NOTE 2 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

Property and Equipment

The following table sets forth the components of our property and equipment as of December 31, 2025, and 2024:

 SCHEDULE OF PROPERTY AND EQUIPMENT 

For the years ended December 31, 2025, and 2024, we recorded depreciation expense of $28,877 and $4,381, respectively recorded in general and administrative expense. In December 2024, the Company wrote off $1.3 million relating to the premium paid for an option to acquire two mining rights. Results of geological studies did not achieve the expected results and the Company decided not to exercise the option, derecognizing the amounts recorded for the premium paid. The assets objective of this option do not have any relation with the Company’s Das Neves Project.

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.

Accounts Payable and Accrued Liabilities

 SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Leases

Finance Leases

For the reporting period ended December 31, 2025 and 2024, 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 commercial offices with third parties.

The lease agreements have terms between 2 to 5 years, with the possibility of extending one of the contracts for an additional two years and another for an additional 12 months. The liability was measured at the present value of the lease payments discounted using interest rates with a weighted average rate of 6.5% which was determined to be our 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 MATURITY OF THE LEASE LIABILITIES

Convertible Debt

 SCHEDULE OF CONVERTIBLE DEBT

On November 7, 2023, we entered into a convertible note purchase agreement (“November 7, 2023, Convertible Note Agreement”) with 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 the November 7, 2023, Convertible Note Agreement, and there were no other purchases and sales of the convertible promissory notes pursuant to the November 7, 2023 Convertible Note 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 year ended December 31, 2025, we recorded $650,002 in interest expense and $103,898 in accretion expense in the consolidated statement of operations and comprehensive loss ($651,782 and $104,183, for the year ended December 31, 2024).

Derivative Liabilities

SCHEDULE OF DERIVATIVE LIABILITIES 

a) Derivative liability – embedded conversion feature on convertible debt

On November 7, 2023, we issued convertible promissory notes to Martin Rowley and other investors as further disclosed in Note 2. 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 statement of financial position. The derivative liability is measured at fair value through profit or loss.

On 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 December 31, 2025, the fair value of the embedded conversion feature was determined to be $6,507 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 our and our peers’ securities, 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 year ended December 31, 2025, we recognized a $59,804 gain on changes in fair value of financial instruments in the consolidated statement of operations and comprehensive loss ($419,993 in the year ended December 31, 2024).

b) Derivative liability – restricted stock unit (“RSU”) awards

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 December 31, 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 of September 30, 2023, the grant date fair value of these awards was $2,517,300, as determined a Monte Carlo Simulation valuation method according to the assumptions disclosed in Note 5. In the year ended December 31, 2023, we recognized $513,757 in stock-based compensation expense in the consolidated statement of operations and comprehensive loss, met the market conditions for Tranche 1 and Tranche 2, and issued 40,533 shares of common stock to the executive officer.

As at December 31, 2025, Tranche 3, Tranche 4, Tranche 5, Tranche 6 and Tranche 7 remain outstanding and unvested, and the total fair value of these restricted stock awards outstanding was $15,072, as measured using a Monte Carlo Simulation with the following ranges of assumptions: our common stock price on the December 31, 2025 measurement date, expected dividend yield of 0%, expected volatility of 84.64%, risk-free interest rate between a range of 3.48%, and an expected term 12 months. The expected volatilities were based on historical volatilities of the securities of the Company and of our 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 liability - Non-Deliverable Forward

Atlas Litio, a subsidiary of Atlas Lithium, is exposed to foreign-currency exchange-rate fluctuations in the normal course of business considering that portion of expenses are in Brazilian reais (BRL). To mitigate this exposure, the subsidiary 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 the subsidiary nor Atlas Lithium engages in speculative transactions. Additionally, these contracts do not contain any credit-risk-related contingent features.

As of December 31, 2025, the fair value of outstanding NDF contracts was recorded as Derivative Assets on the balance sheet.

For the year ended December 31, 2025:

The following table summarizes the non-deliverable forward foreign exchange contracts that remain open as of December 31, 2025:

 SCHEDULE OF NON DELIVERABLE FORWARD EXCHANGE CONTRACTS