American Battery Technology Company — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended December 31, 2021; balance-sheet comparisons are against June 30, 2021. The financial statements are unaudited. ABTC is a development-stage battery materials and recycling company and reported no revenue from operations.
Financial performance and position
| Metric | Three months ended Dec. 31, 2021 | Six months ended Dec. 31, 2021 |
|---|---|---|
| Revenue | No revenue reported | No revenue reported |
| Operating expenses | $4.11 million | $24.09 million |
| Net loss | $4.09 million; $0.01 per share | $24.06 million; $0.04 per share |
| Net loss, comparable 2020 period | $28.04 million | $31.19 million |
- Cash at December 31 was $42.54 million, versus $12.84 million at June 30. Current assets were $44.37 million; current liabilities were $4.66 million, yielding working capital of approximately $39.7 million.
- Total assets were $60.23 million and total liabilities were $4.89 million. Stockholders’ equity was $55.34 million; accumulated deficit was $129.15 million.
- Six-month cash used in operating activities was $4.32 million, compared with $2.71 million in the prior-year period. Investing activities used $7.23 million, primarily for pilot-plant property, equipment, and water rights. Financing activities provided $41.25 million.
- Property and equipment was $11.75 million and water-rights intangible assets were $3.82 million at period-end. The pilot-plant building was under construction and not yet available for use.
- No convertible notes or derivative liabilities were reported at period-end. Liabilities included $205,646 due on demand to former executives and $303,102 in operating lease liabilities; current liabilities also included accounts payable and accrued liabilities.
Margins are not meaningful because ABTC had no reported revenue.
Changes versus comparable periods
- Second-quarter net loss fell to $4.09 million from $28.04 million a year earlier, while six-month net loss declined to $24.06 million from $31.19 million. The prior-year results included substantial noncash derivative revaluation and other financing-related charges.
- Six-month operating expenses declined about 4% year over year. Management attributed the quarter’s lower costs in part to ending noncritical consulting engagements and increasing internal technical resources. General and administrative expense was $3.92 million for the quarter, versus $22.61 million in the prior-year quarter.
- Cash used in operations rose about 59% year over year, which management attributed to increased activity and spending on staff and professional services. Property, equipment, and water-rights investment also increased substantially from the prior-year period.
- Cash and working capital increased following equity financings. Common shares outstanding rose to 631.79 million at December 31 from 573.27 million at June 30.
Outlook, risks, contingencies, and unusual items
- Management’s priority is constructing and commissioning its first integrated lithium-ion battery recycling pilot plant. It expects investing activity to increase as the project advances. The filing provides no revenue or earnings guidance.
- Management stated that cash and the recent capital raise were expected to fund operations for at least one year from issuance of the financial statements, while cautioning that future financing may be needed and cannot be assured on acceptable terms. The company had a $24.06 million six-month loss and a $129.15 million accumulated deficit.
- The September 2021 registered direct offering generated approximately $36.9 million net proceeds and included common shares and warrants. The filing also reports 49,210,611 warrants outstanding in the warrant note, while the EPS note gives a different potentially dilutive warrant count of 49,960,611; investors should verify the correct figure.
- Share-based compensation was a significant noncash expense: $18.7 million for the six months, including $16.9 million in the September quarter and $1.8 million in the December quarter, according to management. The company also recorded a $186,779 land impairment.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31 due to material weaknesses involving control documentation, supervision and review of complex accounting matters, and segregation of duties. It described remediation steps and expected remediation during fiscal 2022.
- Litigation with a former CEO remains ongoing, including a Nevada case and a stayed Utah case concerning restricted shares. Management said it was not aware of other legal proceedings expected to have a material adverse effect. The filing identifies COVID-19 impacts as uncertain.
- Subsequent events included redemption of all Series A preferred shares on January 27, 2022, and a February 2 mandatory conversion notice for remaining Series C preferred shares. The company reported that Series C shares had been converted and disclosed a $125,700 dividend payment on February 8.
Important facts for investors to verify
- Progress, commissioning timetable, funding needs, and expected economics of the pilot plant; no operating revenue has yet been generated.
- Cash-burn trajectory and whether available liquidity remains sufficient as construction and operating spending increase.
- Warrant count discrepancy between the EPS note and warrant schedule, plus potential dilution from warrants, preferred-stock conversions, and service-related share awards.
- Remediation progress for the disclosed material weaknesses and whether internal controls become effective.
- Status and potential financial exposure from the ongoing litigation with the former CEO.