American Battery Metals Corporation — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended March 31, 2020; financial statements are unaudited. The company’s fiscal year ends September 30. The filing describes a pre-revenue battery-metals exploration, extraction and recycling business.
Financial results and liquidity
- Revenue: None in the three or six months ended March 31, 2020 or the comparable 2019 periods. Margins are not meaningful without revenue.
- Net loss: $7.51 million for the quarter, versus $6.56 million in 2019; $10.46 million for six months, versus $9.13 million. Six-month basic and diluted loss per share was $0.05, compared with $0.09.
- Operating expenses: $2.02 million for the quarter versus $6.46 million; $3.10 million for six months versus $7.62 million. Lower share-based service costs were the principal reason for the decline; exploration and management costs increased.
- Significant non-operating costs: Six-month interest and accretion expense was $4.44 million, and the loss from revaluing derivative liabilities was $3.62 million. The derivative revaluation is a major reported expense associated with convertible debt.
- Cash flow: Operations used $1.97 million over six months, compared with $0.97 million in 2019. Financing provided $2.24 million; there were no investing cash flows. Cash at March 31 was $282,374, up from $7,371 at September 30, 2019.
- Balance sheet: Total assets were $443,677 and total liabilities $5.18 million at March 31. Current liabilities exceeded current assets by $4.77 million, a working-capital deficit. Accumulated deficit was $60.35 million.
- Debt and dilution: Reported convertible-note carrying value was $224,239 current, net of substantial unamortized discounts; management reported $2.37 million of convertible debt by face value. Derivative liabilities were $3.78 million. The company issued 168.6 million common shares for note and interest conversions during the six months; common shares outstanding rose from 132.7 million at September 30 to 328.4 million at March 31 and 346.3 million as of May 14.
Changes, outlook and risks
- Quarterly and six-month operating expenses fell sharply from 2019 mainly because fewer dollars of stock-based service compensation were recorded. Net losses nevertheless increased, principally due to higher interest/accretion and derivative revaluation expense.
- The company says it is exploring 30,000 acres in Railroad Valley, Nevada, developing battery-metal extraction technology, and working on battery recycling. It anticipates no revenue until a recycling facility is built; exploration and extraction revenues would require successful exploration and development, which could take years and may never occur. No quantified financial guidance is provided.
- Management states that substantial doubt exists about the company’s ability to continue as a going concern. Continued operations depend on management support, future financing and ultimately profitable operations. COVID-19’s effects on operations, suppliers, markets and liquidity were uncertain.
- Financing included convertible notes with conversion prices set at discounts to recent trading prices, creating potential dilution. The filing reports $1.125 million of share subscriptions received by March 31 for units not yet issued, plus $400,000 received in April on similar terms. The company also disclosed 17.9 million shares issued for note conversions between April 1 and May 11.
- The CINC joint venture has minimum equipment-purchase commitments rising from $1 million by October 2020 to $10 million by October 2023. Failure to meet them could cost the company its exclusive marketing, promotion and sales rights.
- Management concluded disclosure controls and procedures were not effective as of March 31. Litigation with a former CEO continued and was delayed by COVID-19 restrictions; a separate shareholder claim had been resolved.
Key facts for investors to verify
- Current cash, subsequent financing proceeds, and the company’s near-term funding needs against its working-capital deficit and operating cash use.
- Convertible-note face amounts, repayment and conversion terms, derivative-liability assumptions, and potential share dilution; reconcile these with the reported note carrying value.
- Subsequent share issuances and the status and terms of the $1.125 million and April $400,000 private-placement subscriptions.
- Progress, funding requirements and milestones for Nevada exploration, extraction and recycling plans, including the CINC joint-venture commitments.
- Remediation of ineffective disclosure controls and developments in the former-CEO litigation.