Business Context and Reporting Period
The supplied filing is Oroplata Resources, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2017, covering its fiscal third quarter and nine months ended June 30, 2017. This does not match the request metadata naming American Battery Technology Co. Oroplata is an exploration-stage mineral company focused on 500 lithium claims in Nevada; it reported no revenue and had not established an ore body.
Financial Results and Liquidity
| Metric | Three months ended June 30, 2017 | Nine months ended June 30, 2017 | Comparable 2016 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Net loss | $235,927 | $2,294,477 | $27,082,217 and $27,108,588, respectively |
| Net loss per share | $0.00 | $0.04 | $0.68 for both periods |
| Operating cash flow | Not presented for the quarter | $(255,197) | $(58,442) in the cash flow statement |
For the three-month period, operating expenses were $143,254 and interest expense was $92,673. For the nine-month period, operating expenses were $2,024,376, interest expense was $234,101, and the company recorded a $36,000 loss on settling debt with shares. No profit margin is meaningful because revenue was zero.
At June 30, cash and total assets were $33,755, versus $90,040 at September 30, 2016. Current liabilities were $959,895 and total liabilities were $959,895; stockholders’ deficit was $926,140. The balance sheet shows $314,023 of convertible notes payable net of discount, a $274,932 note payable, $223,246 due to related parties, and $147,694 of accounts payable and accrued liabilities. The company reported a $30,796,377 accumulated deficit.
The filing contains conflicting working-capital figures: the balance-sheet amounts imply a deficit of $926,140, while the going-concern note says $925,140 and MD&A says $651,208. MD&A also reports different prior-period cash-flow figures from the cash flow statement. The filing text does not provide a clear reconciliation.
Material Changes Versus Prior Period
The nine-month net loss was substantially lower than in 2016, primarily because the prior-year period included a $27,051,848 impairment loss on the Nye County property. Excluding that unusual prior-year charge, the company’s current-period loss reflects materially higher operating activity, including share-based and service compensation, exploration-related costs, payroll, and interest and accretion expense. Convertible debt and accrued liabilities increased, cash declined, and the working-capital position worsened compared with September 30, 2016.
During the period, Oroplata issued shares for property-related consideration and services, settled $60,000 of payables with shares valued at $96,000, and issued warrants. It reported 58,000,000 common shares outstanding at June 30 and 58,500,000 at August 14, 2017.
Outlook, Risks, and Other Notable Items
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing no revenue, a working-capital deficit, accumulated losses, and dependence on management support and debt or equity financing. Financing may not be available on favorable terms.
- Exploration outlook: Management expected to begin exploration on the Nevada claims in 2017, subject to financing and other requirements; results would determine subsequent work. The filing cautions that exploration may take years and may never lead to production or revenue. The company said it did not expect to explore the Mogollon claim.
- Debt and financing: Convertible notes generally bear 10% interest and include conversion rights; the $274,932 unsecured note bears 2.5% interest and is due June 15, 2018. A July 25, 2017 subsequent-event loan provided $44,000 of stated initial proceeds, net of $4,000 in fees, and is convertible at $0.10 per share.
- Controls: Management concluded disclosure controls and internal control over financial reporting were ineffective, citing entity-level control weaknesses, period-end reporting problems, and insufficient personnel and monitoring. No material control changes were reported during the quarter.
- Governance and commitments: The filing describes multiple officer and director changes, including Douglas Cole’s appointment as CEO, CFO, and chairman on August 7, 2017. It also says the company was reviewing prior agreements and share issuances. No material legal proceedings or off-balance-sheet arrangements were reported.
Key Facts for Investors to Verify
- Confirm the issuer identity: the supplied filing is for Oroplata Resources, Inc., not American Battery Technology Co.
- Reconcile the conflicting working-capital figures and the different cash-flow amounts in MD&A versus the financial statements.
- Verify cash runway, financing availability, debt terms and maturities, and related-party balances given the going-concern warning.
- Confirm the status, title, maintenance requirements, permits, and actual exploration progress for the Nevada claims.
- Assess the disclosed ineffective controls, management turnover, share and warrant dilution, and the company’s review of historical agreements and issuances.