AMERICAN BATTERY TECHNOLOGY Co - Quarter Report: 2020 December (Form 10-Q)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [   ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes [X] No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes [   ] No [X]

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Table of Contents

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PART I – FINANCIAL STATEMENTS

Operating results for the six months ended December 31, 2020 are not necessarily indicative of the results that can be expected for the year ending June 30, 2021.

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AMERICAN BATTERY METALS CORPORATION

Condensed Consolidated Balance Sheets

(unaudited)

(The accompanying notes are an integral part of these condensed consolidated financial statements)

4

AMERICAN BATTERY METALS CORPORATION

Condensed Consolidated Statements of Operations

(unaudited)

(The accompanying notes are an integral part of these condensed consolidated financial statements)

5

AMERICAN BATTERY METALS CORPORATION

Condensed Consolidated Statement of Stockholders’ Deficit

(unaudited)

AMERICAN BATTERY METALS CORPORATION

Condensed Consolidated Statement of Stockholders’ Deficit

(unaudited)

(The accompanying notes are an integral part of these condensed consolidated financial statements)

6

AMERICAN BATTERY METALS CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited)

(The accompanying notes are an integral part of these condensed consolidated financial statements)

7

AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2020

(unaudited)

1. Organization and Nature of Operations 

The accompanying unaudited condensed consolidated financial statements of American Battery Metals Corporation have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with our audited consolidated financial statements for the period ended June 30, 2020, included in our Annual Report on Form 10-KT for the period ended June 30, 2020. 

The Company was incorporated under the laws of the state of Nevada on October 6, 2011 for the purpose of acquiring and developing mineral properties. The Company has a wholly-owned subsidiary called Oroplata Exploraciones E Ingenieria SRL, which was incorporated in the Dominican Republic on January 10, 2012. On July 26, 2016, the Company incorporated Lithortech Resources Inc., a Nevada company, as a wholly-owned subsidiary. The Company currently holds mineral rights in the Western Nevada Basin of Nye County in the state of Nevada.

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The impact on the Company has not been significant, but management continues to monitor the situation.

Going Concern

These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at December 31, 2020, the Company has not earned any revenue, has a working capital deficit of $7,238,396, and an accumulated deficit of $102,064,300. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. If the Company is able to obtain financing, there is no certainty that terms will be favorable to the Company. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2. Summary of Significant Accounting Policies 

(a)Basis of Presentation 

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is June 30.

(b)Principles of Consolidation 

These unaudited condensed consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars. These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Oroplata Exploraciones E Ingenieria SRL and LithiumOre Corporation (formerly Lithortech Resources Inc). All inter-company accounts and transactions have been eliminated on consolidation.

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2020

(unaudited)

3. Convertible Notes Payable 

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2020

(unaudited)

3. Convertible Notes Payable (continued) 

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2020

(unaudited)

3. Convertible Notes Payable (continued) 

During the six months ended December 31, 2020, the Company paid $1,824,613 (2019 - $221,663) for the settlement of $1,295,202 (2019 - $163,766) of outstanding principal balance of convertible notes, $63,216 (2019 - $8,966) of accrued interest, $403,938 (2019 - $nil) of financing costs, and $3,148,613 (2019 - $128,013) of derivative liabilities resulting in a gain on settlement of debt of $3,086,356 (2019 - $79,082).

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2020

(unaudited)

4. Property and Equipment  

During the six months ended December 31, 2020, the Company purchased land at a cost of $907,380. The land is comprised of 12.44 acres and is located at 345 Winston Lane in Fernley, Nevada. The Company will be constructing five separate building areas on this property to create a Pilot Plant campus that includes: Production Process Areas, Feedstock Sorting Area, Analytical Laboratory Spaces & Process Development Bays, a Storage Warehouse, and general Office Space.

5. Related Party Transactions 

(a)As of December 31, 2020, the Company owes $120,146 (June 30, 2020 - $120,146) to the former Chief Executive Officer and Director of the Company for advances to the Company to fund day-to-day operations. The amounts owing are unsecured, non-interest bearing, and due on demand.  

(b)As of December 31, 2020, the Company owes $85,500 (June 30, 2020 - $85,500) to the former Chief Executive Officer and Director of the Company for advances to the Company to fund day-to-day operations and accrued management fees. The amounts owing are unsecured, non-interest bearing, and due on demand.  

(c)As of December 31, 2020, there is $5,000 (June 30, 2020 - $388,577 owed to) owing from the Chief Executive Officer. The amounts owing are unsecured, non-interest bearing, and due on demand.  

(d)As of December 31, 2020, the Company owes $nil (June 30, 2020– $30,726) to directors of the Company for accrued management fees. The amounts owing are unsecured, non-interest bearing, and due on demand.  

6. Investment in Joint Venture 

On October 8, 2018, the Company entered into a joint venture agreement with CINC Industries Inc. (“CINC”), a non-related Nevada company, for a period of five years whereby the joint venture will propagate the sale of a new process for extraction of lithium salt from salt brine solutions using CINC’s existing and future processing equipment. As part of the joint venture, each of CINC and the Company holds a 50% interest in the joint venture.

CINC is responsible for completing testing on the pilot project, providing training to the Company for use of its processing equipment, manufacturing up to 20 test units, and support and product development, as well as shared costs on other personnel utilized in the joint venture company. The Company is responsible for the initial funding for all equipment and associated expenses, the cost of the lease space, and marketing and sales of the joint venture agreement.

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2020

(unaudited)

6. Investment in Joint Venture (Continued) 

As part of the joint venture agreement, the Company issued 250,000 common shares to CINC. The joint venture is committed to acquiring a minimum amount of processing equipment, goods, accessories, and/or materials totaling: (i) $1,000,000 by October 8, 2020; (ii) $3,000,000 by October 8, 2021; (iii) $6,000,000 by October 8, 2022; and (v) $10,000,000 by October 8, 2023. In the event that the joint venture fails to meet the minimum amounts above, the Company will lose the exclusive right to market, promote and sell the processing equipment provided by CINC. To date, the joint venture has not purchased any amounts and the Company believes that it is unlikely that any amounts shall be purchased in the future. Furthermore, neither party is making any efforts towards the joint venture at this time.

7. Derivative Liabilities 

The Company records the fair value of the conversion price of the convertible debentures in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivatives was calculated using a multi-nominal lattice model. The fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations. For the six months ended December 31, 2020, the Company recorded a loss on the change in the fair value of derivative liability of $7,018,171 (2019 - $939,514). As at December 31, 2020, the Company recorded a derivative liability of $6,669,330 (June 30, 2020 - $4,519,654).

The following inputs and assumptions were used to value the derivative liabilities outstanding at December 31, 2020 and June 30, 2020:

A summary of the activity of the derivative liability is shown below:

8. Loans Payable  

(a)On January 27, 2020, the Company entered into a finance loan agreement relating to the acquisition of a company vehicle. Under the terms of the finance loan, the Company will make monthly installment payments of $1,089 at a finance loan interest rate of 7.99% per annum, which is due in February 2026. As of December 31, 2020, the Company owed $54,451 (June 30, 2020 - $59,236) on the finance loan, including $8,934 (June 30, 2020 - $8,580) which is due in the next twelve months. The remaining balance has been fully paid off subsequent to the period ended December 31, 2020. Refer to Note 11. 

(b)On May 7, 2020, the Company received $255,992 from the U.S. Small Business Administration as part of the Coronavirus Aid Relief and Economic Security (“CARES”) Act Paycheck Protection Program. The amounts are unsecured, bears interest at 1% per annum commencing on November 7, 2020, and is due on May 7, 2022. Funds from these loans may be used for payroll, rent, utilities and other qualifying expenses. The terms of the loans provide that certain amounts may be forgiven if the funds are used for qualifying expenses as described in the CARES Act. 

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2020

(unaudited)

9. Share Capital 

The Company’s authorized common stock consists of 1,200,000,000 shares of common stock, with par value of $0.001 per share, 1,000,000 shares of Series A preferred stock, with par value of $0.001 per share, and 1,000,000 shares of Series C preferred stock, with par value of $10 per share.

Series A Preferred Stock

Series C Preferred Stock

On December 18, 2020, the Company issued 48.29 units of Series C Preferred Stock at $50,000 per unit for proceeds of $2,414,500. Each unit is comprised of 5,000 shares of Series C Preferred Stock (each share of Series C Preferred Stock is convertible into eighty shares of common stock) and a warrant to purchase 400,000 common shares of the Company at $0.25 per share until December 31, 2023. Each holder is entitled to receive a non-cumulative dividend at 8% per annum at the rate per share. The dividend shall be payable at the Company's option either in cash or in common shares of the Company. If paid in Common Shares, the Company shall pay to the holders the number of Common Shares equal to the dividend amount divided by the Stated Value and then multiplied by eighty. The investors in the Series C Preferred Stock are all independent investors except for 2,500 shares of Series C Preferred Stock purchased by our chief resource officer.

In addition, the Company issued 8 units with a fair value of $400,000 for the conversion of $381,622 of note payable and $18,378 of accrued interest. During the six months ended December 31, 2020, the Company has received additional $1,200,000 for future issuance.

Common Stock

On July 9, 2020, the Company issued 7,950,000 common shares with a fair value of $941,280 for consulting services.

On July 9, 2020, the Company issued 6,081,150 common shares with a fair value of $720,008 for the conversion of $147,250 of note payable, $6,503 of accrued interest, $105 of fees and $614,477 of derivative liability resulting in a gain on settlement of $48,327.

On August 18, 2020, the Company issued 2,890,000 common shares with a fair value of $262,990 for consulting services.

On August 26, 2020, the Company issued 2,196,822 common shares with a fair value of $193,320 for the conversion of $100,000 of note payable, $5,342 of accrued interest, $105 of fees and $110,007 of derivative liability resulting in a gain on settlement of $22,134.

On September 16, 2020, the Company issued 1,696,856 common shares with a fair value of $157,808 for the conversion of $77,200 of note payable, $4,931 of accrued interest, $105 of fees and $87,842 of derivative liability resulting in a gain on settlement of $12,270.

On September 29, 2020, the Company issued 2,400,000 common shares with a fair value of $378,000 for consulting services, including 2,000,000 common shares with a fair value of $315,000 issued to a director of the Company as management fee.

On September 30, 2020, the Company issued 5,178,487 common shares with a fair value of $699,096 for the conversion of $270,000 of note payable, $13,833 of accrued interest, $105 of fees and $560,268 of derivative liability resulting in a gain on settlement of $145,110.

On October 6, 2020, the Company issued 4,805,558 common shares with a fair value of $617,514 for the conversion of $250,000 of note payable, $12,311 of accrued interest, $105 of fees and $491,605 of derivative liability resulting in a gain on settlement of $136,507.

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2020

(unaudited)

9. Share Capital (Continued) 

On October 20, 2020, the Company issued 1,326,098 common shares with a fair value of $197,721 for the conversion of $71,548 of note payable, $7,396 of accrued interest and $130,683 of derivative liability resulting in a gain on settlement of $11,906.

On November 30, 2020, the Company issued 3,000,000 common shares with a fair value of $765,000 to directors of the Company for consulting services.

On December 15, 2020, the Company issued 6,500,000 common shares with a fair value of $1,365,000 for consulting services.

On December 23, 2020, the Company issued 6,000,000 common shares with a fair value of $6,480,000 for consulting services.

On December 29, 2020, the Company issued 14,400,000 common shares with a fair value of $20,160,000 for consulting services.

During the six months ended December 31, 2020, the Company issued 60,625,000 units for proceeds of $2,450,000 received during the year ended June 30, 2020. Each unit is comprised of one common share of the Company and 0.8 share purchase warrant where each whole share purchase warrant can be exercised into one common share of the Company at $0.075 per share until October 31, 2024.

During the six months ended December 31, 2020, the Company issued 12,381,562 common shares for the exercise of cashless warrants. The fair value of $12,381 for the warrants exercised was transferred to common shares from additional paid-in capital.

10. Share Purchase Warrants 

Additional information regarding share purchase warrants as of December 31, 2020, is as follows:

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2020

(unaudited)

11. Subsequent Events 

The Company has evaluated events occurring subsequent to December 31, 2020 through the date these financial statements were issued and noted the following:

(a)On January 19, 2021, the Company issued 486,451 common shares for past legal fees. The fair value of $35,000 has been included in share subscriptions received as of December 31, 2020. 

(b)On February 3, 2021, the Company issued 3,200,000 common shares pursuant to conversion of 40,000 Series C preferred shares. 

(c)On February 5, 2021, the Company issued 69,252 common shares pursuant to a rental agreement with purchase option dated February 24, 2019 for the sale of real property situate at 601 S Main Street, City of Tonopah, County of Nye, State of Nevada. These common shares have been held in escrow until title is transferred to the Company.  

(d)On February 10, 2021, the Company issued 175,958 common shares pursuant to the conversion of $138,378 of convertible notes payable and $2,388 of accrued interest dated July 27, 2020. 

(e)On February 10, 2021, the Company issued 408,271 common shares pursuant to the conversion of $312,000 of convertible notes payable and $14,617 of accrued interest dated August 14, 2020. 

(f)On February 10, 2021, the Company issued 379,441 common shares pursuant to the conversion of $302,500 of convertible notes payable and $1,053 of accrued interest dated September 29, 2020. 

(g)On February 10, 2021, the Company issued 437,109 common shares pursuant to the conversion of $340,000 of convertible notes payable and $9,688 of accrued interest dated October 20, 2020. 

(h)Subsequent to the period ended December 31, 2020, the Company issued 15,426,974 common shares for the exercise of warrants.  

(i)Subsequent to the period ended December 31, 2020, the Company issued 4,250,000 common shares to a third party pursuant to a share purchase agreement dated October 20, 2020. Proceeds of $3,045,869 have been received as of February 10, 2021. 

(j)Subsequent to the period ended December 31, 2020, the Company has fully paid off the remaining balance of the finance loan agreement relating to the acquisition of a company vehicle. Refer to Note 8(a).  

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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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In addition, The Company contracts with an independent firm to review and test its internal controls. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

As of December 31, 2020, the Company’s management carried out an evaluation of the effectiveness of our disclosure controls and procedures as such term is defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934. Based on that evaluation, it was concluded the disclosure controls and procedures were not effective as of December 31, 2020.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In January 2018, the Company filed a complaint in Nevada seeking the return or cancellation of 16 million common shares which the Company believes were fraudulently issued as well as claims against the former CEO of the Company, Craig Alford. As a result, the Company entered into agreements to cancel eleven million shares (of which ten million shares have already been cancelled). The remaining five million shares were cancelled and reissued after the Company determined that the recipients provided proper consideration for such shares. Alford has filed a counterclaim against the Company for amounts allegedly owed to him that the Company believes is entirely without merit. The litigation continues against Alford and certain other relief defendants but has been delayed due to Covid -19 restrictions.

Other than the preceding, to the best of our knowledge, we are not currently a party to any legal proceedings that, individually or in the aggregate, are deemed to be material to our financial condition or results of operations.

We are required by Section 78.090 of the Nevada Revised Statutes (the "NRS") to maintain a registered agent in the State of Nevada. Our registered agent for this purpose is United Corporate Services, Inc., 2520 St Rose Pkwy Suite 319, Henderson, NV 89074. All legal process and any demand or notice authorized by law to be served upon us may be served upon our registered agent in the State of Nevada in the manner provided in NRS 14.020(2).

ITEM 1A. RISK FACTORS.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On October 20, 2020, the Company issued a 10% Convertible Promissory Note in the principal amount of $340,000 with a purchase price of $332,500 to GS Capital Partners, LLC. The note is due October 20, 2021. The holder shall have the right from time to time, and at any time to convert all or any amount of the outstanding and unpaid principal amount of the note into fully paid and non-assessable shares of common stock. The conversion price shall be a fixed price of $0.10 per share. The note may be prepaid until 180 days from the issuance date at a price of 108% - 128% of the face amount plus any accrued interest as of the date of prepayment. The default rate on the note is 24% per annum.

On November 30, 2020, the Company issued 3,000,000 common shares with a fair value of $765,000 to directors of the Company for consulting services.

On December 15, 2020, the Company issued 6,500,000 common shares with a fair value of $1,365,000 for consulting services.

On December 23, 2020, the Company issued 6,000,000 common shares with a fair value of $6,480,000 for consulting services.

On December 29, 2020, the Company issued 14,400,000 common shares with a fair value of $20,160,000 for consulting services

On December 18, 2020, the Company issued 48.29 units of Series C Preferred Stock at $50,000 per unit for proceeds of $2,414,500. Each unit is comprised of 5,000 shares of Series C Preferred Stock (each share of Series C Preferred Stock is convertible into eighty shares of common stock) and a warrant to purchase 400,000 common shares of the Company at $0.25 per share until December 31, 2023.

In addition, the Company issued 8 units of Series C Preferred Stock with a fair value of $400,000 for the conversion of $381,622 of note payable and $18,378 of accrued interest.

From October 1, 2020 through December 31, 2020, the Company issued 7,326,430 common shares for the exercise of cashless warrants.

From October 1, 2020 through December 31, 2020, the Company issued 6,131,656 common shares for the conversions of $321,548 in principal of convertible notes and $19,707 of accrued interest.

The foregoing securities were issued under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D under the Securities Act. In the case of the promissory notes, each investor represented that it was an accredited investor, as defined in Rule 501 of Regulation D, and that it was acquiring the securities for its own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act. Any proceeds issued from the above issuances were used for working capital purposes of the Company.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES 

None

ITEM 4. MINE SAFETY DISCLOSURE

Not Applicable

ITEM 5. OTHER INFORMATION

As of February 8, 2021, the Company no longer had any variable convertible notes outstanding. The Company believes that going forward it shall be able to finance its business operations from more traditional sources.

ITEM 6. EXHIBITS

(a) (3) Exhibits

The following exhibits are either provided with this Quarterly Report or are incorporated herein by reference:

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SIGNATURES

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