Atlas Lithium Corp - Quarter Report: 2023 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2023

For the transition period from ____________ to ____________

Commission File Number 001-41552

ATLAS LITHIUM CORPORATION

(Exact name of registrant as specified in its charter)

+55-31-3956-1109

(telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act

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

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company,” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of August 14, 2023, there were outstanding 10,662,060 shares of the registrant’s common stock.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ATLAS LITHIUM CORPORATION

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

June 30, 2023 and December 31, 2022

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

ATLAS LITHIUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

For the Three and Six Months Ended June 30, 2023 and 2022

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

ATLAS LITHIUM CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

For the Six Months Ended June 30, 2023 and 2022

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

ATLAS LITHIUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the Six Months Ended June 30, 2023 and 2022

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

ATLAS LITHIUM CORPORATION

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 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 years ended December 31, 2022 and 2021, the consolidated financial statements include the accounts of the Company; its 99.99% owned subsidiary, Atlas Litio Brasil Ltda. (“Atlas Brasil”), which includes the accounts of Atlas Brasil’s wholly-owned subsidiary, Mineração Duas Barras Ltda. (“MDB”), and Atlas Brasil’s 50% owned subsidiary, RST Recursos Minerais Ltda. (“RST”); its 99.99% owned subsidiary, Hercules Resources Corporation (“HRC”), which includes the accounts of HRC’s wholly-owned subsidiary, Hercules Brasil Comercio e Transportes Ltda. (“Hercules Brasil”); its 45.11% equity interest in Apollo Resources Corporation (“Apollo Resources”) and its subsidiary Mineração Apollo, Ltda.; and its 28.00% 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.

ATLAS LITHIUM CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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.

ATLAS LITHIUM CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 as of June 30, 2023 and December 31, 2022:

 SCHEDULE OF PROPERTY AND EQUIPMENT

For the three and six months ended June 30, 2023, the Company recorded depreciation expense of $4,093 and $8,108, respectively, and for the three and six months ended June 30, 2022, the Company recorded depreciation expense of $13,661 and $27,323, respectively.

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 June 30, 2023 and at December 31, 2022 was $7,361,149 and $4,971,267, respectively.

On January 19, 2023, the Company consummated a transaction in which it acquired five mineral rights (the “Mineral Rights”) totaling 1,090.88 hectares (~ 2,696 acres) owned by an unrelated Brazilian mining enterprise pursuant to a Mineral Rights Purchase Agreement (the “Acquisition Agreement”). The Mineral Rights are 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 has reasons to believe that the acquisition of the Mineral Rights was part of a competitive process.

The Company’s obligations under the Acquisition Agreement are:

ATLAS LITHIUM CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS (CONTINUED)

Accounts Payable and Accrued Liabilities

 SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

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 payment 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 interest 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 June 30, 2023, and December 31, 2022, amounted to $52,582 and $78,964, 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”) adopted resolutions to effect 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”). For additional information on the Originally Intended Reverse Stock Split, refer to the Definitive Information Statement filed by the Company with the U.S. Securities and Exchange Commission (the “SEC” or the “Commission”) on July 29, 2022 (the “2022 Information Statement”) and the Form 8-K filed by the Company with the Commission on December 22, 2022, both available on EDGAR at www.sec.gov.

On December 20, 2022, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada (“SOS”) that was intended to effect the Originally Intended Reverse Stock Split (the “Original Articles Amendment”). In April 2023, the Board of Directors determined (i) that the Original Articles Amendment inaccurately stated that the Originally Intended Reverse Stock Split was obtained by a stockholder vote under NRS 78.390, while approval of the stockholders was required under NRS 78.2055, with the holders of common stock voting as a separate class; and (ii) that the Original Articles Amendment was a nullity in that, under Nevada law, filing an amendment to articles of incorporation is not necessary to effectuate a reverse stock split. As a result, the Board of Directors determined 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.

Pursuant to the action of the Company’s board of directors by unanimous written consent on April 21, 2023, the board of directors authorized and approved (i) the Certificate of Correction to correct the Original Articles Amendment (the “Certificate of Correction”), and (ii) the Certificate of Change Pursuant to NRS 78.209 (the “Certificate of Change”) including the Certificate of Validation of the Certificate of Change (the “Change Validation Certificate”) in order to decrease the number of shares 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. The board of directors also directed that the Company file the Certificate of Correction with the SOS and thereafter file the Certificate of Change including the Change Validation Certificate with the SOS. Pursuant to the NRS, no stockholder approval for this action was required. On May 25, 2023, the Company filed the Certificate of Correction and Certificate of Change including the Change Validation Certificate with the SOS, as also reported in Exhibits 3.2 and 3.1, respectively, to the Form 8-K filed by the Company with the Commission on May 25, 2023.

To carry out the original intent of the Originally Intended Reverse Stock Split and in light of the correction, ratification and validation of the Rectified Reverse Stock Split as described above, the Company’s Board of Directors and the Majority Stockholder approved on April 21, 2023 the 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. 

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 (as amended to date, the “Current Articles”) 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 Current Articles (the “Amended and Restated Articles”). The Board of Directors and the Majority Stockholder determined to decrease the number of shares of our authorized common stock in order to reduce the number of shares available for issuance given that the large number of shares of common stock authorized for issuance may have a perceived negative impact on any potential future efforts to attract additional financing due to the dilutive effect of having such a large number of shares available for issuance. On April 21, 2023, the Company’s board of directors and the Majority Stockholder approved the Amended and Restated Articles. Following the effectiveness of the Certificate of Correction and the Certificate of Change including the Change Validation Certificate filed with the SOS, on May 25, 2023, the Company filed the Amended and Restated Articles, as also reported in Exhibit 3.3 of the Form 8-K filed by the Company with the Commission on May 26, 2023.

The foregoing corporate actions were disclosed in the Definitive Information Statement on Schedule 14C (the “Information Statement”) filed by the Company with the Commission on May 2, 2023. As also contemplated in the Information Statement, 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 the Certificate of Withdrawal of Designation of the Series C Convertible Preferred (collectively, the “Certificates of Withdrawal”). The filings of the Certificates of Withdrawals were effective as of May 25, 2023. 

As of December 31, 2022, the Company had 4,000,000,000 common shares authorized with a par value of $0.001 per share. Pursuant to the vote by a written consent dated April 21, 2023, of the Company’s Majority Stockholder, entitled to 51% of the voting power of the Company’s issued and outstanding voting stock, the number of shares of the Company’s authorized common stock was decreased to 200,000,000 shares. As of June 30, 2023, the Company had 200,000,000 authorized shares of common stock, with a par value of $0.001 per share.  

Reverse Stock Split

In connection with the Originally Intended Reverse Stock Split, as corrected by the Rectified Reverse Stock Split, the Company effectuated as of December 20, 2022 a reverse stock split of our issued and outstanding shares of common stock at a ratio of 1-for-750 (the “Reverse Stock Split”). Following the Reverse Stock Split, each 750 shares of our issued and outstanding shares of common stock were automatically converted into one issued and outstanding share of common stock, without any change in par value per share. No fractional shares were issued as a result of the Reverse Stock Split and no cash or other consideration was paid. Instead, we issued one whole share of the post-split common stock to any stockholder who otherwise would have received a fractional share as a result of the Reverse Stock Split. As rectified, the Reverse Stock Split did not affect the number of shares of authorized stock. All share, equity award, and per share amounts contained in these Condensed Interim Consolidated Financial Statements have been adjusted to reflect the Reverse Stock Split for all prior periods presented.

Series A Preferred Stock

On December 18, 2012, the Company filed with the Nevada Secretary of State 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 Nevada Secretary of State 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.

Six Months Ended June, 2023, Transactions

On January 9, 2023, the Company, entered into an underwriting agreement (the “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, to the Representative, at a public offering price of $6.00 per share (the “Offering Price”) 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) filed with the Commission and declared effective on January 9, 2023 (the “Registration Statement”). The consummation of the Offering took place 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 Offering Price (the “Representative’s Warrants”). The Representative’s Warrants are exercisable for a period of five years from the effective date of the Registration Statement, provided that they are subject to a mandatory lock-up for 180 days from the commencement of sales of the Offering in accordance with FINRA Rule 5110(e). Aggregate gross proceeds from the Offering were $4,657,500.

The “Intangible Assets” discussion in Note 2 above, is incorporated herein by reference.

On January 30, 2023, the company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with two investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors in a Regulation S private placement (the “Private Placement”) an aggregate of 640,000 restricted shares of the Company’s common stock (the “Shares”). The purchase price for the Shares was $6.25 per share, for total gross proceeds of $4,000,000. The Private Placement transaction closed on February 1, 2023.

Additionally, during the six months ended June 30, 2023, the Company sold an aggregate of 192,817 shares of our common stock to Triton Funds, LP for total gross proceeds of $1,675,797 pursuant to a Common Stock Purchase Agreement (the “CSPA”) entered into between the Company and Triton Funds, LP, dated February 26, 2021. For a description of the transactions contemplated under the CSPA, please refer to our Form 8-K filed with the Commission on March 2, 2021.

On May 26, 2023, our CEO and Chairman, Mr. Marc Fogassa, elected to convert 214,006 shares of Series D Stock, representing all of his outstanding shares of Series D Stock at that time, into shares of common stock. As a result, of such conversion, the Company issued Mr. Fogassa 2,853,413 new shares of common stock.

Lastly, during the six months ended June 30, 2023, the Company issued 5,206 shares of common stock to officers and consultants in compensation for services rendered.

Six Months Ended June 30, 2022 Transactions

During the six months ended June 30, 2022, the Company issued 317,291 shares of common stock for gross proceeds of $1,385,960 pursuant to subscription agreements with accredited investors.

2023 Stock Incentive Plan

On May 25, 2023, the Board approved the 2023 Stock Incentive Plan (the “Plan”) which enables the grant of stock options, stock appreciation rights, restricted stock, performance shares, stock unit awards, other stock-based awards, and performance-based cash awards, each of which may be granted separately or in tandem with other awards. The number of shares of Company’s common stock issuable pursuant to Plan will be equal to 2,000,000 shares. For a description of the 2023 Stock Incentive Plan, please refer to the Company’s Revised Definitive Information Statement on Schedule 14C filed with the Commission on June 5, 2023.

Common Stock Options

During the six months ended June 30, 2023 and 2022, the Company granted options to purchase common stock to officers and non-management directors. The options were valued using the Black-Scholes option pricing model with the following ranges of assumptions:

 SCHEDULE OF OPTIONS FAIR VALUE ASSUMPTIONS

Changes in common stock options for the six months ended June 30, 2023 and 2022 were as follows:

 SCHEDULE OF OUTSTANDING AND EXERCISABLE OPTIONS

During the six months ended June 30, 2023, option holders exercised a total 16,000 options with a $0.75 exercise price. These exercises were paid for with 542 options conceded in cashless exercises. As a result of the options exercised, the Company issued 15,458 common shares.

Changes in Series D preferred stock options for the six months ended June 30, 2023 and 2022 were as follows:

All Series D preferred stock options vested immediately upon issuance and are exercisable for a period of ten years from the date of issuance. The Series D preferred stock options issued in the six months ended June 30, 2023 were issued with a total grant date fair value of $1,003,783, compared to total grant date fair value of $322,135 for the Series D preferred stock options issued in the six months ended June 30, 2022.

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 six months ended June 30, 2023 and 2022, the Company issued common stock purchase warrants to brokers in connection with the private placement financing. All warrants vest within 180 days from issuance and are exercisable for a period of two to five years from the date of issuance. Changes in stock purchase warrants for the six months ended June 30, 2023 and 2022 were as follows:

 SCHEDULE OF WARRANT ACTIVITY

Common Stock Awards

During the six months ended June 30, 2023, the Company awarded a total of 138,697 restricted and unrestricted shares of common stock to officers for a total purchase price of five ($5) dollars. These common stock awards included (i) 50,933 common shares which vested immediately, (ii) 63,764 restricted shares of common stock which vest in equal annual installments over three years, and (iii) 24,000 restricted shares of common stock which vest in equal annual installments over four years. The restricted shares of common stock will become unrestricted common shares immediately upon vesting. These common stock awards were issued with a total grant date fair value of $1,175,129, as measured using the Company’s 20-day volume weighted average price trailing to the date of issuance. During the six months ended June 30, 2023, the Company recognized $649,062 in stock-based compensation expense in the condensed consolidated statements of operations and comprehensive loss ($nil, for the six months ended June 30, 2022). As of June 30, 2023, the Company had 87,764 unvested common stock awards outstanding.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Rental Commitment