Company’s RSU activity in the period ($2,891,703 during the three months ended March 31, 2024).

Other stock incentives measured at fair value through profit or loss

As of March 31, 2025, the Company had certain other outstanding obligations to issue shares of the Company’s common stock in case some markets conditions are met 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. As of March 31, 2025, the Company recognized a $40,353 derivative liability and would have been obligated to issue 160,145 shares of common stock pursuant to these other stock incentives had the conditions of such stock incentives been met (December 31, 2024: recognized a $513,757 derivative liability relating to 127,535 shares of common stock that the Company would have been obligated to issue had the conditions of the stock incentives been met).

NOTE 6 –COMMITMENTS AND CONTINGENCIES

Commitments

The following table summarizes certain of Atlas’s contractual obligations at March 31, 2025 (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.

The Company’s related parties include:

Technical Services Agreement

In July 2023, we entered into a technical service agreement (“Technical Services Agreement”) with RTEK pursuant to which RTEK agreed to provide us certain mining engineering, planning and business development services. Messrs. Nicholas Rowley and Brian Talbot are the founders and principals of RTEK. On March 31, 2024, the Technical Services Agreement was amended and restated (the “Amended and Restated RTEK Agreement”) to reflect that part of the compensation originally scheduled to be paid to RTEK was allocated as compensation for Mr. Talbot in connection with his appointment as director and officer. Under the terms of the Amended and Restated RTEK Agreement, we issued RTEK RSUs for (i) 75,000 (seventy-five thousand) fully paid shares of our common stock vesting on the successful completion of certain performance criteria outlined in the Amended and Restated R-TEK Agreement; RSUs for 100,000 (one hundred thousand) fully paid shares of our common stock vesting upon completion of other identified performance criteria; and RSUs for 100,000 (one hundred thousand) fully paid shares of our common stock vesting upon on the delivery of a working plant as defined in the Amended and Restated RTEK Agreement. Any unvested RSUs shall immediately vest in the event of a Change in Control (as defined in our 2023 Equity Incentive Plan).

On August 16, 2024, the parties further amended and restated the Technical Services Agreement (the “Second A&R RTEK Agreement”) in order to, among other things:(i) revise and amend the Stage Two Budget and revise the terms of service with respect to the Phase Two Services (each, as described in the Second A&R RTEK Agreement); (ii) form an operations committee tasked with ensuring progress toward our goals under such agreement; and (iii) issue to RTEK additional RSUs with aggregate value of up to $5.0 million, subject to RTEK’s achievement of certain milestones and performance criteria.

On March 12, 2025, RTEK delivered a letter to the Company (the “RTEK Notice”) purporting to terminate the Agreement due to the Company’s alleged repudiation of its obligations under the Agreement. The Company firmly disagrees with such allegation and at that time regarded the Agreement as in effect.

On March 20, 2025, the Company notified RTEK that it was terminating the Agreement due to RTEK’s failure and inability to perform several of the services required under the Agreement, including the timely delivery of a certain updated study, RTEK’s material breach of the exclusivity provisions of the Agreement, as well as several breaches to the other terms of the Agreement.

The Company does not believe that it will incur any early termination penalties as a result of its termination of the Agreement.

NOTE 7 – RELATED PARTY TRANSACTIONS (CONTINUED)

Convertible Note Purchase Agreement

In November 2023, the Company entered into a Convertible Note Purchase Agreement with Jaeger Investments Pty Ltd., an entity controlled by Mr. Rowley, relating to the issuance to Jaeger Investments Pty Ltd., 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 Convertible Note Purchase Agreement, Jaeger Investments Pty Ltd. purchased an aggregate of $1,967,503.0 of the Notes. The Notes will mature in November 2026.

The related parties outstanding amounts and expenses as of March 31, 2025 and December 31, 2024 are shown below:

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

Atlas Critical Minerals Corporation

During the three months ended March 31, 2025, Atlas Critical Minerals was party to the following stock-based compensation transactions with related parties of the Company:

Pursuant to the amended and restated employment agreement between Atlas Critical Minerals and Mr. Fogassa, dated June 26, 2024, Atlas Critical Minerals issued 1,333,469 shares of its common stock to Mr. Fogassa during the three months ended March 31, 2025, representing 4% of Atlas Critical Mineral’s total outstanding common stock as of January 1, 2025.

Atlas Critical Minerals issued 144,125 shares of common stock of Atlas Critical Minerals to officers and directors of the Company at a weighted average price of $0.82 per share in settlement of $118,520 in salaries and fees owed to such officers and directors.

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 condensed 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 condensed 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

In accordance with FASB ASC 855-10 Subsequent Events, we have analyzed our operations subsequent to March 31, 2025 to the date these condensed consolidated financial statements were issued, and we have determined that there are no material subsequent events to disclose in these condensed consolidated financial statements.