Business Context and Reporting Period
This Form 8-K Current Report is filed by Oroplata Resources, Inc. (not American Battery Technology Co) for the reporting period ending September 30, 2016. The filing discloses the entry into a material definitive agreement involving a secured convertible promissory note and related financing arrangements.
Key Financial Metrics and Transaction Details
- Debt Issuance: The Company sold a secured 10% Fixed Convertible Promissory Note with a principal amount of up to $550,000 to Tangiers Investment Group, LLC.
- Cash Proceeds: The Company received $100,000 in cash consideration. $10,000 was retained by the purchaser as an original discount for due diligence and legal fees.
- Initial Principal Due: The initial principal amount recorded under the Note is $110,000.
- Interest Rate: 10% fixed annual interest.
- Conversion Terms: Convertible into common stock at a fixed price of $0.10 per share. Conversion is capped at 9.99% beneficial ownership.
- Warrants: Issued 121,000 cashless warrants exercisable at $0.50 per share with a 5-year term.
- Collateral: The Note is secured by a security interest in all assets of the Company and its subsidiary, Lithortech Resources, Inc.
- Maturity Date: September 28, 2017.
Material Changes and Prior Period Comparisons
The filing details a new financing event rather than a comparative financial performance report. However, it references a Previous Note issued on July 18, 2016:
- Previous Note Principal: $121,000.
- Previous Note Proceeds: $110,000 cash (with $11,000 original discount).
- Comparison: The September 2016 transaction represents an additional capital raise with similar terms (10% interest, original discount structure) but a higher potential principal cap ($550,000 vs. $121,000).
Guidance, Risks, and Unusual Items
- Default Provisions: Upon an event of default, the principal accelerates to 145% of the outstanding amount. Additional interest accrues at the lesser of 20% per annum or the maximum legal rate.
- Default Conversion Penalty: After 180 days post-default, the holder may convert at a "Default Conversion Price" equal to the lower of the fixed price ($0.10) or 60% of the lowest trading price over the prior 20 trading days.
- Market Status Penalties: The conversion discount increases if the Company is placed on "chilled" status with the DTC (increasing discount to 50%) or if not DWAC eligible (increasing discount to 45%). Both conditions result in a 55% discount.
- Prepayment Restrictions: Prepayment is restricted with penalties ranging from 125% to 140% of principal depending on the timing (90-180 days). After 180 days, prepayment requires written consent from the holder.
- Right of First Refusal: Tangiers Investment Group, LLC holds a right of first refusal on future capital or equity/debt financing proposals while the Note is outstanding.
- Liquidity and Cash Flow: The filing text does not provide clear values for overall company revenue, operating profit, or total liquidity positions outside of the specific transaction proceeds.
Investor Verification Checklist
- Verify the Company's current cash position and ability to service the 10% interest on the new and previous notes.
- Confirm the Company's DTC status and DWAC eligibility to assess potential dilution risks from the "chilled" status penalty clauses.
- Review the 9.99% beneficial ownership cap to understand the maximum immediate dilution from conversion.
- Assess the impact of the Right of First Refusal on the Company's ability to secure alternative financing.
- Examine the subsidiary guarantee to understand the extent of asset collateralization.