American Battery Metals Corporation — Form 10-Q Summary
Reporting period: Fiscal first quarter ended December 31, 2019; unaudited. Income and cash-flow results are compared with the three months ended December 31, 2018. Balance-sheet comparisons are with September 30, 2019. The filing identifies the registrant as American Battery Metals Corporation.
Business context
The company is a pre-revenue battery-metals exploration and development business. It reports mineral claims covering approximately 30,000 acres in Nevada, is developing lithium-brine extraction technology, and began work on a battery-recycling process during the quarter. It says it has not identified reserves or reached a development decision.
Financial performance and condition
| Metric | Quarter ended Dec. 31, 2019 | Prior comparable period / balance date |
|---|---|---|
| Revenue | $0 | $0 |
| Exploration costs | $11,311 | $19,620 |
| General and administrative expense | $1,071,820 | $1,142,596 |
| Interest expense | $1,119,583 | $277,690 |
| Loss from change in derivative fair value | $876,960 | $708,155 |
| Net loss | $2,948,065 | $2,569,806 |
| Basic and diluted loss per share | $0.02 | $0.03 |
| Cash used in operating activities | $792,558 | $518,802 |
| Cash provided by financing activities | $804,750 | $448,750 |
With no revenue, a profit margin is not meaningful. The company ended December 31 with cash of $19,563 and total assets of $104,886. Current liabilities were $6,058,844, versus $4,879,614 at September 30; the reported working-capital deficit was $5,989,208, compared with $4,822,170. Total liabilities were $6,063,663, including a $4,240,914 derivative liability and notes payable reported net of discounts. Stockholders’ deficit was $5,958,777.
Changes, financing and dilution
- Net loss increased by approximately $378,000 year over year, primarily reflecting higher interest and accretion expense and a larger derivative fair-value loss. Operating expenses were lower by approximately $79,000.
- Financing included $529,750 of convertible-note proceeds and $275,000 in share subscriptions. Operating cash outflow exceeded the prior-year amount, while ending cash remained very limited.
- The company issued 29.6 million common shares during the quarter for note and interest conversions, and 5.56 million shares for services. It also issued 300,000 preferred shares to officers and directors; these carry 1,000 votes each.
- After quarter-end through February 11, 2020, the company issued 87,507,730 common shares to convert outstanding notes and 7,236,200 shares for consulting services. Common shares outstanding were 265,533,805 as of February 11, 2020.
Outlook, risks and contingencies
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing no revenue, the working-capital and accumulated deficits, and dependence on management support and future debt or equity financing. The statements include no adjustments that might be required if the company cannot continue as a going concern.
- Outlook: Management does not expect revenue until sufficient exploration identifies lithium or other battery-metal reserves; exploration may take several years, and there is no certainty the company will reach production. The filing provides no quantified operating or financial guidance.
- Debt and dilution: Numerous unsecured convertible notes have conversion prices tied to discounts to recent market prices; some carry default interest rates up to 24%. The company recorded a $876,960 quarterly derivative fair-value loss. Note conversions and subsequent share issuances create substantial dilution risk.
- Joint venture: Under its five-year CINC agreement, the company is responsible for initial equipment and related expenses, among other obligations. Minimum equipment-related purchase commitments rise to $1 million by October 2020, with additional milestones thereafter; failure to meet them could end the company’s exclusive marketing rights.
- Controls and legal matters: Management concluded disclosure controls were not effective at December 31, 2019. The company also reported ongoing litigation concerning former CEO Craig Alford and a separate shareholder lawsuit over a restrictive legend and damages.
Important facts for investors to verify
- Available cash, near-term funding needs, and whether the company can obtain financing on acceptable terms.
- Convertible-note principal, discounts, maturities, default provisions, derivative valuations, and the potential share count from conversions.
- The scale and terms of post-quarter share issuances, including reconciliation of reported conversion amounts and share counts.
- Exploration results, progress toward identifying reserves, and the feasibility and funding of extraction and recycling plans.
- Ability to meet CINC joint-venture commitments and the status and potential outcomes of the disclosed lawsuits.