AMERICAN BATTERY TECHNOLOGY Co - Quarter Report: 2020 September (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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PART I – FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements of American Battery Metals Corporation have been prepared by the Company's management in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

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

AMERICAN BATTERY METALS CORPORATION

Condensed Consolidated Financial Statements

For the Period Ended September 30, 2020

(unaudited)

Condensed Consolidated Balance Sheets (unaudited)4 

Condensed Consolidated Statements of Operations (unaudited)5 

Condensed Consolidated Statements of Stockholders’ Deficit (unaudited)6 

Condensed Consolidated Statements of Cash Flows (unaudited)7 

Notes to the Condensed Consolidated Financial Statements (unaudited)8 

3

AMERICAN BATTERY METALS CORPORATION

Condensed Consolidated Balance Sheets

(unaudited)

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

4

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)

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 September 30, 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 is not currently determinable, but management continues to monitor the situation.

Going Concern

These 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 September 30, 2020, the Company has not earned any revenue, has a working capital deficit of $3,182,537, and an accumulated deficit of $66,360,155. 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 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 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 September 30, 2020

(unaudited)

3.Convertible Notes Payable 

9

AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 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 September 30, 2020

(unaudited)

3.Convertible Notes Payable (continued) 

During the three months ended September 30, 2020, the Company paid $913,233 (2019 - $221,663) for the settlement of $635,250 (2019 - $163,766) of outstanding principal balance of convertible notes, $30,662 (2019 - $8,966) of accrued interest, $213,599 (2019 - $nil) of financing costs, and $1,418,312 (2019 - $128,013) of derivative liabilities resulting in a gain on settlement of debt of $1,384,590 (2019 - $79,082).

4.Equipment 

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2020

(unaudited)

5.Related Party Transactions 

(a)As of September 30, 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 September 30, 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 September 30, 2020, the Company owes $142,084 (June 30, 2020 - $388,577) to the Chief Executive Officer of the Company for accrued management fees.  The amounts owing are unsecured, non-interest bearing, and due on demand.  

(d)As of September 30, 2020, the Company owes $30,726 (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.

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.

While technically still in place, the October 8, 2020 milestone was not met, and the Company does not believe this joint venture agreement will go forward.

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 three months ended September 30, 2020, the Company recorded a loss on the change in the fair value of derivative liability of $773,886 (2019 - $62,554).  As at September 30, 2020, the Company recorded a derivative liability of $2,777,634 (June 30, 2020 - $4,519,654).

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2020

(unaudited)

7.Derivative Liabilities (continued) 

The following inputs and assumptions were used to value the derivative liabilities outstanding at September 30, 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 September 30, 2020, the Company owed $57,142 (June 30, 2020 - $59,236) on the finance loan, including $8,755 (June 30, 2020 - $8,580) which is due in the next twelve months.  

(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 and is payable monthly commencing on November 7, 2020, and is due on May 7, 2022.  The terms of the loan provide that certain amount may be forgiven if the funds are used for qualifying expenses as described in the CARES Act.  

9.Common Shares 

The Company’s authorized common stock consists of 1,200,000,000 shares of common stock, with par value of $0.001 per share, and authorized Series A preferred stock of 500,000 shares of preferred stock, with par value of $0.001 per share. 

Period ended September 30, 2020

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.

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2020

(unaudited)

9.Common Shares (continued) 

On August 27, 2020, the Company issued 5,055,132 common shares for the exercise of cashless warrants.

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.

During the three months ended September 30, 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 $0.15 per share until October 31, 2024.

As at September 30, 2020, the Company received share subscriptions of $1,343,750 for the future issuance of private placement units at $50,000 per unit, where each unit is comprised of 5,000 shares of Series C Preferred Stock (each share of Series C Preferred Stock is convertible into 80 shares of common stock) and a warrant to purchase 400,000 common shares of the Company at $0.075 per share until December 31, 2023.

Period ended September 30, 2019

On July 8, 2019, the Company issued 1,650,000 common shares with a fair value of $396,000 for consulting services.

On July 15, 2019, the Company issued 1,352,240 common shares with a fair value of $311,015 as part of a conversion of $190,000 of convertible notes payable, $11,192 of accrued interest and derivative liability of $133,574, resulting in a gain on settlement of debt of $23,750.

On July 19, 2019, the Company issued 1,414.000 common shares with a fair value of $162,610 as part of the conversion of $136,100 of convertible notes payable and $26,510 of accrued interest.

On July 30, 2019, the Company issued 160,552 common shares with a fair value of $27,294 for the settlement of $15,000 of convertible notes payable, conversion fees of $500, accrued interest of $9, and derivative liability of $12,388 resulting in a gain on settlement of debt of $603.

On July 31, 2019, the Company issued 129,453 common shares with a fair value of $23,302 for the settlement of $12,500 of convertible notes payable and $10,853 of derivative liability resulting in a gain on settlement of debt of $51.

On August 1, 2019, the Company issued 300,000 common shares with a fair value of $54,000 for consulting services.  

On August 8, 2019, the Company issued 196,711 common shares with a fair value of $34,424 for the settlement of $20,000 of convertible notes payable, conversion fees of $500, and derivative liability of $13,998 resulting in a gain on settlement of debt of $74.

On August 12, 2019, the Company issued 167,946 common shares with a fair value of $28,551 for the settlement of $17,500 of convertible notes payable and $11,110 of derivative liability resulting in a gain on settlement of debt of $59.  

On August 21, 2019, the Company issued 1,500,000 common shares with a fair value of $226,500 for consulting services including 1,000,000 common shares with a fair value of $151,000 to the Chief Executive Officer of the Company.

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2020

(unaudited)

9.Common Shares (continued) 

On August 22, 2019, the Company issued 1,233,035 common shares with a fair value of $188,038 for the conversion of $110,000 of convertible notes payable, $6,781 of accrued interest, and $76,580 of derivative liability resulting in a gain on settlement of debt of $5,223.  

On August 27, 2019, the Company issued 310,606 common shares with a fair value of $34,167 for the conversion of $20,000 of convertible notes payable, conversion fees of $500, and derivative liability of $13,717 resulting in a gain on settlement of debt of $50.

On August 27, 2019, the Company issued 303,030 common shares with a fair value of $33,333 for the conversion of $20,000 of convertible notes payable and $13,383 of derivative liability resulting in a gain on settlement of debt of $50.

On September 3, 2019, the Company issued 507,826 common shares with a fair value of $49,513 for the settlement of $30,000 of convertible notes payable, conversion fees of $500, and derivative liability of $19,078 resulting in a gain on settlement of debt of $65.

On September 3, 2019, the Company issued 249,727 common shares with a fair value of $24,348 for the settlement of $15,000 of convertible notes payable, $988 of accrued interest, and $9,149 of derivative liability resulting in a gain on settlement of debt of $789.

On September 5, 2019, the Company issued 504,919 common shares with a fair value of $40,394 for the settlement of $25,000 of convertible notes payable, $1,660 of accrued interest, and $15,344 of derivative liability resulting in a gain on settlement of debt of $1,610.  

On September 6, 2019, the Company issued 388,257 common shares with a fair value of $29,090 for the settlement of $20,000 of convertible notes payable, conversion fees of $500, and derivative liability of $8,620 resulting in a gain on settlement of debt of $40.  

On September 9, 2019, the Company issued 622,086 common shares with a fair value of $42,862 for the settlement of $25,000 of convertible notes payable, $1,688 of accrued interest, and $17,260 of derivative liability resulting in a gain on settlement of debt of $1,086.

On September 11, 2019, the Company issued 426,997 common shares with a fair value of $43,554 for the settlement of $15,000 of convertible notes payable, $500 of conversion fees, and $28,080 of derivative liability resulting in a gain on settlement of debt of $25.  

On September 11, 2019, the Company issued 471,763 common shares with a fair value of $48,120 for the settlement of $12,500 of convertible notes payable, $500 of conversion fees, and $2,913 of accrued interest and derivative liability resulting in a loss on settlement of debt of $32,207.  

On September 11, 2019, the Company issued 650,000 common shares with a fair value of $66,300 for the settlement of $17,375 of convertible notes payable, $500 of conversion fees, and $49,683 of derivative liability resulting in a gain on settlement of debt of $1,258.  

On September 13, 2019, the Company issued 200,000 common shares with a fair value of $14,000 for consulting services.

On September 16, 2019, the Company issued 736,532 common shares with a fair value of $51,395 for the settlement of $30,000 of convertible notes payable, $2,100 of accrued interest, and $50,051 of derivative liability resulting in a gain on settlement of debt of $2,564.  

On September 17, 2019, the Company issued 1,619,344 common shares with a fair value of $100,399 for the settlement of $55,000 of convertible notes payable, $3,782 of accrued interest, and $50,872 of derivative liability resulting in a gain on settlement of debt of $9,255.  

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AMERICAN BATTERY METALS CORPORATION

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2020

(unaudited)

9.Common Shares (continued) 

On September 17, 2019, the Company issued 463,843 common shares with a fair value of $28,758 for the settlement of $10,000 of convertible notes payable, $500 of conversion fees, $6,338 of accrued interest, and $1,487 of derivative liability resulting in a loss on settlement of debt of $10,433.

On September 18, 2019, the Company issued 884,298 common shares with a fair value of $79,587 for the settlement of $30,000 of convertible notes payable, $2,100 of accrued interest, and $50,051 of derivative liability resulting in a gain on settlement of debt of $2,564.  

10.Share Purchase Warrants 

Additional information regarding share purchase warrants as of September 30, 2020, is as follows:

11.Subsequent Events 

(a)On October 1, 2020, the Company purchased land for $900,000, of which $50,000 was held in an escrow and included in prepaid expenses for the period ended September 30, 2020. The land is comprised of 12.44 acres and is located at 345 Winston Lane in Fernley, Nevada,  

(b)On October 9, 2020, the Company issued 4,805,558 common shares pursuant to the conversion of $250,000 of convertible notes payable and $13,288 of accrued interest dated March 17, 2020. 

(c)On October 20, 2020, the Company issued 1,326,098 common shares pursuant to the conversion of $71,548 of convertible notes payable and $6,904 of accrued interest dated April 10, 2020. 

(d)Subsequent to September 30, 2020, the Company received $820,750 of subscription proceeds relating to the issuance of units of Series C preferred stock for $50,000 per unit where each unit is comprised of 5,000 Series C Preferred Stock (convertible into common shares of the Company at 80 common shares per Series C Preferred Stock) and one share purchase warrant where each warrant is exercisable into 400,000 common shares of the Company at $0.25 per share until December 31, 2023. 

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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.

Employees

The company has fourteen employees: (a) two officers, Mr. Cole, our chief executive officer, Ryan Melsert, our Chief Technical Officer, and (b) twelve other employees which include Head of Resources, Principal Chemical Engineer, Lead Onsite Project Manager, Senior Chemist, Head of Business Development, Controller, Human Resources head, and Corporate Communications head.  

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RESULTS OF OPERATIONS

American Battery Metals Corp. (“ABMC”) has not realized any revenue from its exploration activities on the Nye County property and it is extremely doubtful that the mineral property will be able to produce any revenue for many years. Without an ore reserve ABMC cannot seek substantial investors to further fund the Company so that production can be achieved. Not until commercial production is realized will ABMC have any chance of recognizing any form of revenue.

Results of Operations

Revenues

During the three months ended September 30, 2020 and 2019, the Company has not realized any revenues.

Expenses

Three Months Ended September 30, 2020 and 2019

During the three months ended September 30, 2020, the Company incurred $2,413,093 of operating expenses compared to $1,394,637 of operating expenses during the three months ended September 30, 2019. Overall, the increase in operating expense was due to the fact that the Company issued 13,240,000 common shares for services with a fair value of $1,582,270 in fiscal 2020 compared to 3,650,000 common shares for fair value of $690,500 during fiscal 2019.  The Company also had an increase in payroll expense from $151,000 during the three months ended September 30, 2019 to $447,000 during the three months ended September 30, 2020 as the Company had more employees and operations compared to the prior year.

In addition to operating expenses, the Company incurred interest and accretion expense of $1,362,547 during the three months ended September 30, 2020 compared to $1,100,494 during the three months ended September 30, 2019.  The increase in interest and accretion expense was due to the fact that the Company had more conversions of outstanding convertible notes in the current year compared to prior year which resulted in the acceleration of accretion on the debt discount that was originally derived due to the fair value of the convertibility features on the convertible notes.  The Company also had an increase in the loss due to the change in the fair value of the derivative liability from $62,554 for the three months ended September 30, 2019 to $773,886 for the three months ended September 30, 2020 due to the fact that the Company had a more volatile share price during the current year which resulted in a wider spread between the fair value of the common stock and the discounted conversion rates for the convertible debentures.  Finally, the Company recorded a gain on the settlement of debt of $1,612,433 compared a gain of $86,187 during the three months ended September 30, 2019 due to the fact that the Company entered into more settlement agreements for the conversion of notes payable as well as cash settlements of outstanding notes payable during the current fiscal period that resulted in an elimination of a larger amount of the outstanding derivative liability which resulted in a higher gain on settlement of debt.  As part of the cash settlement of outstanding notes payable, the Company incurred financing costs of $214,116 during the current period compared to $nil in the prior year.

Net Loss

During the three months ended September 30, 2020, the Company incurred a net loss of $3,151,209 or $0.01 loss per share compared to a net loss of $2,475,244 or $0.02 loss per share during the three months ended September 30, 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 payroll expense and 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 September 30, 2020, the Company had cash of $1,292,358 and total assets of $1,627,240 compared to cash of $829,924 and total assets of $1,161,314 as at June 30, 2020.  The increase in cash is due to the fact that the Company received $1,343,750 of financing from private placements and $1,075,000 of proceeds from convertible debentures during the period ended September 30, 2020 less repayments of convertible debentures of $882,571.  The increase in total assets is due to the increase in cash of $462,434 and increase in prepaid expense of $6,093.

The Company had total current liabilities of $4,718,322 at September 30, 2020 compared to $5,795,170 at June 30, 2020.  The decrease is due to a decline in the derivative liability from $4,519,654 at June 30, 2020 to $2,777,634 at September 30, 2020 based on the settlement of convertible notes payable from the conversion of debt and the repayment of notes payable with cash during the period.  As at September 30, 2020, the Company had total face value of convertible debt outstanding of $2,116,000 compared to total face value of convertible debt of $2,211,200 as at June 30, 2020.

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As at September 30, 2020, the Company had a working capital deficit of $3,182,537 compared to a working capital deficit of $4,727,912 at June 30, 2020. The decrease in the working capital deficit was due to the settlement of outstanding convertible notes payable, and the corresponding derivative liabilities associated with those convertible notes, with the issuance of common shares and payment of cash during the period.  

During the three months ended September 30, 2020, the Company issued 13,240,000 common shares for services with a fair value of $1,582,270, issued 15,153,315 common shares to convert outstanding notes payable and accrued interest totaling $1,770,232, 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 5,055,132 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.  

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

Cash Flows

Cash from Operating Activities.

During the three months ended September 30, 2020, the Company used $1,071,651 of cash for operating activities as compared to $838,772 during the three months ended September 30, 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 $1,343,750 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 three months ended September 30, 2020, the Company incurred $2,094 for the acquisition of equipment.  The Company did not have any investing activities during the three months ended September 30, 2019.

Cash from Financing Activities

During the three months ended September 30, 2020, the Company received $1,536,179 of financing, which included $1,343,750 from subscription proceeds related to a private placement of units, $1,075,000 of funding from the issuance of convertible notes payable less repayments of $882,571 on the convertible notes during the period.  Comparatively, for the three months ended September 30, 2019, the Company received $829,453 of funding from financing activities which was primarily from the funding and repayment of outstanding convertible notes.  

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.

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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.

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 September 30, 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 September 30, 2020.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 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 July 9, 2020, the Company issued 7,950,000 common shares with a fair value of $941,280 for consulting services.

On July 27, 2020, the Company issued a 10% Convertible Promissory Note in the principal amount of $520,000 with a purchase price of $510,000 to GS Capital Partners, LLC. The note is due October 27th, 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. For the first 6 months that the note is in effect, the conversion price shall be a fixed price of $0.25 per share. After the 6^th month anniversary of the note, the conversion price shall be equal to 64% of the lowest trading price of common stock during the prior twenty (20) trading day period ending on the conversion date. 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 August 14th, 2020, the Company issued a 10% Convertible Promissory Note in the principal amount of $312,000 with a purchase price of $306,000 to GS Capital Partners, LLC. The note is due August 14th, 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. For the first 6 months that the note is in effect, the conversion price shall be a fixed price of $0.25 per share. After the 6^th month anniversary of the note, the conversion price shall be equal to 64% of the lowest trading price of common stock during the prior twenty (20) trading day period ending on the conversion date. 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 August 18, 2020, the Company issued 2,890,000 common shares with a fair value of $262,990 for consulting services.  

On August 27, 2020, the Company issued 5,055,132 common shares for the exercise of cashless warrants.

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.

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On September 29, 2020, the Company issued a 1% Convertible Promissory Note in the principal amount of $302,500 with a purchase price of $275,000 to Jefferson Street Capital LLC. The note is due March 29, 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 equal to shall equal the lesser of (i) 70% multiplied by the lowest Trading Price (as defined in the note) during the previous ten (10) trading days before the issue date of the note (representing a discount rate of 30%) or (ii) 70% multiplied by the Market Price (as defined in the note). The note may be prepaid until 180 days from the issuance date at a price of 100% - 125% of the face amount plus any accrued interest as of the date of prepayment. The default rate on the note is 22% per annum.

On September 30, 2020, the Company issued 60,625,000 common shares and warrants to purchase 48,500,000 common shares for proceeds of $2,450,000.

From July 1, 2020 through September 30, 2020, the Company issued 15,153,315 common shares for the conversions of $594,450 in principal of convertible notes and $30,609 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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES 

None

ITEM 4. MINE SAFETY DISCLOSURE

Not Applicable

ITEM 5. OTHER INFORMATION

None

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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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