American Battery Technology Company — Form 10-Q
Reporting period: Quarter and nine months ended March 31, 2022; filed May 16, 2022. This is fiscal 2022 Q3, although the request metadata labels it 2021 Q3. The financial statements are unaudited.
Business context
ABTC is a development-stage battery materials and recycling company pursuing battery-metal exploration, extraction technology, and lithium-ion battery recycling. It has not generated revenue. Its principal near-term priority is constructing and commissioning a lithium-ion battery recycling pilot facility; it is also advancing a demonstration system for producing battery-grade lithium hydroxide from Nevada claystone resources.
Financial performance and position
- Revenue: None reported; the company states it has not yet generated revenue. Gross margin and operating margin are therefore not meaningful.
- Three months ended March 31, 2022: Operating expenses were $2.8 million versus $6.8 million a year earlier; net loss was $2.6 million versus $4.9 million. Basic and diluted loss per share was reported as $0.00, compared with $0.01.
- Nine months ended March 31, 2022: Operating expenses were $26.9 million, down 15% from $31.8 million. Net loss was $26.7 million, compared with $36.1 million; loss per share was $0.04 versus $0.08. The filing attributes much of the operating-expense decrease to lower share-based compensation for services.
- Cash and liquidity: Cash was $36.3 million at March 31, 2022, compared with $12.8 million at June 30, 2021. Working capital was $33.0 million versus $12.3 million. Management said available capital was expected to fund operations for at least one year from issuance of the statements, while cautioning that additional capital may be needed and cannot be assured.
- Cash flows, nine months: Operating activities used $7.3 million, up from $5.2 million used in the prior-year period. Investing activities used $11.0 million, versus $1.7 million, primarily for pilot-plant construction, equipment, land and water rights. Financing activities provided $41.7 million, versus $13.1 million.
- Assets, liabilities and debt: Total assets were $56.6 million and total liabilities $3.9 million. Current liabilities were $3.7 million; these included $205,646 owed to former executives, unsecured, non-interest-bearing and due on demand. The balance sheet reports no convertible debt or derivative liability at period-end. Operating lease liabilities were $290,186.
- Capital spending and equity: Property and equipment, net, increased to $15.7 million from $5.5 million; water-right intangible assets rose to $3.8 million from $1.6 million. The company raised net proceeds of $36.9 million in a September 2021 offering and issued shares for services with a reported fair value of $18.1 million during the nine-month period. Common shares outstanding increased to 645.7 million from 573.3 million at June 30, 2021.
Material changes and unusual items
- Prior-year comparisons were affected by substantial noncash debt-related items: for the nine months ended March 31, 2021, the company recorded a $19.7 million derivative-liability expense and an $18.7 million gain on debt settlement. Neither item was recorded in the current nine-month period.
- Current-period other income was $239,000, including a $153,393 gain on sale of mining claims. The company also recorded a $186,779 land impairment.
- During the nine months, Series C preferred shares were converted into common shares and Series A preferred shares were redeemed; no preferred shares remained outstanding at March 31, 2022.
- The company expects investing activity to increase as pilot-plant and related projects progress. It received a U.S. Department of Energy grant cooperative agreement for a multi-ton-per-day demonstration system, but the filing text does not provide a clear grant amount.
Outlook, risks and contingencies
- Management’s liquidity assessment is based on current cash and the recent capital raise; it cannot assure that it can control cash use or raise additional capital on acceptable terms, or at all. The company remains loss-making and has an accumulated deficit of $131.8 million.
- Construction, commissioning and successful operation of the recycling pilot plant and scaling of extraction technologies are key execution priorities. Management expects further capital investment.
- Disclosure controls and internal control over financial reporting were both assessed as ineffective at March 31, 2022 due to material weaknesses involving control documentation, supervision and review of complex accounting, and segregation of duties. Remediation efforts include hiring, ERP implementation, employee training, and improved policies and IT controls. Management aimed to remediate during fiscal 2022 but gave no assurance it would do so.
- Litigation involving a former CEO and disputed shares remained on hold while the parties attempted settlement. Management stated it knew of no other legal proceedings expected to have a material adverse effect. Mine reclamation financial-assurance obligations were $47,730.
- The filing notes that results for the quarter are not necessarily indicative of full-year results. It provides no quantified revenue or earnings guidance.
Important facts for investors to verify
- Whether pilot-plant construction, commissioning, and commercialization milestones are being achieved on schedule and within available funding.
- Actual cash consumption and capital needs, given $7.3 million of operating cash use and $11.0 million of investing cash use in nine months.
- Progress and terms of the DOE-supported demonstration project, including grant funding and any milestones or conditions.
- Remediation of the disclosed material weaknesses and any subsequent changes to financial-reporting controls.
- Potential dilution from 41.2 million outstanding warrants, alongside the substantial shares issued for services and financing.
- Developments in the former-CEO litigation and any resulting financial or share-count impact.