Atlas Lithium Corp 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report. This Quarterly Report contains forward-looking statements. Forward-looking statements for Brazil Minerals, Inc. reflect current expectations, as of the date of this Quarterly 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. Description of Business We are a U.S. mineral exploration and mining company with projects and properties in essentially all battery metals to power the Green Energy Revolution – lithium, rare earths, nickel, cobalt, graphite, and titanium. Our current focus is on developing our hard-rock lithium project located in a premier pegmatitic district in Brazil – as lithium is essential for batteries in electric vehicles. Additionally, through subsidiaries, we participate in iron, gold, and quartzite projects. We also own multiple mining concessions for gold, diamond, and industrial sand. All of our mineral projects and properties are located in Brazil and, as of the date of this Report, our mineral rights portfolio for battery metals includes approximately 62,926 acres (255 km 2 ) for lithium, 30,009 acres (121 km 2 ) for rare earths, 57,900 acres (234 km 2 ) for nickel, 22,050 acres (89 km 2 ) for titanium, and 14,507 acres (59 km 2 ) for graphite. We believe that we have one of the largest battery metals exploration footprints among publicly listed companies. Currently we are primarily focused on advancing and developing our hard-rock lithium project located in the state of Minas Gerais, Brazil, where some of our high-potential mineral rights are adjacent to or near large lithium deposits that belong to a large, publicly traded competitor. Our Minas Gerais Lithium Project is our largest endeavor and consists of 48 mineral rights spread over 46,659 acres (190 km 2 ) and predominantly located within the Brazilian Eastern Pegmatitic Province which has been surveyed by the Brazilian Geological Survey and is known for the presence of hard rock formations known as pegmatites which contain lithium-bearing minerals such as spodumene and petalite. In general, lithium derived from pegmatites is less costly to purify for uses in high technology applications than lithium obtained from brine. Such applications include the battery supply chain for electric vehicles (“EVs”), an area of expected high growth for the next several decades. We also own 44.41% of the shares of common stock of Apollo Resources Corporation (“Apollo Resources”), a private company currently primarily focused on the development of its initial iron mine, expected to start operations and revenues in early 2023. We also own approximately 24.56% of Jupiter Gold Corporation (“Jupiter Gold”), a company focused on the development of gold projects and a quartzite mine, and whose shares of common stock are quoted on the OTCQB under the symbol “JUPGF”. The results of operations from both Apollo Resources and Jupiter Gold are consolidated in our financial statements under U.S. GAAP. 3 Table of Contents As the self-titled “Mineral Resources Company for the Green Energy Revolution,” we are deeply committed to Environmental, Social, and Corporate Governance (“ESG”) causes. We have an ESG Chief who coordinates our efforts in these important matters. Within the last few years, we planted more than 6,000 trees of diverse types for the benefit of local populations in areas in which we operate and constructed over 1,000 small retention walls to preserve and enhance dirt access roads used by such communities. Separately, many of our work needs have been specifically delegated to firms owned or managed by women and minorities. We are an expl oration stage company and we have no “reserves” as such term is defined by Regulation S-K, Subpart 1300 (“S-K 1300”). Operational Update During the second quarter of 2022 and continuing to date, we have significantly advanced our knowledge of the Neves Area, one of the 48 mineral rights that comprise our Minas Gerais Lithium Project. We have continuously drilled the Neves Area and have identified several spodumene bodies; spodumene is the main mineral containing lithium in hard rock pegmatitic projects such as ours. One of our latest drill holes yielded a zone of over 27 meters of spodumene, a result that our lithium experts qualified as very positive and indicative of the potential of the Neves Area. Geochemical results from Neves have included a reading of 2.86% Li 2 O. We have two qualified persons under S-K 1300 who are responsible for the technical advancement of our Minas Gerais Lithium Project. SLR Consulting Ltd., a premier independent company, is finalizing an initial report on the Neves Area. Given our belief in the strength of our lithium holdings, and our desire to provide a clear message to our shareholders, and current and potential partners, we announced on July 18, 2022, that we will be changing our corporate name to Atlas Lithium Corporation, and such change is expected to take effect before the end of 2022. As previously disclosed, we are actively working towards a desired uplisting to the Nasdaq Capital Market, and this process includes various steps, some of which are completed while others are in the process of being completed during the third quarter of 2022. Results of Operations Three Months Ended June 30, 2022 Compared to the Three Months ended June 30, 2021 Revenue for the three months ended June 30, 2022 totaled $2,367, compared to revenue of $1,645 during the three months ended June 30, 2021 representing an increase of 44%. This revenue comes from sales of industrial sand during the rainy season. Industrial sand is a residual business line as we are primarily focused on our lithium exploration as described above. Cost of goods sold for the three months ended June 30, 2022 totaled $26,343, as compared to cost of goods sold of $24,105 during the three months ended June 30, 2021 representing a increase of 9%. Cost of goods sold is primarily comprised of labor, fuel, and repairs and maintenance on our mining equipment. Gross loss for the three months ended June 30, 2022 totaled $23,976, compared to gross loss of $22,460 during the three months ended June 30, 2021, representing an increase of 6.75%. Operating expenses for the three months ended June 30, 2022 totaled $989,294, compared to operating expenses of $740,540 during the three months ended June 30, 2021, representing an increase of 34%. The increase was mostly due to higher general and administrative expenses related to public company costs and higher compensation cost of officers and directors. As a result, we incurred a net loss attributable to our stockholders of $871,016, or $0.00 per share, for the three months ended June 30, 2022, compared to a net loss attributable to our stockholders of $826,674, or $0.00 per share, during the three months ended June 30, 2021. Six Months Ended June 30, 2022 Compared to the Six Months ended June 30, 2021 Revenue for the six months ended June 30, 2022 totaled $2,844, compared to revenue of $6,104 during the six months ended June 30, 2021 representing a decrease of 53%. This revenue comes from sales of industrial sand during the rainy season. Industrial sand is a residual business line as we are primarily focused on our lithium exploration as described above. Cost of goods sold for the six months ended June 30, 2022 totaled $36,198, as compared to cost of goods sold of $47,094 during the six months ended June 30, 2021 representing a decrease of 23%. Cost of goods sold is primarily comprised of labor, fuel, and repairs and maintenance on our mining equipment. The decrease is explained by reduced production activities and mining costs partially attributable to our exploratory efforts. Gross loss for the six months ended June 30, 2022 totaled $33,354, compared to gross loss of $40,990 during the six months ended June 30, 2021, representing an improvement of 19%. Operating expenses for the six months ended June 30, 2022 totaled $1,816,611, compared to operating expenses of $1,852,836 during the six months ended June 30, 2021, representing a decrease of 2%. As a result, we incurred a net loss attributable to our stockholders of $1,402,506, or $0.00 per share, for the six months ended June 30, 2022, compared to a net loss attributable to our stockholders of $1,542,696, or $0.00 per share, during the six months ended June 30, 2021. 4 Table of Contents Liquidity and Capital Resources As of June 30, 2022, we had cash and cash equivalents of $393,864 and a working capital deficit of $413,094. Net cash used by operating activities totaled $1,327,301 for the six months ended June 30, 2022, compared to net cash used of $98.400 during the six months ended June 30, 2021 representing an increase in cash used of $1,228,901. Net cash used in investing activities totaled $247,163 for the six months ended June 30, 2022, compared to net cash used of $957,978 during the six months ended June 30, 2021, representing a decrease in cash used of $710,815. Net cash provided by financing activities totaled $1,910,960 for the six months ended June 30, 2022, compared to $877,812 during the six months ended June 30, 2021, representing an increase in cash provided of $1,033,148. We have limited working capital, have historically incurred net operating losses, and have not yet received material revenues from the sale of products or services. These factors create substantial doubt about our ability to continue as a going concern. Our primary sources of liquidity have been derived through proceeds from the (i) issuance of debt and (ii) sales of our equity and the equity of one of our subsidiaries. Our ability to continue as a going concern is dependent upon our capability to generate cash flows from operations and successfully raise new capital through debt issuances and sales of our equity. We have no plans for any significant cash acquisitions in the foreseeable future. Currency Risk We operate primarily in Brazil which exposes us to currency risks. Our business activities may generate intercompany receivables or payables that are in a currency other than the functional currency of the entity. Changes in exchange rates from the time the activity occurs to the time payments are made may result in us receiving either more or less in local currency than the local currency equivalent at the time of the original activity. Our 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 consolidated financial statements. Our 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. Off-Balance Sheet Arrangements We currently have no off-balance sheet arrangements. Critical Accounting Policies and Estimates Our 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 our financial statements. If our estimate of the fair value is incorrect at June 30, 2022, it could negatively affect our financial position and liquidity and could result in our having understated our net loss. 5 Table of Contents Recent Accounting Pronouncements Our consolidated financial statements are prepared in accordance with U.S. GAAP. 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 us. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), we are not required to provide the information required by this Item as we are a “smaller reporting company,” as defined by Rule 229.10(f)(1).