Atlas Lithium Corp 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation. The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes to those financial statements appearing elsewhere in this Annual Report. This discussion and analysis below include forward-looking statements that are subject to risks, uncertainties and other factors described in the “Risk Factors” section that could cause actual results could differ materially from those anticipated in these forward- looking statements as a result of various factors. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. We caution you to read the “Forward Looking Statements” section of our Annual Report. Overview Atlas Lithium Corporation (“Atlas Lithium”, the “Company”, “we”, “us”, or “our” refer to Atlas Lithium Corporation and its consolidated subsidiaries) is a mineral exploration and development company with lithium projects and multiple lithium exploration properties. In addition, we own exploration properties in other battery minerals, including nickel, copper, rare earths, graphite, and titanium. Our current focus is the development from exploration to active mining of our hard-rock lithium project located in the state of Minas Gerais in Brazil at a well-known pegmatitic district in Brazil, which has been denominated by the government of Minas Gerais as “Lithium Valley.” We intend to mine and then process our lithium-containing ore to produce lithium concentrate (also known as spodumene concentrate), a key ingredient for the battery supply chain. Our modular dense media separation (DMS) lithium processing plant was manufactured in South Africa. It was designed to produce 150,000 tons of lithium concentrate per annum (“tpa”). The manufacturing process of the DMS plant was concluded in the end of 2024 and the plant was successfully shipped to Brazil. The shipment, consisting of 141 containers and 10 bulk items, departed the Port of Durban, South Africa, on February 2, 2025, and arrived in Brazil, Port of Santos, on March 7, 2025. Our DMS plant represents a cornerstone of our Neves Project, designed to deliver high-quality lithium concentrate to the global market for electric vehicles (EVs) and renewable energy storage systems. With worldwide lithium demand growing, we are positioned to emerge as a key contributor to the sustainable energy transition. This milestone marks a significant step in our progression toward becoming the next lithium producer in Brazil’s resource-rich Lithium Valley. However, there can be no assurance that we will have the necessary capital resources to develop such a facility or, if developed, that we will reach the production capacity necessary to commercialize our products and with the quality needed to meet market demand. All our mineral projects and properties are located in Brazil, a well-established mining jurisdiction. Our mineral rights include approximately: ● 53,942 hectares (539 km 2 ) for lithium in 95 mineral rights (2 in pre-mining concession stage, 85 in exploration stage, and 8 in pre-exploration stage); ● 44,913 hectares (449 km 2 ) for nickel in 29 mineral rights (23 in exploration stage, and 6 in pre-exploration stage); ● 25,050 hectares (251 km 2 ) for copper in 13 mineral rights (12 in exploration stage, and 1 in pre-exploration stage); ● 12,144 hectares (121 km 2 ) for rare earths in 7 mineral rights, all in exploration stage; ● 6,927 hectares (69 km 2 ) for titanium in 5 mineral rights, all in exploration stage; ● 3,910 hectares (39 km 2 ) for graphite in 2 mineral rights, all in exploration stage; ● 1,030 hectares (10 km 2 ) for gold mineral rights, all in exploration stage. We believe that we hold the largest portfolio of exploration properties for lithium and other battery minerals in Brazil among publicly listed companies. 25 Table of Contents Operational Update In early October 2024, we announced the discovery of spodumene-rich pegmatites in our Salinas Project area (the “Salinas Project”), located approximately 60 miles north of our flagship Neves Project. The Salinas Project spans 388 hectares (approximately 959 acres) and is situated just five miles east of Latin Resources’ Colina Project, a significant lithium deposit. Our technical team had completed soil geochemistry and LIDAR geological mapping with favorable results and began pursuing further geological and geophysical studies prior to initiating a drilling campaign. Given the positive data collected by us and current market dynamics, the Salinas Project area has emerged as a prime candidate for our future growth plans, though commencing production at our Neves Project area remains our highest priority. On October 25, 2024, a voting board comprised of twelve representatives from the local civil society and government unanimously approved our operational permit application for our Neves Project. The permit was formally issued and published in the official gazette of the Minas Gerais government on October 26, 2024. The permit authorizes us to assemble and operate our lithium processing plant, process mined ore from one of our deposits at the facility, and sell the lithium concentrate that it produces. This key development came after an extensive technical review process by regulatory agencies that began with our initial permit application on September 1, 2023. The triphasic permit obtained by us is the most expeditious licensing modality available as it encompasses the initial, installation, and operating licenses all within this same issued authorization (known as “LP/LI/LO” in the local regulatory terminology). In November 2024, we outlined our medium to long-term regional growth strategy within Brazil’s Lithium Valley (“LV”), locally known as the Jequitinhonha River Valley. We announced that we had assembled Brazil’s largest portfolio of lithium mineral rights among publicly listed companies, with three key projects spanning the major lithium-mineralized zones: the Neves Project in southern LV, our flagship development which has recently been permitted and is advancing toward production; the Clear Project in central LV, encompassing 470 acres situated 3.8 miles from Sigma Lithium’s mine, where detailed geological mapping has resulted in the discovery of two pegmatites and completed soil sampling revealed a substantial northeast-southwest trending lithium anomaly; and the Salinas Project in northern LV, spanning 2,070 acres with natural spodumene outcrops located 4.7 miles from Latin Resources Ltd. Our strategic approach prioritizes the Neves Project for initial production while simultaneously advancing exploration at the Clear and Salinas Projects. In December 2024, we strengthened our leadership team with two strategic appointments aimed at accelerating our production readiness. Eduardo Queiroz joined as Project Management Officer and Vice President of Engineering, bringing over 20 years of experience managing complex, large-scale mining projects. His most recent role was as General Manager of Planning and Management at Bamin, a unit of Eurasian Resources Group, where he successfully led the strategic planning of several projects over US$3 billion, including an integrated iron ore mining project encompassing mining operations, processing plant, railway, and ocean port facilities. Additionally, we expanded our global presence by appointing Lili Wu as Head of Business Development for Asia. Based in Beijing, Ms. Wu brings extensive knowledge and network in the lithium and battery materials industries, with prior roles at InsightWoo and IHS Markit (now part of S&P Global). Her appointment is particularly strategic as China’s electric vehicle sales demonstrated 51% year-over-year growth as of November 2024. In February 2025, we achieved a significant milestone with the successful shipment of our modular dense media separation (DMS) lithium processing plant from South Africa to Brazil. The shipment, consisting of 141 containers and 10 bulk items, departed the Port of Durban on February 2, 2025, and arrived at the Port of Santos, Brazil, on March 7, 2025. The newly manufactured processing facility is fully paid and wholly owned by us and a cornerstone of our Neves Project, is designed to deliver high-quality lithium concentrate to the global market for electric vehicles (EVs) and renewable energy storage systems. The plant incorporates cutting-edge and environmentally conscious design features, including a compact, modular design for efficient transportation and installation, optimized physical footprint to minimize environmental impact while ensuring high operational efficiency, advanced water conservation through internal recycling systems, and sustainable tailings management using dry-stacking technology that eliminates the need for tailings dams. This development marked another critical step in our progression toward becoming the next lithium producer in Brazil’s resource-rich Lithium Valley. We believe that our operations in Brazil’s Lithium Valley will benefit from significant strategic advantages, including competitive production costs and high-quality spodumene, positioning us well to meet demand for premium-grade lithium concentrate, particularly from Asian markets where electric vehicle adoption continues to accelerate. We have engaged SGS Canada Inc. to produce a definitive feasibility study (as such term is defined under Regulation S-K Item 1300) with respect to our Neves Project. We expect such study to be completed around mid-year 2025. 26 Table of Contents Results of Operations Fiscal Year Ended December 31, 2024, Compared to Fiscal Year Ended December 31, 2023 After a trial mining period in the second half of 2023, one of our subsidiaries commenced ongoing operations at its quartzite quarry in 2024. Our gross margin of $265,694 was generated from the sales of 551 m 3 of unprocessed blocks of quartzite and 905 m 2 of processed slabs produced by our subsidiary’s quartzite operation. By comparison, there was no gross margin generation in the year ended December 31, 2023. Operating expenses for the year ended December 31, 2024, totaled $44,123,939, compared to operating expenses of $42,106,732 during the year ended December 31, 2023, representing an increase of 4,8%. The increase was mostly due to increases in general and administrative expenses and stock-based compensation expense, offset by a reduction in exploration expenses, as detailed below: ● Higher general and administrative expenses of approximately $5.7 million during the period, primarily due to: (i) an increase in technical service costs of $2.4 million ($4.3 million in 2024 compared to $1.9 million in 2023), directly related to engineering and planning activities; (ii) higher third-party service costs, mainly related to the process to obtain the operational permit for the Neves Project, totaling $1.8 million ($2.8 million in 2024 compared to $0.4 million in 2023); and (iii) a $1.5 million increase in payroll expenses ($2 million in 2024 compared to $0.5 million in 2023) driven by team expansion as the project progresses; ● An increase of approximately $10 million in stock-based compensation expense compared to the prior period, reflecting contractual obligations to members of the management team eligible for stock-based compensation with a different vesting profile compared to 2023. In 2024, 81% of the instruments issued fully vested during the year, compared to 40% of similar instruments issued in 2023; and ● A decrease in exploration costs due to a reduction in exploratory drilling activities in 2024 and the commencement of the capitalization of exploration expenses ($4.5 million from April to December 2024 and Nil in 2023) due to the conclusion of a preliminary economic assessment of the Neves Project in the second quarter of 2024. Other expenses for the year ended December 31, 2024 totaled $1,338,370 compared to $194,175 during the year ended December 31, 2023, representing an increase of 589%, driven by the derecognition of a $1.3 million asset relating to the premium paid for an option to acquire two mining rights in Governador Valadares, Minas Gerais, and the corresponding recognition of a $1.3 million expense. We decided not to exercise such option and derecognized the amount recorded for the premium occurred because the results of geological studies did not achieve the expected results. The assets subject to the option are unrelated to the Company’s Das Neves Project. As a result, we incurred a net loss attributable to our stockholders of $42,241,196, or $2.97 per share, for the year ended December 31, 2024, compared to a net loss attributable to our stockholders of $40,768,275, or $4.37 per share, during the year ended December 31, 2023. 27 Table of Contents Liquidity and Capital Resources As of December 31, 2024, we had cash and cash equivalents of $15,537,476 and net working capital of $12,258,774. Net cash used by operating activities totaled $18,784,844 for the year ended December 31, 2024, compared to net cash used of $5,962,602 during the year ended December 31, 2023, representing an increase in cash used of $12,822,242, or 215%. The variation in net cash used by operating activities was mainly due to: ● In the year ended December 31, 2023, we received $20 million of deferred consideration from royalty sold arising from the one-time royalty sale to Lithium Royalty Corp. with no similar transaction in 2024, as explained in Note 3; and ● An increase of approximately $5.7 million in General and administrative expenses due to the growth of our personnel, infrastructure and the costs related to our operational permit relating to our Neves Project as we move towards revenue-generating operations. As a result, we had more expenditures such as employee compensation and the costs of third parties service providers such as technical consultants. ● A decrease of approximately $13.4 million in Exploration costs due to a reduction in drilling activities in 2024 and the commencement of capitalization of exploration expenses. Net cash used in investing activities totaled $27,344,436 for the year ended December 31, 2024, compared to net cash used of $7,970,172 during the year ended December 31, 2023, representing an increase in cash used of $19,374,264, or 243%. The variation in net cash used by investing activities was mainly due to: ● Increase of approximately $13.3 million due to cash advances the manufacturing of the DMS plant during 2024 ● The capitalization of exploration costs incurred since April 2024 of approximately $4.5 million ● Increase in the acquisition of intangible assets represented by the implementation of SAP Net cash provided by financing activities totaled $32,131,672 for the year ended December 31, 2024, compared to $43,156,759 during the year ended December 31, 2023, representing a decrease in cash provided of $11,025,087, or 26%. We completed the following financing activities in 2024: ● On March 28, 2024, we entered into a Securities Purchase Agreement with Mitsui to issue 1,871,250 shares of our common stock in a registered direct offering for total gross proceeds of $30,000,000. Net proceeds were approximately $29.6 million after deducting offering expenses. ● On November 22, 2024, we entered into an At The Market Offering Agreement with H.C. Wainwright & Co., LLC for the issuance of up $25.0 million of shares of our common stock (the “ATM Agreement”). During the year ended December 31, 2024, we sold 191,723 shares under the ATM Agreement for proceeds of $1.3 million, net of commissions and fees. The consolidated financial statements have been prepared on a going concern basis. We have historically incurred net operating losses and have not yet received material revenues from the sale of products or services. As a result, our primary source of liquidity has been the proceeds from the sale of our equity. As of December 31, 2024, we had cash and cash equivalents of $15,537,476 and net working capital of $12,258,774, compared to cash and cash equivalents $29,549,927 and a working capital deficit of $23,809,637 as of December 31, 2023. We believe our cash on hand will be sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months. However, our future short- and long-term capital requirements will depend on several factors, including but not limited to, the rate of our growth, our ability to identify areas for mineral exploration and the economic potential of such areas, the exploration and other drilling campaigns needed to verify and expand our mineral resources, the types of processing facilities we would need to install to obtain commercial-ready products, and the ability to attract talent to manage our different areas of endeavor. To the extent that our current resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing. If the needed financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to scale back our existing operations and growth plans, which could have an adverse impact on our business and financial prospects and could raise substantial doubt about our ability to continue as a going concern. We currently have no off-balance sheet arrangements. Offtake and Sales Agreements In December 2023, we 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 we 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 our authority to increase or decrease such quantity by up to ten percent (10%) each year. Each of the buyers agreed that upon the Company reaching certain milestones, including the obtaining of customary licenses, to pre-pay to the Company $20.0 million (each, a “Pre-Payment Amount”) for future deliveries of the Product after we obtain customary licenses. Each Pre-Payment Amount when made will be used to offset against such buyers’ future payment obligations for the Product. On March 27, 2024, In connection with the closing of a registered offering of our common stock to Mitsui (the “Mitsui Registered Offering”), our subsidiary Atlas Brazil and Mitsui entered into an Offtake and Sales Agreement, pursuant to which Atlas Brazil agreed to sell and deliver to the Mitsui, and Mitsui 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. For more information about the Mitsui Registered Offering, please see “Note 7 – Related Party Transactions. ” 28 Table of Contents 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 it receiving either more or less in local currency than the local currency equivalent at the time of the original activity. Our 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. Critical Accounting Polices and Estimates The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements. 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. Exploration Stage Company The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to accounting and reporting by exploration stage companies. An exploration stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from. Trade Receivables Trade receivables represent amounts to be received from clients due to the sale of quartzite products. We recognize a trade receivable following the recognition of revenue when control of a product is transferred to the customer, and we have an unconditional right to receive payment for such product. The receivable is initially recognized at fair value, which usually corresponds to the price of the transaction (invoice), and such receivable is subsequently assessed to determine the recoverability of the amounts as of each balance sheet date. Inventories We value our inventories in accordance with Accounting Standards Codification (“ASC”) 330, Inventory (“ASC 330”), which requires that inventories be valued at the lower of cost or market. The cost of inventories is determined using the weighted average cost method. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation. Major improvements and betterments are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful life. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the statements of operations as other gain or loss, net. The processing plant and other machinery are depreciated over an estimated useful life of ten years; vehicles are depreciated over an estimated life of five years; and computers and other office equipment are depreciated over an estimated useful life of five years. Mineral Properties Costs of exploration, carrying and retaining unproven mineral lease properties are expensed as incurred, up to the stage at which the commercial and economic feasibility of the mineral properties are proved. After the feasibility is determined, exploration costs are capitalized as incurred. Mineral property acquisition costs, including licenses and lease payments, are capitalized. Although we have taken steps to verify title to mineral properties in which we have an interest, these procedures do not guarantee our rights. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects. Impairment losses are recorded on mineral properties used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. As of December 31, 2024, and 2023, we did not recognize any impairment losses related to mineral properties held. Proceeds received on the sale of interests in exploration and evaluation assets are credited to the incurred exploration and evaluation expenditures, with any excess included in operations. Write-downs due to impairment in value are charged to profit or loss. Mineral properties are amortized throughout the life of the property based on a units-of-production method. 29 Table of Contents Impairment of Intangible Assets with Indefinite Useful Lives We account for intangible assets in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other (“ASC 350”). ASC 350 requires that intangible assets with indefinite useful lives no longer be amortized but instead be evaluated for impairment at least annually. On an annual basis, in the fourth quarter of the fiscal year, we review our intangible assets with indefinite useful lives for impairment by first assessing qualitative factors to determine whether the existence of events or circumstances makes it more-likely-than-not that the fair value of an intangible asset is less than its carrying amount. If it is determined that it is more-likely-than-not that the fair value of an intangible asset is less than its carrying amount, the intangible asset is further tested for impairment by comparing the carrying amount to its estimated fair value using a discounted cash flow. Impairment, if any, is measured as the amount by which an indefinite-lived intangible asset’s carrying amount exceeds its fair value. Application of impairment tests requires significant management judgment, including the determination of fair value of each indefinite-lived intangible asset. Judgment applied when performing the qualitative analysis includes consideration of macroeconomic, industry and market conditions, overall financial performance of the entity, composition, or strategy changes affecting the recoverability of asset groups. Judgments applied when performing the quantitative analysis include estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these judgments, estimates and assumptions could materially affect the determination of fair value for each indefinite-lived intangible asset. Impairment of Long-Lived Assets For long-lived assets, such as property and equipment and intangible assets subject to amortization, we continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. Variable Interest Entities We determine at the inception of each arrangement whether an entity in which we hold an investment or in which we have other variable interests in is considered a variable interest entity. We consolidate VIEs when we are the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE; and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, we assess whether any changes in the interest or relationship with the entity affect the determination of whether the entity is still a VIE and, if so, whether we are the primary beneficiary. If we are not the primary beneficiary in a VIE, we account for the investment under the equity method or cost method in accordance with the applicable GAAP. We have concluded that Atlas Critical Minerals and its subsidiaries are VIEs in accordance with applicable accounting standards and guidance; and although the operations of Atlas Critical Minerals are independent of ours, because our Chief Executive Officer and Chairman, Mr. Fogassa, is also the controlling shareholder of Atlas Critical Minerals, we may be considered to have power to direct the activities that are most significant to Atlas Critical Minerals. Therefore, we concluded that we are the primary beneficiary of Atlas Critical Minerals. Stock-Based Compensation We measure and record stock-based compensation expense in accordance with ASC Topic 718 for share-based payments related to stock options, restricted stock, and performance-based awards granted to certain directors, employees and consultants. ASC 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. Under ASC 718, volatility is based on the historical volatility of our stock or the expected volatility of the stock of similar companies. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The fair value of stock options and performance awards without a market condition is estimated at the date of grant using the Black-Scholes option-pricing model. The fair value of restricted stock awards and stock options with a market condition is estimated at the date of grant, using the Monte Carlo Simulation model. The fair value of restricted stock awards with a required lock-up period without a market condition is estimated at the date of grant, using the Hull-White Lattice (binomial) model. The Black-Scholes, Monte Carlo Simulation, and Hull-White Lattice valuation models incorporate assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate, illiquidity discount, and dividend yield. In valuing our stock options, significant judgment is required in determining the expected volatility of our common stock and the expected life that individuals will hold their stock options prior to exercising. Expected volatility for stock options is based on the historical and implied volatility of our common stock while the volatility for restricted stock awards with a market condition is based on the historical volatility of our own stock and the stock of companies within our defined peer group. Because changes in the subjective assumptions can materially affect the estimated value of our employee stock options, it is management’s opinion that the valuation models may not provide an accurate measure of the fair value of our stock options, restricted stock and performance-based awards. Although the fair value of stock options and restricted stock awards is determined in accordance with ASC Topic 718, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. 30 Table of Contents Foreign Currency With the exception of Atlas Lítio Brasil Ltda, our foreign subsidiaries use a local currency as the functional currency. Resulting translation gains or losses are recognized as a component of accumulated other comprehensive income. Transaction gains or losses related to balances denominated in a currency other than the functional currency are recognized in the consolidated statements of operations. Net foreign currency transaction losses included in our consolidated statements of operations were negligible for all periods presented. Recent Accounting Pronouncements In August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05, Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which clarifies the business combination accounting for joint venture formations. The amendments in the ASU seek to reduce diversity in practice that has resulted from a lack of authoritative guidance regarding the accounting for the formation of joint ventures in separate financial statements. The amendments also seek to clarify the initial measurement of joint venture net assets, including businesses contributed to a joint venture. The guidance is applicable to all entities involved in the formation of a joint venture. The amendments are effective for all joint venture formations with a formation date on or after January 1, 2025. Early adoption and retrospective application of the amendments are permitted. We do not expect the adoption of the new guidance to have a material impact on our consolidated financial statements and disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, and are applied prospectively. Early adoption and retrospective application of the amendments are permitted. We do not expect the adoption of the new guidance to have a material impact on our consolidated financial statements and disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this update require disclosure, in the notes to financial statements, of specified information about certain costs and expenses. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. We will analyze the impacts of this update in the upcoming years and anticipate that we will not adopt the update early. In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. The Board issued this update to improve the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20, Debt— Debt with Conversion and Other Options. The amendments in this update clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. Management does not expect this new guidance to have any impact on our consolidated financial statements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The information to be reported under this Item is not required of smaller reporting companies. Item 8. Financial Statements and Supplementary Data. Our financial statements, including the notes thereto, together with the report from our independent registered public accounting firm are presented beginning at page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None .