NOTE 2 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

Inventories

Inventories as of June 30, 2025, and December 31, 2024, are comprised of the following:

 SCHEDULE OF INVENTORIES

Materials and supplies consists primarily of feedstock intended for use in the Company’s production processes related to lithium operations.

Quartzite inventories June 30, 2025 only contain slabs produced through the cutting and polishing of natural quartzite. Slabs are actively sold in the market and classified as finished goods.

Property and Equipment

The following table sets forth the components of the Company’s property and equipment as of June 30, 2025 and December 31, 2024:

 SCHEDULE OF PROPERTY AND EQUIPMENT

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

Intangible Assets

Intangible assets consist of the cost of software (implementation of SAP enterprise resource planning software, as well as other software). The carrying value of these intangible assets as of June 30, 2025 and December 31, 2024 were $354,516 and $399,773, respectively.

Accounts Payable and Accrued Expenses

 SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

ATLAS LITHIUM CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Leases

Finance Leases

For the reporting period ended June 30, 2025, no financial leases meeting the criteria outlined in ASC 842 have been identified.

Operating Leases

Right of use (“ROU”) assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. When the rate implicit to the lease cannot be readily determined, we utilize our incremental borrowing rate in determining the present value of the future lease payments. The ROU asset includes any lease payments made and lease incentives received prior to the commencement date. Operating lease ROU assets also include any cumulative prepaid or accrued rent when the lease payments are uneven throughout the lease term. The ROU assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The ROU and lease liabilities are primarily related to the Company’s offices in Belo Horizonte and Araçuaí and Geology sheds leased from third parties.

The lease agreements have terms between two2 to five years and the liability was measured at the present value of the lease payments discounted using interest rates with a rate of 6.5%, which was determined to be the Company’s incremental borrowing rate. The continuity of the lease liabilities is presented in the table below:

 SCHEDULE OF OPERATING LEASE LIABILITY

The maturity of the lease liabilities (contractual undiscounted cash flows) is presented in the table below:

 SCHEDULE OF CONTRACTUAL UNDISCOUNTED CASH FLOWS

ATLAS LITHIUM CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Convertible Debt

 SCHEDULE OF CONVERTIBLE DEBT

On November 7, 2023, the Company entered into a convertible note purchase agreement (the “Convertible Note Purchase Agreement”) with Jaeger Investments Pty Ltd, an entity controlled by Mr. Martin Rowley, and other investors to raise up to $20,000,000 in proceeds through the issuance of convertible promissory notes with the following key terms:

On November 7, 2023, we issued $10,000,000 in convertible promissory notes under the terms of Convertible Note Purchase Agreement, and there were no other purchases and sales of the convertible promissory notes pursuant to the Convertible Note Purchase Agreement. On the date of issuance, we received $10,000,000 in cash proceeds and recorded (i) a $9,688,305 convertible debt liability and (ii) a $311,695 conversion feature derivative liability in our consolidated statement of financial position, as further disclosed below.

In the three and six months ended June 30, 2025, the Company recorded $162,055 and $322,330 in interest expense and $25,903 and $51,522 in accretion expense in the condensed consolidated statement of operations and comprehensive loss ($162,055 and $324,110, in interest expenses and $25,903 and $51,806 in accretion expense in the three and six months ended June 30, 2024).

Derivative Liabilities

 SCHEDULE OF DERIVATIVE LIABILITIES

ATLAS LITHIUM CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

a) Derivative liability – embedded conversion feature on convertible debt

On November 7, 2023, the Company issued convertible promissory notes to Jaeger Investments Pty Ltd and other investors. In accordance with FASB ASC 815, the conversion feature of the convertible debt was determined to be an embedded derivative. As such, it was bifurcated from the host debt liability and was recognized as a derivative liability in the consolidated balance sheets. The derivative liability is measured at fair value through profit or loss.

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

 SCHEDULE OF FAIR VALUE EMBEDDED CONVERSION PRICING MODEL ASSUMPTION

At June 30, 2025, the fair value of the embedded conversion feature was determined to be $7,070 using a Black-Scholes collar option pricing model with the following assumptions:

In the Black-Scholes collar option pricing models, the expected volatilities were based on historical volatilities of the securities of the Company and its trading peers, and the risk-free interest rates were determined based on the prevailing rates at the grant date for U.S. Treasury Bonds with a term equal to the expected term of the instrument being valued.

In the three and six months ended June 30, 2025, the Company recognized a $17,067 and a $59,240 gain on changes in fair value of financial instruments in the condensed consolidated statement of operations and comprehensive loss ($124,228 and $311,717 in the three and six months ended June 30, 2024).

ATLAS LITHIUM CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

b) Derivative liability – other stock incentives

The employment agreement of Igor Tkachenko, a Vice President of the Company, dated September 30, 2023, provides for the issuance of shares of the Company’s common stock based on us achieving certain market capitalization milestones. As of June 30, 2025, the Company’s obligations under this employment agreement contemplates the issuance of additional shares of the Company’s common stock in five tranches, each representing 0.2% of the Company’s common stock outstanding at the time of vesting, with an expiry date of December 31, 2026 and market vesting conditions as follows:

In accordance with FASB ASC 815, these RSU awards were classified as a liability, measured at fair value through profit or loss, and compensation expense is recognized over the expected term.

As at December 31, 2024, Tranche 3, Tranche 4, Tranche 5, Tranche 6 and Tranche 7 remain outstanding and unvested, and the total fair value of these outstanding rights to receive restricted stock was $315,189, as measured using a Monte Carlo Simulation with the following ranges of assumptions: the Company’s stock price on the December 31, 2024 measurement date, expected dividend yield of 0%, expected volatility between 71.2% and 82.3%, risk-free interest rate between a range of 5.09% to 5.48%, and an expected term of 2.5 years. The expected volatilities were based on historical volatilities of the securities of the Company and its trading peers, and the risk-free interest rates were determined based on the prevailing rates at the grant date for U.S. Treasury Bonds with a term equal to the expected term of the award being valued.

As at June 30, 2025, Tranche 3, Tranche 4, Tranche 5, Tranche 6 and Tranche 7 remain outstanding and unvested, and the total fair value of these outstanding rights to received restricted stock was $21,101, as measured using a Monte Carlo Simulation with the following ranges of assumptions: the Company’s stock price on the June 30, 2025 measurement date, expected dividend yield of 0%, expected volatility between 68.9% and 82.1%, risk-free interest rate between a range of 3.72% to 4.41%, and an expected term of 3 months. The expected volatilities were based on historical volatilities of the securities of the Company and its trading peers, and the risk-free interest rates were determined based on the prevailing rates at the grant date for U.S. Treasury Bonds with a term equal to the expected term of the award being valued.

c) Derivative asset - Non-Deliverable Forward

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

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

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

As of June 30, 2025, the fair value of outstanding NDF contracts was recorded as Derivative assets on the balance sheet.

For the period ended June 30, 2025:

ATLAS LITHIUM CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the non-deliverable forward foreign exchange contracts that remain open as of June 30, 2025:

 SCHEDULE OF NON DELIVERABLE FORWARD EXCHANGE CONTRACTS