Filing summary
Entity and period: The supplied filing is for Oroplata Resources, Inc., not American Battery Technology Co. It is an unaudited Form 10-Q for the quarter ended March 31, 2018; results are also reported for the six months ended that date. Oroplata’s fiscal year ends September 30.
Business context and outlook
Oroplata describes itself as a start-up lithium exploration company, with claims in Nevada’s Western Nevada Basin and mineral rights in the Dominican Republic. It has no revenue and remains at the exploration stage. After evaluating its 5,200-acre Nevada claim area, it identified 260 claims for planned exploration, which it expected to begin in the second or third quarter of 2018. The company cautions that exploration may take years, may not identify an economic deposit, and may never lead to production.
Financial performance and condition
| Metric | Three months ended March 31, 2018 | Six months ended March 31, 2018 | Comparable 2017 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $797,324 | $3,291,152 | $1,120,744 and $1,881,122, respectively |
| Net loss | $829,108 | $3,347,085 | $1,222,086 and $2,033,550, respectively |
| Basic and diluted loss per share | $0.01 | $0.05 | $0.02 and $0.04, respectively |
There is no meaningful revenue or profit margin to assess. The six-month operating-expense increase was largely associated with equity issued for services and management, professional, and other costs; many of these charges were noncash. Interest expense for the six months was $55,933, down from $141,428.
- Liquidity: Cash was $5,911 at March 31, 2018, versus $9,141 at September 30, 2017. Current assets were $320,911, including $315,000 of prepaid expenses; current liabilities were $1,757,846. The resulting working-capital deficit was $1,436,935.
- Cash flow: Six-month operating cash use was $229,730, compared with $132,642 in 2017. Financing provided $226,500, principally from convertible notes; there were no investing cash flows.
- Debt and related parties: Notes payable, net of discount, were $813,817. Amounts due to related parties were $528,949, including accrued management fees and advances. Total current liabilities rose from $1,327,646 at September 30, 2017.
- Equity and dilution: The company reported a $1,436,935 stockholders’ deficit and a $34,564,327 accumulated deficit. It issued substantial shares for services, fees, and debt conversions during the period. Prepaid expenses include $315,000 for services to be provided in the future.
Material changes, risks, and unusual items
- Six-month net loss increased to $3.35 million from $2.03 million. Management attributes the increase in operating costs in part to shares issued for services and other company activity; the prior-year period included $600,000 of exploration costs.
- Management states that substantial doubt exists about the company’s ability to continue as a going concern. Continued operations depend on management support, obtaining debt or equity financing, and eventually generating profitable operations; financing may not be available on favorable terms.
- Subsequent to quarter-end, the company disclosed new convertible financing, including notes with 12% interest and conversion terms tied to discounted market prices, and 10% notes with conversion prices based on 66% of recent trading prices. Such terms may create significant dilution; some notes also include higher default interest or prepayment penalties.
- In January 2018, the company sued seeking the return or cancellation of 16 million shares it believes were fraudulently issued; one million shares had already been canceled. The filing does not quantify the potential financial effect of the case.
- Management concluded disclosure controls and procedures were not effective as of March 31, 2018. The company also said it was reviewing prior agreements and stock issuances.
- The filing’s cover reports 90,916,957 common shares outstanding as of March 15, 2018, while the balance sheet reports 89,147,392 issued and outstanding at March 31, 2018. These figures appear inconsistent and should be reconciled.
Key facts for investors to verify
- Confirm the issuer identity: the filing is for Oroplata Resources, Inc., not American Battery Technology Co.
- Reconcile the reported common-share counts and assess potential dilution from outstanding and subsequent convertible notes and warrants.
- Review available cash, near-term obligations, related-party amounts, and the company’s ability to secure financing in light of the going-concern warning.
- Verify whether the planned Nevada exploration began, what results it produced, and whether the claims support an economic resource.
- Track the share-cancellation litigation and the status of the company’s review of prior agreements and issuances.