Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results of operations of Chilean Cobalt Corp. ("Chilean Cobalt" and including its subsidiaries, collectively, the "Company") should be read in conjunction with our condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. References in this Management's Discussion and Analysis of Financial Condition and Results of Operations to "us," "we," "our," and similar terms refer to the Company. This Quarterly Report on Form 10-Q includes forward-looking statements, as that term is defined in the federal securities laws, based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Words such as "anticipate," "estimate," "plan," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could," and similar expressions are used to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Reference is made to "Risk Factors", which are included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission ("Commission") on June 30, 2026, as the same may be amended from time to time.

Overview

We are a critical materials exploration and development company focused on the La Cobaltera and El Cofre cobalt-copper projects, located in the San Juan District in northern Chile, one of the world's few known primary cobalt districts. We have a deliberate focus on building a dynamic and sustainable business with an emphasis on applying leading environmental stewardship, social engagement, and corporate governance practices to its strategy.

Our wholly-owned subsidiary Baltum Mineria SpA ("Baltum"), has acquired 6,377 hectares of fully exploitable mining concessions in northern Chile's Atacama region in the San Juan District and is pursuing other opportunities to further consolidate mining rights in the district. The San Juan mining district, which includes the La Cobaltera and El Cofre areas, has been identified by CORFO, the Chilean governmental agency responsible for the country's economic development, as likely containing the highest quality cobalt assets in Chile. The San Juan District in northern Chile (Atacama Region III), is a historic mining district with numerous past-producinng mines, infrastructure and accessibility. The project includes copper oxide and cobalt-copper oxide with drilling evidence of sulphide mineralization, including gold at depth across several known exploration and development targets district-wide. Chile is the leading copper-producing country in the world with the La Cobaltera and El Cofre areas historically supporting the existence of established and high-quality copper assets. The site is strategically located near robust mining infrastructure, including roads, electricity, water, and ports.

Cobalt demand has been driven by the growth of its use in high performance metal alloy products for industrial and defense applications, as well as in lithium-ion batteries for portable electronic devices (tablets, phones) and electric vehicles (EVs). Copper demand continues to be driven by the growth in all manner of electrification as copper is a staple in nearly all things electric.

Our principal business activities since incorporation have been the assessment, acquisition and consolidation of mining concessions; the exploration of the potential cobalt-copper resources within the concessions, including geophysics, geochemistry, drilling, IP surveys and AI pilot studies; developing an accelerated phased implementation plan; establishing off-take and downstream refining relationships; developing and advancing our ESG strategy; building our board of directors, management team, and governance systems; and raising capital.

Our commercial priorities are to have funding lined up to allow for timely development, when appropriate, and to put in place the necessary downstream processing relationships. Related to funding for development, efforts include a new application for a non-binding letter of interest ("LOI") with the Export-Import Bank of the United States ("EXIM Bank"), that was approved for potential debt-related financing of up to $375.0 million on August 4, 2026, with an effective date of August 13, 2026, and an expiration date of August 14, 2027. This new LOI replaced the originally approved LOI of up to $317.4 million pursuant to a June 4, 2024, and further extended LOI that was recently not renewed. Under EXIM Bank's published guidelines, LOI's are limited to a single twelve-month extension, for a maximum of two years. There can be no assurance that EXIM Bank will provide financing under the LOI as it does not represent a financing commitment. Financing is contingent on an application for financing being submitted to EXIM by the Company followed by a standard due diligence process conducted by EXIM prior to any financing commitment. Whereas, related to the downstream processing objectives, we envision a three-way strategic partnership between the Company, Glencore and US Strategic Metals ("USSM") to establish an Americas-centric cobalt and copper supply chain, connecting Chilean Cobalt's La Cobaltera and El Cofre cobalt-copper projects in Chile with USSM's integrated critical minerals processing site in Missouri, USA - which may include development of a dedicated processing line for our concentrate at USSM's site. Our partnership with USSM and Glencore is expected to strengthen United States critical minerals supply chains while intended to support development of a sustainable and traceable source of raw materials for the growing domestic lithium-ion battery manufacturing capacity and high-performance metal alloy markets.

On September 6, 2024, and then extended on September 5, 2025, we put in place a non-binding LOI with USSM to process and refine cobalt and copper concentrate we expect to produce. Refined outputs from USSM are expected to be used in cobalt metal, battery chemical intermediate products, and/or other products critical for the production of advanced materials and energy technologies. We are working with USSM to define final terms and conditions for downstream processing. In addition, on November 11, 2025, we signed a Deed of Undertaking with a subsidiary of Glencore plc ("Glencore") whereby Glencore has been granted a right of first and last refusal to purchase cobalt and copper product from the La Cobaltera and El Cofre projects, which it expects to ship to the United States or U.S. Free Trade Agreement countries.

Chilean Cobalt is participating in a research and development ("R&D") project awarded through Chilean Economic Development Agency ("CORFO") to evaluate the technical and environmental feasibility of recovering cobalt and copper from legacy waste piles at the La Cobaltera site. The project is funded through a $3,000,000 grant from Albermarle Limitada, the industry sponsor of the CORFO R&D project-selection process. This project remains in the research and evaluation stage and does not involve operational activities or changes to the our current permitting requirements. Our support equates to approximately 21% of the overall consortium-required support contribution of $950,000 toward the project. The other key participants in the consortium of project sponsors are Universidad Andres Belo, through its Center for Systems Biotechnology, Pucobre (SSE: PUCOBRE), a Chilean copper mining company listed on the Santiago Stock Exchange, and ENAMI, Chile's state-owned mining company.

We remain aware of and are investigating other critical minerals opportunities particularly in Chile. On January 8, 2026, we entered into a binding earn-in and option agreement with NeoRe SpA, a privately-held Chilean company to acquire approximately 6,300 hectares of mining concessions (the "Properties") within the coastal belt region near Concepcion Chile with an ionic adsorption clay-style rare earth elements system enriched with yttrium, neodymium, dysprosium and terbium elements critical to defense and advanced manufacturing supply chains. While contributing to the project, we earn credit toward a net smelter return ("NSR") royalty, with percentage depending on the extent of the contribution and the progress of the project. After the project achieves certain developmental milestones, we would then have an option to acquire the Properties through the relinquishment of the NSR royalty and payment of equity-based consideration.

We are committed to building a mature, transparent, and continuously improving ESG framework that supports responsible development and long-term value creation. Responsible-sourcing and ESG-assurance frameworks such as IRMA and Digbee increasingly shape the expectations of downstream customers, investors, and supply-chain partners. In 2025, the board of directors approved the adoption of the Digbee and IRMA ESG frameworks, and we completed our first independent Digbee ESG assessment in July 2025. We continue to strengthen our governance and ESG systems, including the board of directors' adoption in principle of a new governance framework in March 2026, which is intended to support enhanced oversight and disclosure readiness.

We have not generated any revenues to date. Our limited operations have included the formation of the Company and Baltum, oversight of cobalt exploration activities, business development activities and sustainability framework development activities. These limited operations have been funded by capital raised through the issuance of our common stock, preferred stock, and debt.

From December 4, 2017 through August 14, 2026, we raised a total of $36,645,547 from accredited investors through the issuance of our common stock, preferred stock, and debt, net of $247,500 of direct and incremental costs of equity raising. This total does not include the $56,272 of stock-based compensation inferred by the issuance of 216,429 shares for the retainer for services provided by Collingwood Capital Partners AG at $0.26 per share on March 19, 2024, the $1,890,000 of stock-based expenditures inferred by the issuance of 4,500,000 shares for 3,742 hectares of full exploitation mining concessions acquired from Cobalt Chile SpA at $0.42 per share on September 12, 2025, capitalized direct costs of equity issuances (see Footnote 4. Other assets, the Equity Raising Activities section) or any other non-cash amounts for other stock-based compensation, dividends paid-in-kind or similar.

We have limited business operations and have achieved losses since inception. We have been issued a going concern opinion from our auditors as a result of not generating sufficient business to date.

Our monthly "burn rate," the amount of expenses we expect to incur on a monthly basis, is approximately $197,000 for a total of $2,364,000 for the following 12 months, which excludes expenses related to major exploration activities and project and concession acquisitions. We have relied and will continue to rely on capital raised from third parties to fund operations during the upcoming 12 months and plan to potentially raise additional funds in private offerings or a public offering. We expect to be able to further our acquisition and exploration plans, if we are successful in raising the anticipated working capital. However, there can be no assurance that we will be successful in securing additional capital, timely or at all, and if we are able to if there will be favorable terms.

In order to complete our plan of operations, which entails proving out feasibility, commencing production and generating saleable product, we estimate that approximately $400 million in funds will be required.

For the years ended December 31, 2025 and 2024, we generated no revenues and reported net losses of $3,263,140 and $882,574, respectively, however, $1,882,082 of the 2025 loss was related to a one-time, non-cash charge for impairment of mining concessions, and negative cash flow from operating activities of $1,146,473 and $718,275, respectively. For the six-months ended June 30, 2026 and June 30, 2025, we reported net losses of $730,176 and $644,809, respectively, and negative cash flow from operating activities of $710,044 and $561,860, respectively. Our management has concluded that our historical recurring losses from operations and negative cash flows from operations as well as our dependence on securing private equity and other financings raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit reports for the fiscal years ended December 31, 2025 and 2024. As noted in our unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q, we had an accumulated stockholders' deficit of approximately $37,376,128 and recurring losses from operations as of June 30, 2026. See the risk factor in our Annual Report on Form 10-K titled, "Risk Factors - We have a history of operating losses and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal years ended December 31, 2025 and 2024."

Plan of Operations

In order to complete our plan of operations during the next 12 months, we estimate that approximately $2,364,000 in funds will be required. In order to pursue our strategic priorities of progressing mining rights acquisition and consolidation, along with both brownfield and greenfield exploration and having a longer operational runway, we will require no further funding. To complete mining rights acquisition and consolidation along with drilling and feasibility assessments will require substantially more funding. The source of such funds is anticipated to come from private offerings and/or a public offering. There is no guarantee that we will be able to raise such funds. If we fail to raise the amounts we require, we may not be able to fully carry out our plan of operations.

Assuming we are able to raise the necessary funds for the next 12 months, we intend to implement our business plan as follows:

	·	Exploration and Development Expenses. During this period, we plan to, among other things, continue exploration and development of the mining sites in addition to any new mining sites that are successfully acquired. The exploration and development expenses are expected to encompass sampling, mapping and trenching in greenfield areas and further diamond drilling and work towards establishing pre-feasibility and/or definitive feasibility studies in brownfield areas.
	·	Possible Strategic Acquisition Opportunities. During this period, we plan to, among other things, consider possible strategic acquisitions of other possible mining sites. There are several sites that we have expressed interest in acquiring and the ability to close on these acquisitions is dependent on our success in achieving the projected capital raise objectives and being able to negotiate favorable terms with mining concession sellers in the areas of cash, equity and net smelter return royalties, as applicable. In addition, we plan to make additional capital infusions into the NeoRe Project during the period toward the earn-in of net smelter return royalties.
	·	General and Administrative Expenses. During this period, we plan to, among other things, hire additional staff, engage additional advisors to assist with operations, and incur substantial legal, registration and other professional services fees. We also plan to continue incurring the same level of general and administrative expenses, such as corporate insurance, professional services, public filer services, marketing, site and conference travel and other administrative costs in order to further our plan.

We are seeking to secure a source of financing to fund our exploration and development efforts within our mining concessions that comprise our La Cobaltera and El Cofre cobalt-copper projects, as well as to complete or at least further our progress toward acquiring a rare earth elements project in south-central Chile in association with NeoRe SpA. In addition, there are other mining concessions we are evaluating within the San Juan District in northern Chile that would require funding to acquire them. These funding efforts include a new application for an EXIM Bank LOI, that was approved for potential debt-related financing of up to $375.0 million on August 4, 2026, with an effective date of August 13, 2026, and an expiration date of August 14, 2027. This new LOI replaced the originally approved LOI of up to $317.4 million pursuant to a June 4, 2024, further extended LOI with EXIM Bank that was recently not renewed. Under EXIM Bank's published guidelines, LOI's are limited to a single twelve-month extension for a maximum of two years. There can be no assurance that EXIM Bank will provide financing under the LOI as it does not represent a financing commitment. Financing is contingent on an application for financing being submitted to EXIM by the Company followed by a standard due diligence process conducted by EXIM prior to any financing commitment. There can be no assurance that a private raise or debt financing, when instituted can occur as planned or at all. Our future is dependent upon our ability to obtain further financing, the successful execution of our business plan, securing favorable off-take agreements, and achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. There are no assurances that we will be able to obtain further funds required for our continued operations. Even if additional financing is available, it may not be available on terms we find favorable. At this time, there are no anticipated sources of additional funds in place. Failure to secure the needed additional financing will have an adverse effect on our ability to remain in business.

Components of revenues and costs and expenses

Exploration and development expense. Our exploration and development costs are incurred during the exploration and development of mining sites. The costs incurred in the three and six-months ended June 30, 2026 were related to geological and exploration labor deployed during our one site visit in the three-month period and our three site visits in the six-month period. The exploration leveraged the improvements from the value-added outputs from our prior year artificial intelligence trials and lead to further development of our geographic information system ("GIS"). Trench sampling was performed in the El Cofre project areas to further the exploration and geological understanding of that opportunity.

General and administrative expense. Our general and administrative ("G&A") expenses include compensation of staff and overhead, which includes depreciation and foreign currency transaction (gains) and losses.

Interest expense, interest income, net. Interest expense consists of interest expense associated with debt obligations. Interest income consists of interest income earned on our cash, cash equivalents and short-term investments.

Provision for Income Taxes. Provision for income taxes consists of an estimate of United States federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business, as adjusted for allowable credits, deductions and the valuation allowance against deferred tax assets.

Gain (loss) on retirement/sale of assets. When fixed assets are sold, retired or disposed, there is either a non-cash gain or loss associated with the action depending on whether there is receipt of proceeds (in the case of a sale) and the extent of depreciation that has already been claimed on the fixed asset that is being removed from the books. For a gain, there must be proceeds received in excess of the residual book value of the asset, whereas, otherwise, there is no loss or a loss by the amount that the residual book value exceeds any applicable proceeds.

Results of Operations - Three-Months Ended June 30, 2026 Compared to the Three-Months Ended June 30, 2025

		Three-Months Ended June 30, 2026				Three-Months Ended June 30, 2025				Increase (Decrease)
Revenue		$	0			$	0			$	0
Cost of Sales			0				0				0
Gross Profit			0				0				0
Gross Profit %			0%				0%				0%
Operating Expenses:
Cost of Mineral Exploration			18,000				19,798				(1,798	)
General and administrative expenses and foreign currency transaction loss			399,349				296,165				103,184
Interest and Miscellaneous (income) expense, net			(15,540	)			(5,452	)			(10,088	)
Loss before income taxes			(401,809	)			(310,511	)			91,298
Provision for income taxes			0				0				0
Net Loss		$	(401,809	)		$	(310,511	)		$	91,298

Operating losses for the three-months ended June 30, 2026, compared to June 30, 2025, were higher due primarily to the higher patent fee costs to Baltum, but also in part to higher advertising and marketing costs, legal expense, site visit and sampling costs, in addition to higher regulatory and filing costs, travel expense and other business expense, but somewhat offset by higher interest income, all impacts when compared to the same period for the previous year, which resulted in a higher overall net loss.

Results of Operations - Six-Months Ended June 30, 2026 Compared to the Six-Months Ended June 30, 2025

		Six-Months Ended June 30, 2026				Six-Months Ended June 30, 2025				Increase (Decrease)
Revenue		$	0			$	0			$	0
Cost of Sales			0				0				0
Gross Profit			0				0				0
Gross Profit %			0%				0%				0%
Operating Expenses:
Cost of Mineral Exploration			40,000				19,798				20,202
General and administrative expenses and foreign currency transaction loss			756,102				637,994				118,108
Interest and Miscellaneous (income) expense, net			(65,926	)			(12,983	)			(52,943	)
Loss before income taxes			(730,176	)			(644,809	)			85,367
Provision for income taxes			0				0				0
Net Loss		$	(730,176	)		$	(644,809	)		$	85,367

Operating losses for the six-months ended June 30, 2026, compared to June 30, 2025, were higher due primarily to the higher patent fee costs to Baltum and the site visit and sampling costs, but also in part to higher advertising and marketing costs, exploration costs, AI Program completion costs in the current year only, travel expense, in addition to higher regulatory and filing costs, and employee compensation, but offset by other income, decreases in accounting and tax expense, and higher interest income, all impacts when compared to the same period for the previous year, which resulted in a higher overall net loss.

Liquidity and Capital Resources

Liquidity

We have primarily financed our operations through the sale of unregistered equity. As of June 30, 2026, we had cash totaling $3,024,044, current assets totaling $3,203,482 and total assets of $4,801,389. As of June 30, 2026, we had total liabilities of $129,184, all current, positive working capital of $3,074,298, and stockholders' equity of $4,672,205.

Sources and Uses of Cash for the Six-Months Ended June 30, 2026 and 2025

The following table summarizes our cash flows for the six-months ended June 30, 2026 and 2025.

		Six-Months Ended June 30, 2026				Six-Months Ended June 30, 2025				Increase (Decrease)
Net Cash Used In Operating Activities		$	(710,044	)		$	(561,860	)		$	(148,184	)
Net Cash Provided By (Used In) Investment Activities			(1,530,992	)			0				(1,530,992	)
Net Cash Provided By (Used In) Financing Activities			2,490,130				830,945				1,659,185
Effect of foreign exchange rate on cash			2,868				714				2,154
Net Increase (Decrease) in Cash		$	251,962			$	269,799			$	(17,837	)

Net cash used in operations

Net cash used in operating activities was $710,044 for the six-months ended June 30, 2026 versus net cash used in operating activities of $561,860 for the six-months ended June 30, 2025. The increase in cash flow used in operating activities was primarily due to higher prepaid cash for higher patent charges in the current period compared to the same period in the previous year, along with higher site visit costs, advertising and marketing expenses, travel expenses, and slightly higher employee compensation and benefits, which were partially offset by higher amounts of legal expense in accounts payable and lower tax and accounting expenses in the current period compared to the previous year. Each of these factors along with nominal impacts from various other expense areas contributed to the $148,184 higher use in net cash for operations in the current period compared to the same period in the previous year.

Net cash used in investment activities

Net cash used in investment activities was $1,530,992 for the six-months ended June 30, 2026 versus net cash used in investment activities of $-0- for the six-months ended June 30, 2025. The increase in cash used in investment activities was driven primarily by the contributions to NeoRe toward a net smelter return royalty and the potential for eventual acquisition of the NeoRe rare earth project. However, approximately one-third of the cash was used toward the acquisition of additional mining concessions in the La Cobaltera project area in continuing to work towards consolidation of the district.

Net cash provided by financing activities

Net cash provided by financing activities of $2,490,130 in the six-months ended June 30, 2026, which included an aggregate of $2,500,000 proceeds from the sale of an aggregate 1,562,500 shares of common stock at $1.60 per share, and offset by cash paid toward direct costs for equity issuances, capitalized pending the closing of the associated issuances, versus net cash provided by financing activities of $830,945 in the six-months ended June 30, 2025, which included an aggregate of $830,945 proceeds from the sale of an aggregate 1,683,365 shares of preferred stock for $757,514 in cash and $73,431 of subscriptions receivable received in the period from prior year issuances.

Going Concern

Based upon our working capital of $3,074,298 compared to our $710,044 cash used in operating activities year-to-date through June 30, 2026, that annualized would equate to cash used in operating activities of $1,420,088, combined with anticipated additional investing activities toward the funding of the NeoRe Project and the acquisition of mining concessions in the La Cobaltera project area, which may exceed our existing working capital, coupled with our accumulated deficit of $37,376,128 from continued existence without generation of revenues, as of June 30, 2026, we require additional equity and/or debt financing to continue our operations. These conditions raise substantial doubt about our ability to continue as a going concern for at least one year from the date of this filing. As a result of the foregoing factors, together with our recurring losses from operations and negative cash flows since inception, our independent registered public accounting firm included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited consolidated financial statements for the fiscal years ended December 31, 2025 and 2024 and as footnoted in our unaudited quarterly condensed consolidated financial statements for the quarters ended June 30, 2026 and 2025.

Availability of Additional Funds

Our capital requirements going forward will consist of financing our operations until we are able to reach a level of revenues and gross margins adequate to equal or exceed our ongoing operating expenses. Other than the possibility of borrowings from related and third parties, it should be noted that we do not have any credit agreement or source of liquidity immediately available to us.

Since inception, our operations have primarily been funded through proceeds from existing and occasionally new shareholders in exchange for equity. There can be no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. We expect to have ongoing needs for working capital in order to (a) fund operations plus (b) exploration and development. To that end, we may be required to raise additional funds through equity or debt financing, such as the equity-based capital recently raised. However, there can be no assurance that we will be successful in securing additional capital. If we are unsuccessful, we may need to (a) initiate cost reductions; (b) forego business development opportunities; (c) seek extensions of time to fund its liabilities or (d) seek protection from creditors.

In addition, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our shareholders or that result in our shareholders losing all of their investment in our Company.

If we are able to raise additional capital, we do not know what the terms of any such capital raising would be. In addition, any future sale of our equity securities would dilute the ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade. Our inability to raise capital could require us to significantly curtail or terminate our operations. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties.

Our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"), which contemplate our continuation as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Public Company Expenses

We expect to incur direct, incremental selling, general and administrative expenses as a result of being a publicly traded company, including, but not limited to, where applicable, increased scope of our operations and costs associated with hiring new personnel, implementation of compensation programs that are competitive with our public company peer group, annual and quarterly reports to shareholders, tax return preparation, independent registered public accounting firm fees, investor relations activities, legal and registration fees, registrar and transfer agent fees, incremental director and officer liability insurance costs and independent director compensation. Some of these direct, incremental selling, general and administrative expenses are not yet applicable in our historical results of operations.

Climate Change

The potential physical impacts of climate change on our operations are highly uncertain and are specific to the geographic circumstances of areas in which we operate. These may include changes in rainfall and storm patterns and intensities, droughts and water shortages, changing sea levels and changing temperatures, and an increase in the number and severity of weather events and natural disasters. These changes may have a material adverse effect on our future operations, including cobalt extraction and production processes, as well as transportation of raw materials and delivery of products to customers. We may also face more stringent customer and regulatory requirements to accelerate water use reduction initiatives, more reliance on renewable energy sources and more water re-use and re-cycling. Climate change may also exacerbate socio-economic and political issues around the world and have other direct impacts to ecosystems, human health and quality of life, ranging from destruction of habitats to air, water and land quality to growing incidences of famines, pandemics and population shifts.

Our climate-related risk processes are informed in part by the independent Digbee ESG assessment completed in July 2025, which identified water scarcity, extreme weather events, and seismic activity as material considerations for long-term planning. We are also participating in a research and development project granted through the CORFO to evaluate bioleaching and related technologies for potential recovery of cobalt and copper from legacy waste piles. The project is funded through Albermarle Limitada, the industry sponsor of the CORFO R&D project-selection process. This project includes analysis of water use, energy requirements, and environmental impacts associated with alternative processing technologies, which may inform future climate-related risk assessments and planning.

In addition, a number of governmental bodies have introduced or are contemplating legislative and regulatory change in response to the potential impacts of climate change. Such legislation or regulation, if enacted, potentially could include provisions for a "cap and trade" system of allowances and credits or a carbon tax, among other provisions. There is also a potential for climate change legislation and regulation to adversely impact the cost of purchased energy and electricity.

The growing concerns about climate change and related increasingly stringent regulations may provide us with new or expanded business opportunities. Our future product contributes to the efforts of our customers to revolutionize their product lines and markets. As a key part of the EV and battery supply chain, we would eventually be providing cobalt-containing solutions that help enable the growth of electric transportation and the shift away from fossil fuels. As demand for, and legislation mandating or incentivizing the use of, alternative fuel technologies that limit or eliminate greenhouse gas emissions increases, we will continue to monitor the market and offer solutions where we have appropriate technology.

Off-Balance Sheet Arrangements

We have entered into off-balance sheet commitments related to a research and development project consortium as described in Footnote 9. Commitments and contingencies, indemnification agreements.

We have not entered into any derivative contracts that are indexed to our shares and classified as stockholders' equity or that are not reflected in our condensed consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Our estimates form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur, could materially impact the financial statements. We believe that our critical accounting policies reflect the most significant estimates and assumptions used in the preparation of the consolidated financial statements.

We believe that the assumptions and estimates associated with our mining concession capitalization and stock-based compensation and the valuation of stock option grants have the greatest potential impact on our financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

Principal Accounting Policies and Related Financial Information

Refer to Note 3. "Summary of Significant Accounting Policies Basis of Presentation" in the accompanying unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

The Company's management has evaluated all the recently issued accounting pronouncements through the filing date of these financial statements and does not believe that any of these pronouncements will have a material impact on the Company's current financial position and results of operations.