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 Atlas Lithium Corporation 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 lithium projects and properties in other critical battery metals to power the Green Energy Revolution – nickel, rare earths, graphite, and titanium. Our current focus is on developing our hard-rock lithium project located in Minas Gerais state in Brazil at a well-known, premier pegmatitic district in Brazil. We intend to produce and sell lithium concentrate, a key ingredient for battery supply chain. Lithium is essential for batteries in electric vehicles and demand is expected to outstrip supply. All of our mineral projects and properties are located in Brazil and, as of the date of this prospectus, our mineral rights portfolio for battery metals includes approximately 72,344 acres (293 km 2 ) for lithium in 59 mineral rights, 54,950 acres for nickel (222 km 2 ) in 15 mineral rights, 30,054 acres (122 km 2 ) for rare earths in seven mineral rights, 22,050 acres (89 km 2 ) for titanium in seven mineral rights, and 13,766 acres (56 km 2 ) for graphite in three mineral rights. We believe that we hold the largest portfolio of lithium mineral exploration properties in Brazil, a premier and well-established jurisdiction for hard-rock lithium. We also believe that we are among the largest holders by size and breadth in exploration projects for other critical and battery metals among publicly traded companies. 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 competitor, a Nasdaq listed company. Our Minas Gerais Lithium Project is our largest endeavor and consists of 52 mineral rights spread over 56,078 acres (227 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. Generally, 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 believe that we can materially increase our value by the acceleration of our exploratory work and quantification of our lithium mineralization. Our initial commercial goal is to be able to enter production of lithium-bearing concentrate, a product which is highly sought after in the battery supply chain for EVs. According to Benchmark Mineral Intelligence, demand for lithium-ion batteries is set to grow six-fold by 2032 as global automakers scale up production of EVs. To meet the world’s lithium requirements would require 74 new lithium mines with an average size of 45,000 tonnes by 2035. 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. We also own approximately 24.22% 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 (“Regulation S-K 1300”). Operational Update During the third quarter of 2022, our primary focus was on the continuation of drilling of our Neves Area, one of the 52 mineral rights that comprise our Minas Gerais Lithium Project. Other highlights of the period included: ● We published the initial Technical Report Summary on the Neves Area authored by SLR International Corporation, a premier and independent mineral evaluation firm. This exploration report was prepared in accordance with Regulation S-K 1300. ● We were approached in an unsolicited manner by two large companies seeking to secure lithium supply and conversations are ongoing; there can be no assurance, however, that these discussions will result in any orders. After the end of the third quarter of 2022, the following items have taken place: ● We retained MZ Global, a well-known international consultancy, to lead our investor relations and shareholder communications program. ● We launched our new website ( www.atlas-lithium.com ).* ● We hired a Director of Lithium Processing and have started metallurgical studies towards establishment of our processing route for production of commercial lithium concentrate. ● We hired a Director of Strategic Development to lead certain business development efforts. In addition, and as previously disclosed, we continue to actively work towards the uplisting of our common stock to the Nasdaq Capital Market. *The information contained in our website is not incorporated by reference into this Quarterly Report on Form 10-Q. Results of Operations Three Months Ended September 30, 2022 Compared to the Three Months ended September 30, 2021 Revenue for the three months ended September 30, 2022 totaled $3,301, compared to revenue of $2,984 during the three months ended September 30, 2021 representing an increase of 10.62%. 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 program. Cost of goods sold for the three months ended September 30, 2022 totaled $27,534, as compared to cost of goods sold of $27,382 during the three months ended September 30, 2021 representing an increase of 0.55%. 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 September 30, 2022 totaled $24,233, compared to gross loss of $24,398 during the three months ended September 30, 2021, representing a decrease of 0.68%. Operating expenses for the three months ended September 30, 2022 totaled $1,247,694, compared to operating expenses of $707,335 during the three months ended September 30, 2021, representing an increase of 76.39%. 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 $1,028,192, or $0.00 per share, for the three months ended September 30, 2022, compared to a net loss attributable to our stockholders of $619,139, or $0.00 per share, during the three months ended September 30, 2021. Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021 Revenue for the nine months ended September 30, 2022 totaled $6,145, compared to revenue of $9,088 during the nine months ended September 30, 2021, representing a decrease of 32.38%. 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 program. Cost of goods sold for the nine months ended September 30, 2022 totaled $63,732, as compared to cost of goods sold of $74,476 during the nine months ended September 30, 2021, representing a decrease of 14.43%. 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 nine months ended September 30, 2022 totaled $57,587, compared to gross loss of $65,388 during the nine months ended September 30, 2021, representing an improvement of 11.93%. Operating expenses for the nine months ended September 30, 2022 totaled $3,064,305, compared to operating expenses of $2,560,171 during the nine months ended September 30, 2021, representing an increase of 19.69%. 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 $2,430,698, or $0.00 per share, for the nine months ended September 30, 2022, compared to a net loss attributable to our stockholders of $2,161,835, or $0.00 per share, during the nine months ended September 30, 2021. 4 Table of Contents Liquidity and Capital Resources As of September 30, 2022, we had cash and cash equivalents of $418,263 and a working capital deficit of $2,475,660. Net cash used by operating activities totaled $258,293 for the nine months ended September 30, 2022, compared to net cash used of $1,201,277 during the nine months ended September 30, 2021 representing an decrease in cash used of $942,984. Net cash used in investing activities totaled $2,573,86 for the nine months ended September 30, 2022, compared to net cash used of $272,153 during the nine months ended September 30, 2021, representing an increase in cash used of $2,301,673. Net cash provided by financing activities totaled $3,188,736 for the nine months ended September 30, 2022, compared to $1,237,542 during the nine months ended September 30, 2021, representing an increase in cash provided of $1,951,194. 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 ability 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 September 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).