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OFFON

AMERICAN BATTERY METALS CORPORATION

(ABML)
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AMERICAN BATTERY METALS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

02/16/2021 | 04:06pm EDT

Forward-Looking Statements

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in the Form 10-Q. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q.



Background


The lithium-ion battery manufacturing supply chain is organized into four industries that operate in series: battery feedstock providers, material refiners, cell manufacturers, and end-use product (electric vehicle, stationary storage, consumer electronics, etc.) manufacturers. While the scale of manufacturing of lithium-ion battery cells and of electric vehicles and other end-use products have grown substantially within the US in recent years, there has been little domestic growth in the battery feedstock and material refining portions of the manufacturing supply chain. This has led to an imbalance within the domestic US supply chain and has caused the majority of cell manufacturing and end-use product manufacturers to rely on foreign supplies of their raw and refined feedstock materials. The situation is so dire that in its "Mineral Commodity Summaries 2020" report, the US Geological Survey calculated that less than 1% of each of the critical and strategic battery metals (lithium, nickel, cobalt, and manganese) produced globally in 2019 were produced within the US.

American Battery Metals Corporation ("ABMC" or the "Company") is a startup company in the lithium-ion battery industry that is working to increase the domestic US production of these four battery metals through its engagement in the exploration of new primary resources of battery metals, in the development and commercialization of new technologies for the extraction of these battery metals from primary resources, and in the commercialization of an internally developed integrated process for the recycling of lithium-ion batteries for the recovery of battery metals. Through this three-pronged approach ABMC is working to both increase the domestic production of these battery metals, and also to ensure that as these materials reach their end of lives that the constituent elemental battery metals are returned to the manufacturing supply chain in a closed-loop fashion.

The Company was incorporated under the laws of the State of Nevada on October 6, 2011 for the purpose of acquiring rights to mineral properties with the eventual objective of being a producing mineral company, if and when it ever occurs. We have limited operating history and have not yet generated or realized any revenues from our activities. Our principal executive offices are located at 930 Tahoe Blvd., Suite 802-16, Incline Village, NV 89451.

On August 8, 2016, the Company formed Lithortech Resources Inc. as a wholly owned subsidiary of the Company to serve as its operating subsidiary for lithium resource exploration and development. On June 29, 2018, the Company changed the name of Lithortech Resources to LithiumOre Corp. ("LithiumOre"). On May 3, 2019, the Company changed its name to American Battery Metals Corporation.

The growth in demand for lithium-ion batteries is predicted by industry researchers to grow by over ten-fold over the next ten years, while over the same period there are limited announcements for new production sources of domestic US based lithium, nickel, cobalt, or manganese. As a result, there will be increased pressure on the prices of domestically sourced battery metals, and increased reliance on foreign sourced battery metals. These industry trends support and validate the Company's multifaceted three-pronged business model to increase the production of domestic US sourced battery metals. The Company is currently a pre-revenue organization and we do not anticipate earning revenues until such time as we have initial operations of our lithium-ion battery recycling facility underway, or until we have undertaken sufficient exploration work to identify lithium and or other battery metals reserves and have validated and commercialized a cost-effective extraction system.



RESULTS OF OPERATIONS


American Battery Metals Corp. ("ABMC") has not realized any revenue from battery recycling or from its prior exploration activities on the Nye County property and is unsure when it shall be able to produce any revenue from such activities. ABMC's ability to generate revenue is dependent on its ability to secure sufficient capital to fund its business operations.

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Results of Operations



Revenues


During the three and six months ended December 31, 2020 and 2019, the Company has not realized any revenues.



Expenses


Three Months Ended December 31, 2020 and 2019

During the three months ended December 31, 2020, the Company incurred $30,273,236 of operating expenses compared to $1,083,131 of operating expenses during the three months ended December 31, 2019. Overall, the increase in operating expense was due to the fact that the Company issued 29,900,000 common shares for consulting services with a fair value of $28,770,000 during the three months ended December 31, 2020 compared with the issuance of 5,560,000 common shares with a fair value of $233,520 for consulting services during the three months ended December 31, 2019. Of the remaining operating expenses not related to share-based compensation of $1,503,536, the expenditures were higher than the prior period amount of $849,611 due to an increase in general and administrative expense as the overall level of day-to-day operating costs increased including increases in payroll and benefits expense as the Company required more staffing compared to prior year.

In addition to operating expenses, the Company incurred other income and expense of $5,430,909 during the three months ended December 31, 2020 compared to $1,864,934 during the three months ended December 31, 2019. The increase was due to a higher loss relating to the change in fair value of the derivative liability of $6,244,285 compared to $876,960 during the three months ended December 31, 2019 due to the fact that the Company experienced a larger volatility or spread in its share price at December 31, 2020 which resulted in a larger value attributed to the conversion feature of the Company's outstanding convertible debentures for the period. In addition, the Company recorded a gain on the settlement of debt of $1,850,178 for the three months ended December 31, 2020 compared to $127,863 during the three months ended December 31, 2019 due in large part to the fact that the Company was successful in raising financing proceeds from the issuance of common shares which resulted in the Company repaying some outstanding convertible debentures resulting in the reversal of the fair value of the derivative liability. Overall, the Company recorded accretion and interest expense of $837,953 during the three months ended December 31, 2020 compared to $1,119,583 during the three months ended December 31, 2019 and the decrease was due to the repayment of various convertible debentures resulting in lower accretion and interest costs incurred during the current period. As part of the repayment of convertible debentures during the period, the Company incurred financing and early payment penalty costs of $190,980.




Net Loss



During the three months ended December 31, 2020, the Company incurred a net loss of $35,704,145 or $0.08 loss per share compared to a net loss of $2,948,065 or $0.02 loss per share during the three months ended December 31, 2019. The increase in the net loss is due to the fact that the Company had more general and administrative costs due to increases in share-based compensation, but was offset by the fact that the Company recorded a larger gain on settlement of debt in the current year due to an increase in the number of debt settlements which included the elimination of the derivative liability.

Six Months Ended December 31, 2020 and 2019

During the six months ended December 31, 2020, the Company incurred $32,686,329 of operating expenses compared to $2,477,768 of operating expenses during the six months ended December 31, 2019. Overall, the increase in operating expense was due to the fact that the Company issued 43,140,000 common shares for consulting services with a fair value of $30,352,270 during the six months ended December 31, 2020 compared to the issuance of 9,210,000 common shares with a fair value of $924,020 for consulting services during the six months ended December 31, 2019. Of the remaining operating expenses not related to share-based compensation of $2,334,359, the expenditures were higher than the prior period amount of $2,244,248 due to an increase in general and administrative expense as the overall level of day-to-day operating costs increased including increases in payroll and benefits expense as the Company required more staffing compared to prior year.

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In addition to operating expenses, the Company incurred other income and expense of $6,169,025 during the six months ended December 31, 2020 compared to $2,941,795 during the six months ended December 31, 2019. The increase was due to a higher loss relating to the change in fair value of the derivative liability of $7,018,171 compared to $939,514 during the six months ended December 31, 2019 due to the fact that the Company experienced a larger volatility or spread in its share price at December 31, 2020 which resulted in a larger value attributed to the conversion feature of the Company's outstanding convertible debentures for the period. In addition, the Company recorded a gain on the settlement of debt of $3,462,611 for the six months ended December 31, 2020 compared to $214,050 during the six months ended December 31, 2019 due in large part to the fact that the Company was successful in raising financing proceeds from the issuance of common shares which resulted in the Company repaying some outstanding convertible debentures resulting in the reversal of the fair value of the derivative liability. Overall, the Company recorded accretion and interest expense of $2,200,500 during the six months ended December 31, 2020 which was consistent to the six months ended December 31, 2019 amount of $2,220,077. As part of the repayment of convertible debentures during the period, the Company incurred financing and early payment penalty costs of $405,096.




Net Loss



During the six months ended December 31, 2020, the Company incurred a net loss of $38,855,354 or $0.09 loss per share compared to a net loss of $5,419,563 or $0.04 loss per share during the six months ended December 31, 2019. The increase in the net loss is due to the fact that the Company had more general and administrative costs due to increases in share-based compensation, but was offset by the fact that the Company recorded a larger gain on settlement of debt in the current year due to an increase in the number of debt settlements which included the elimination of the derivative liability.

Liquidity and Capital Resources

At December 31, 2020, the Company had cash of $403,654 and total assets of $1,607,342 compared to cash of $829,924 and total assets of $1,161,314 as at June 30, 2020. The decrease in cash is due to the fact that the Company incurred more operating costs as it had more general and administrative expense and payroll expense due to the increase in staffing during the current year compared to the prior year. The Company's cash flow is supported by its financing activities, as it received $3,608,250 of financing from private placements and $1,350,000 of proceeds from convertible debentures during the period ended December 31, 2020 less repayments of convertible debentures of $1,761,397. The increase in total assets is due to the purchase of land in Nevada for $907,380 during the period ended December 31, 2020 offset by the use of cash for operating activities during the period.

The Company had total current liabilities of $7,849,504 at December 31, 2020 compared to $5,795,170 at June 30, 2020. The increase in liabilities is due to an increase in the derivative liability from $4,519,654 at June 30, 2020 to $6,669,330 at December 31, 2020 as the Company's share price during the current period was more volatile than the prior year which resulted in a larger spread between the fair value of the Company's common share and the discounted variable conversion rate of the convertible debenture and hence, a larger fair value in the carrying amount of the conversion feature embedded into the convertible debentures. As at December 31, 2020, the Company had total face value of convertible debt outstanding of $1,092,878 compared to total face value of convertible debt of $2,211,200 as at June 30, 2020. The decrease in the face value of outstanding convertible debentures was due to the repayment of numerous convertible notes during the period by management as they used the proceeds from the issuance of common shares and Series C preferred shares to repay outstanding debt obligations.

As at December 31, 2020, the Company had a working capital deficit of $7,238,396 compared to a working capital deficit of $4,727,912 at June 30, 2020. The increase in the working capital deficit was due to the overall increase in the fair value of the derivative liability relating to the conversion feature on the convertible note payable offset by decreases in the settlement of outstanding convertible notes payable. Trade accounts payable and accrued liabilities were lower by $67,417 and due to timing differences between recognition of costs and the repayment of obligations on a period-by-period basis.

During the period ended December 31, 2020, the Company issued 43,140,000 common shares for services with a fair value of $30,352,270, issued 21,284,971 common shares with a fair value of $2,585,467 to convert outstanding notes payable and accrued interest, issued 60,625,000 common shares in a private placement for $2,450,000 (which was received during the year ended June 30, 2020), and issued 12,381,562 common shares for the exercise of cashless share purchase warrants that were previously issued to note holders as an inducement for the convertible note proceeds. In addition, the Company issued 200,000 Series A preferred shares with a par value of $200 to officers and directors during the period for compensation and 241,450 Series C preferred shares at $10.00 per share for proceeds of $2,414,500 and 40,000 Series C preferred shares to settle outstanding convertible debt and accrued interest of $400,000.

As at December 31, 2020 and June 30, 2020, the Company does not have any issued or outstanding stock options.

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Cash Flows


Cash from Operating Activities.

During the six months ended December 31, 2020, the Company used $2,710,958 of cash for operating activities as compared to $1,441,930 during the six months ended December 31, 2019. The increase in the use of cash for operating activities was due to the fact that the Company raised more funding from financing activities, including $3,608,250 from share subscriptions, which allowed them to incur more operating costs to further the Company's development and operations.

Cash from Investing Activities

During the six months ended December 31, 2020, the Company incurred $907,380 for the purchase of land in Nevada and $4,785 for the purchase of equipment. The Company did not have any investing activities during the six months ended December 31, 2019.

Cash from Financing Activities

During the six months ended December 31, 2020, the Company received $3,196,853 of financing, which included $3,608,250 from subscription proceeds related to a private placement of units, $1,350,000 of funding from the issuance of convertible notes payable less repayments of $1,761,397 on the convertible notes during the period. Comparatively, for the six months ended December 31, 2019, the Company received $1,444,803 of funding from financing activities which included $1,382,500 from the issuance of convertible notes payable less repayments of $212,697, and proceeds from private placement of $275,000.

Off-Balance Sheet Arrangements



None.


Critical Accounting Policies and Estimates

In presenting the Company's financial statements in conformity with U.S. generally accepting accounting principles, or GAAP, the Company is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures.

Some of the estimates and assumptions the Company is required to make relate to matters that are inherently uncertain as they pertain to future events. The Company bases these estimates and assumptions on historical experience or on various other factors that it believes to be reasonable and appropriate under the circumstances. On an ongoing basis, the Company reconsiders and evaluates its estimates and assumptions. Actual results may differ significantly from these estimates.

The Company believes that the critical accounting policies listed below involve its more significant judgments, assumptions and estimates and, therefore, could have the greatest potential impact on its financial statements. In addition, the Company believes that a discussion of these policies is necessary to understand and evaluate the financial statements contained in this filing.



Estimates and Assumptions


Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing these financial statements.

Mineral claim acquisition and exploration costs

The cost of acquiring mineral properties or claims is initially capitalized and then tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Mineral exploration costs are expensed as incurred.



Income Taxes


The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.

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Recent Accounting Pronouncements

The Company does not expect the adoption of any recent accounting pronouncements to have a material impact on its financial statements.

© Edgar Online, source Glimpses

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