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.
Results of Operations
Revenues
During the three and six months ended December 31, 2020 and 2019, the Company
has not realized any revenues.
21
Expenses
Three Months Ended December 31, 2020 and 2019
During the three months ended December 31, 2020, the Company incurred
$22,616,960 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 27,490,000 common
shares for consulting services with a fair value of $21,065,200 in fiscal 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 $28,047,869 or $0.06 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 $25,030,053
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 31,140,000 common shares for
consulting services with a fair value of $22,647,470 in fiscal 2020 compared to
the issuance of 5,560,000 common shares with a fair value of $233,520 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.
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.
22
Net Loss
During the six months ended December 31, 2020, the Company incurred a net loss
of $31,199,078 or $0.07 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 31,140,000 common
shares for services with a fair value of $22,647,470, issued 21,284,971 common
shares with a fair value of $2,985,467 to convert outstanding notes payable and
accrued interest, issued 60,625,000 common shares in a private placement for
$2,408,250 (which was received during the year ended June 30, 2020), issued
12,000,000 common shares in a share purchase agreement for proceeds of
$1,200,000, 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.
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.
23
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.
Recent Accounting Pronouncements
The Company does not expect the adoption of any recent accounting pronouncements
to have a material impact on its financial statements.
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AMERICAN BATTERY TECHNOLOGY COMPANY 
