American Battery Metals Corporation — Form 10-Q Summary
Reporting period: Quarter and six months ended December 31, 2020 (the company’s fiscal second quarter and first half of fiscal 2021). The filing identifies the registrant as American Battery Metals Corporation. Financial statements are unaudited and in U.S. dollars.
Business context and financial performance
The company is a pre-revenue battery-metals startup pursuing mineral exploration, extraction technology development and lithium-ion battery recycling. It reported no revenue in either the three- or six-month periods presented; margins therefore are not meaningful. Management said revenue depends on securing capital and developing operations, and did not provide a timing forecast.
| Metric | Three months ended Dec. 31, 2020 | Six months ended Dec. 31, 2020 | Comparable 2019 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $30.27 million | $32.69 million | $1.08 million / $2.48 million |
| Net loss | $35.70 million | $38.86 million | $2.95 million / $5.42 million |
| Basic and diluted loss per share | $0.08 | $0.09 | $0.02 / $0.04 |
General and administrative expense was $30.27 million for the quarter and $32.58 million for the six months. Management attributed most of the year-over-year expense increase to shares issued for consulting services, including $28.77 million of share-based consulting expense in the quarter and $30.35 million in the six-month period. The six-month loss also included a $7.02 million noncash loss from remeasuring derivative liabilities, partly offset by a $3.46 million gain on debt settlements. Accretion and interest expense was $2.20 million for the six months.
Cash, liquidity, debt and other financial position
| Metric | Dec. 31, 2020 | June 30, 2020 |
|---|---|---|
| Cash | $403,654 | $829,924 |
| Total assets | $1.61 million | $1.16 million |
| Current liabilities | $7.85 million | $5.80 million |
| Total liabilities | $8.15 million | $6.10 million |
| Derivative liability | $6.67 million | $4.52 million |
| Working capital deficit | $7.24 million | $4.73 million |
| Accumulated deficit | $102.06 million | $63.21 million |
For the six months, operating cash outflow was $2.71 million, investing outflow was $0.91 million (principally a $907,380 Nevada land purchase), and financing provided $3.20 million. Financing included $3.61 million in private-placement proceeds and $1.35 million from convertible notes, offset by $1.76 million of note repayments. The company reported $1.09 million of convertible debt face value at period end, with $523,173 net carrying value after discounts. It also had $310,443 in loans payable, including current and long-term amounts.
Management stated that the land is intended for a planned pilot-plant campus. The company had 502.6 million common shares outstanding at December 31, 2020 and 527.5 million as of February 11, 2021. Series C preferred stock carries an 8% non-cumulative dividend and is convertible into common shares; related warrants are also outstanding.
Material changes, outlook and risks
- Compared with 2019, operating expenses and net losses rose sharply, primarily because of substantial stock-based consulting compensation and, for the six-month period, higher derivative remeasurement losses.
- The company bought 12.44 acres in Fernley, Nevada, for $907,380, increasing property and equipment. Cash fell by $426,270 over the six months.
- The filing states there is substantial doubt about the company’s ability to continue as a going concern. It had no revenue, a $7.24 million working capital deficit and a $102.06 million accumulated deficit; continued operations depend on management support, financing and eventual profitable operations. The statements include no adjustments that might be necessary if the company cannot continue as a going concern.
- Convertible-note conversion features caused a $7.02 million six-month fair-value loss and drove much of the reported derivative liability. The notes include potentially dilutive conversion terms. The company stated that, as of February 8, 2021, it no longer had variable convertible notes outstanding and expected to pursue more traditional financing; this is management’s expectation, not a guarantee.
- Management reported that disclosure controls and procedures were not effective as of December 31, 2020. It reported no material changes in internal control over financial reporting during the quarter.
- A legal dispute with a former CEO and other parties remains pending; the company says the counterclaim is without merit. Proceedings have been delayed by COVID-19 restrictions.
- The 50/50 CINC joint venture has not purchased required equipment, and neither party is currently making efforts on it. Management considers future purchases unlikely; failure to meet purchase milestones could cost the company exclusive marketing rights.
- COVID-19 had not significantly affected the company as of the filing, though management said it continued to monitor the situation. The filing provides no specific earnings or revenue guidance; results for the six-month period are not necessarily indicative of the full fiscal year.
Important facts for investors to verify
- Whether the company can obtain adequate financing and address the stated going-concern uncertainty, including the status and terms of funding after December 31, 2020.
- The economic substance, valuation and recipients of the unusually large consulting share issuances, and their continuing dilution impact.
- The company’s post-period share count, including conversions and warrant exercises, and the potential dilution from preferred shares and outstanding warrants.
- Whether the Fernley pilot-plant campus and planned recycling or extraction operations are funded, permitted and progressing toward revenue.
- The status and potential financial impact of the derivative liabilities, convertible notes and pending litigation.
- How management plans to remediate ineffective disclosure controls and procedures.