Filing identity and period
Important mismatch: The supplied filing is Oroplata Resources, Inc.’s Form 10-Q for the three months ended December 31, 2017, not an American Battery Technology Co. filing or a filing labeled 2018 Q1. The filing describes Oroplata as a Nevada lithium-exploration company. Financial statements are unaudited and in U.S. dollars.
Financial results and liquidity
| Metric | Quarter ended Dec. 31, 2017 | Comparable 2016 period |
|---|---|---|
| Revenue | $0 | $0 |
| Exploration costs | $3,130 | $600,000 |
| General and administrative expense | $2,490,698 | $160,378 |
| Interest expense | $24,149 | $76,086 |
| Net loss | $2,517,977 | $811,464 |
| Basic and diluted loss per share | $0.04 | $0.01 |
| Cash used in operations | $141,932 | $84,472 |
| Cash provided by financing | $175,000 | $0 |
| Cash at period end | $42,209 | $5,568 |
At December 31, 2017, total assets were $42,209, all cash. Current liabilities were $1,686,679, including $808,154 of convertible notes, $464,913 due to related parties, and $413,612 of accounts payable and accrued liabilities. The balance sheet reports a stockholders’ deficit of $1,644,470 and accumulated deficit of $33,735,219. The company disclosed a working-capital deficit of $1,644,470.
No revenue or margin was reported. The company has no production-stage operations; therefore, operating margins are not meaningful. It reported no investing cash flows and no off-balance-sheet arrangements.
Changes versus the comparable period
- Net loss increased to $2.52 million from $0.81 million. The main driver was $1.97 million of shares issued for services, including shares issued to the CEO and directors.
- Operating cash use increased to $141,932 from $84,472, while financing provided $175,000 from convertible notes.
- Cash rose from $9,141 at September 30, 2017 to $42,209 at December 31, 2017, but liabilities increased from $1.33 million to $1.69 million.
- During the quarter, the company issued 19.7 million shares for services and 578,696 shares to convert $63,657 of notes. It also granted 1 million warrants exercisable at $0.10 per share.
Outlook, risks and unusual items
- Management expected to begin exploration of selected claims in Nevada’s Railroad Valley in the first half of 2018. The area is described as an untested lithium-brine target; the filing gives no quantified exploration budget or production forecast.
- The company had no revenue and stated that exploration could take years, might not identify an economic deposit, and might never lead to production.
- Management reported substantial doubt about the company’s ability to continue as a going concern, citing the working-capital and accumulated deficits, dependence on management support, and need for additional debt or equity financing. Financing availability and terms are uncertain.
- Convertible notes generally bear 10% interest and are convertible at stated prices, including $0.115 per share for certain notes. Several maturities were extended to December 11, 2018. A subsequent event disclosed another $51,000 of note proceeds, net of issuance costs, received February 9, 2018.
- Management disclosed that disclosure controls and procedures were not effective as of December 31, 2017. The board was reviewing prior agreements and share issuances.
- In January 2018, the company filed a Nevada complaint seeking the return or cancellation of 16 million shares it believes were fraudulently issued; one million had already been canceled.
- Management agreements executed in December 2017 included multi-year monthly fees and future share issuances. A three-year CEO agreement specifies monthly fees of $20,833, retroactive to August 2017.
Important facts to verify
- Confirm the issuer and reporting period: this document identifies Oroplata Resources, Inc., not American Battery Technology Co.
- Reconcile the comparative net-loss figure: the financial statements show $811,464 for 2016, while MD&A states $836,464.
- Review the going-concern disclosure, cash runway, and the availability, terms, and dilution impact of further financing.
- Confirm the status and outcome of the litigation over the disputed shares, and the results of the review of prior agreements and issuances.
- Verify exploration progress, permits, costs, and claim status for the selected Railroad Valley acreage; the filing provides no quantified resource estimate.
- Assess the related-party amounts due on demand, management commitments, convertible-note terms, and potential share dilution.