Business Context and Reporting Period
Company: American Battery Metals Corporation (formerly Oroplata Resources, Inc.)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2019
Business Stage: Pre-revenue exploration stage company focused on lithium deposits in Nevada (Western Nevada Basin) and mineral rights in the Dominican Republic. The company recently changed its name and ticker symbol (ABML) to reflect its focus on battery metals.
Going Concern: The filing explicitly states substantial doubt regarding the company's ability to continue as a going concern due to a working capital deficit and lack of revenue, dependent on future financing.
Key Financial Metrics
| Metric | Six Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2018 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(9,133,011) | $(3,347,085) |
| Net Loss Per Share (Basic/Diluted) | $(0.09) | $(0.05) |
| Cash and Cash Equivalents (End of Period) | $347,549 | $5,911 |
| Total Assets | $453,094 | $308,769 |
| Total Current Liabilities | $4,240,755 | $2,741,281 |
| Working Capital Deficit | $(3,822,911) | $(2,432,512) |
| Convertible Notes Payable (Carrying Value) | $279,265 | $847,652 |
| Derivative Liability | $2,708,198 | $800,973 |
Cash Flow Summary (Six Months Ended Mar 31, 2019):
- Net Cash Used in Operating Activities: $(966,484)
- Net Cash Provided by Financing Activities: $1,191,264 (primarily from issuance of convertible notes)
- Net Increase in Cash: $224,780
Material Changes vs. Prior Period
- Operating Expenses: Increased significantly to $7,618,312 (vs. $3,291,152 in prior year). This was driven largely by the issuance of common shares for services valued at $6,328,360, compared to $2,937,250 in the prior period.
- Derivative Liabilities: Increased by $1,907,225 to $2,708,198. This reflects the fair value adjustment of conversion features on new and existing convertible notes, resulting in a non-cash loss of $944,008 for the period.
- Debt Structure: While the carrying value of convertible notes decreased due to conversions and amortization, the face value of outstanding notes increased to $2,275,200. The company actively issued new convertible notes to fund operations while settling older debt through share conversions.
- Share Count: Outstanding shares increased from 93.3 million to 114.3 million due to issuances for services, joint venture compensation, and debt conversions, partially offset by the cancellation of 10 million shares.
Outlook, Risks, and Management Commentary
- Exploration Status: The company is in the early exploration phase. Exploration work on the Western Nevada Basin claims began in Spring 2019. No revenue is anticipated until commercial production, which is years away and not guaranteed.
- Joint Venture: Entered a 50/50 joint venture with CINC Industries to develop lithium extraction technology. The company is responsible for initial funding and marketing, with commitments to acquire processing equipment totaling up to $10 million by 2023.
- Financing Needs: Management emphasizes the need for continued financial support and equity/debt financing to sustain operations. The company relies heavily on convertible notes with aggressive terms (high interest rates, low conversion discounts) to raise capital.
- Legal Proceedings: Ongoing litigation against a former CEO regarding the fraudulent issuance of shares. Additionally, a shareholder lawsuit was filed in March 2019 regarding securities law restrictive legends.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of March 31, 2019.
Investor Verification Checklist
- Going Concern Status: Verify the company's ability to secure additional funding given the $3.8 million working capital deficit and lack of revenue.
- Dilution Risk: Assess the impact of the aggressive convertible note terms (conversion prices often 60-68% of market price) on future share dilution.
- Derivative Liability Volatility: Monitor the $2.7 million derivative liability, which fluctuates with stock price and can significantly impact reported net loss without affecting cash flow.
- Related Party Transactions: Review the $695,971 owed to related parties (officers/directors) for unpaid fees and advances.
- Exploration Progress: Confirm the status of the Railroad Valley exploration and the joint venture with CINC Industries to ensure capital is being deployed effectively.