AMERICAN BATTERY TECHNOLOGY Co - Quarter Report: 2022 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarter period ended March 31, 2022
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934 |
Commission File number: 000-55088
| AMERICAN BATTERY TECHNOLOGY COMPANY |
| (Exact name of registrant as specified in its charter) |
| Nevada | 33-1227980 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
100 Washington Ave. Suite 100, Reno, NV 89503
(Address of principal executive offices)
(775) 473-4744
(Registrant’s telephone number)
(Former name, former address and former fiscal year, if changed since last report)
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 ☒ 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 ☒ 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.
| ☐ | Large-accelerated filer | ☐ | Accelerated filer | |
| ☒ | Non-accelerated filer | ☒ | Smaller reporting company | |
| ☐ | Emerging growth company |
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 ☒
The number of shares of the Registrant’s common stock, par value $0.001 per share, outstanding as of May 16, 2022 were .
AMERICAN BATTERY TECHNOLOGY COMPANY
Table of Contents
| 2 |
PART I – FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements 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 March 31, 2022 are not necessarily indicative of the results that can be expected for the year ending June 30, 2022.
| 3 |
AMERICAN BATTERY TECHNOLOGY COMPANY
Condensed Consolidated Balance Sheets
March 31, 2022 (Unaudited) | June 30, 2021 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 36,323,316 | $ | 12,843,502 | ||||
| Investments | 44,624 | |||||||
| Prepaid expenses and deposits | 400,929 | 1,292,216 | ||||||
| Total current assets | 36,768,869 | 14,135,718 | ||||||
| Property and equipment, net (Note 3) | 15,741,458 | 5,484,225 | ||||||
| Intangible assets (Note 4) | 3,815,910 | 1,643,160 | ||||||
| Right-of-use asset | 273,449 | |||||||
| Total assets | $ | 56,599,686 | $ | 21,263,103 | ||||
| LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 3,528,576 | $ | 1,616,852 | ||||
| Due to related parties (Note 5) | 205,646 | 205,646 | ||||||
| Total current liabilities | 3,734,222 | 1,822,498 | ||||||
| Long-term liabilities | 204,081 | |||||||
| Total liabilities | 3,938,303 | 1,822,498 | ||||||
| Commitments and contingencies (Note 11) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Series A Preferred Stock Authorized: preferred shares, par value of $per share issued and outstanding: and preferred share as of March 31, 2022 and June 30, 2021, respectively | 500 | |||||||
| Series B Preferred Stock Authorized: preferred shares, par value of $per share issued and outstanding: preferred shares as of March 31, 2022 and June 30, 2021 | ||||||||
| Series C Preferred Stock Authorized: preferred shares, par value of $per share issued and outstanding: and preferred shares as of March 31, 2022 and June 30, 2021, respectively | 2,077,000 | |||||||
| Common Stock Authorized: common shares, par value of $ per share issued and outstanding: and common shares as of March 31, 2022 and June 30, 2021, respectively | 645,695 | 573,268 | ||||||
| Additional paid-in capital | 183,792,910 | 121,615,738 | ||||||
| Common stock issuable | 7,500 | 247,750 | ||||||
| Accumulated deficit | (131,784,722 | ) | (105,073,651 | ) | ||||
| Total stockholders’ equity | 52,661,383 | 19,440,605 | ||||||
| Total liabilities and stockholders’ equity | $ | 56,599,686 | $ | 21,263,103 | ||||
(The accompanying notes are an integral part of these condensed consolidated unaudited financial statements)
| 4 |
AMERICAN BATTERY TECHNOLOGY COMPANY
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended March 31, 2022 | Three months ended March 31, 2021 | Nine months ended March 31, 2022 | Nine months ended March 31, 2021 | |||||||||||||
| Operating expenses | ||||||||||||||||
| Exploration costs | $ | 202,555 | $ | 211 | $ | 473,539 | $ | 109,910 | ||||||||
| General and administrative | 2,631,020 | 6,806,803 | 26,454,436 | 31,727,157 | ||||||||||||
| Total operating expenses | 2,833,575 | 6,807,014 | 26,927,975 | 31,837,067 | ||||||||||||
| Net loss before other income (expense) | (2,833,575 | ) | (6,807,014 | ) | (26,927,975 | ) | (31,837,067 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Accretion and interest expense | (5,962 | ) | (713,970 | ) | (10,102 | ) | (2,914,470 | ) | ||||||||
| Financing costs | (41 | ) | (405,137 | ) | ||||||||||||
| Change in fair value of derivative liability (Note 7) | (12,637,125 | ) | (19,655,296 | ) | ||||||||||||
| Gain on settlement of debt | 15,220,668 | 18,683,279 | ||||||||||||||
| Gain on sale of mining claims | 153,393 | 153,393 | ||||||||||||||
| Unrealized loss on investment | (5,376 | ) | (5,376 | ) | ||||||||||||
| Other income | 60,969 | 1,396 | 100,744 | 1,396 | ||||||||||||
| Total other income (expense) | 203,024 | 1,870,928 | 238,659 | (4,290,228 | ) | |||||||||||
| Net loss attributable to stockholders | $ | (2,630,551 | ) | $ | (4,936,086 | ) | $ | (26,689,316 | ) | $ | (36,127,295 | ) | ||||
| Net loss per share, basic and diluted | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.08 | ) | ||||
| Weighted average shares outstanding | 634,379,111 | 506,775,985 | 619,973,643 | 476,505,278 | ||||||||||||
(The accompanying notes are an integral part of these condensed consolidated unaudited financial statements)
| 5 |
AMERICAN BATTERY TECHNOLOGY COMPANY
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
For the three months ended March 31, 2022
| Series A Preferred Shares | Series A Preferred Par Amount | Series C Preferred Shares | Series C Preferred Par Amount | Common Shares | Par Amount | Additional Paid-In Capital | Common Stock Issuable | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | 500,000 | 500 | 27,700 | 277,000 | 631,787,717 | 631,788 | 180,279,474 | 3,304,500 | (129,154,171 | ) | 55,339,091 | |||||||||||||||||||||||||||||
Shares issued for services | - | - | 4,023,470 | 4,023 | 4,675,820 | (3,297,000 | ) | 1,382,843 | ||||||||||||||||||||||||||||||||
| Cancellation of previously issued shares | - | - | (1,000,000 | ) | (1,000 | ) | (2,029,000 | ) | (2,030,000 | ) | ||||||||||||||||||||||||||||||
| Shares issued for exercise of warrants | - | - | 8,668,150 | 8,668 | 591,332 | 600,000 | ||||||||||||||||||||||||||||||||||
| Shares issued pursuant to Series C preferred share conversion | - | (27,700 | ) | (277,000 | ) | 2,216,000 | 2,216 | 274,784 | ||||||||||||||||||||||||||||||||
| Redemption of Series A preferred shares | (500,000 | ) | (500 | ) | - | - | 500 | |||||||||||||||||||||||||||||||||
| Dividends declared | - | - | - | |||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | (2,630,551 | ) | (2,630,551 | ) | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | 645,695,337 | 645,695 | 183,792,910 | 7,500 | (131,784,722 | ) | 52,661,383 | |||||||||||||||||||||||||||||||||
For the three months ended March 31, 2021
| Series A Preferred Shares | Series A Preferred Par Amount | Series C Preferred Shares | Series C Preferred Par Amount | Common Shares | Par Amount | Additional Paid-In Capital | Common Stock Issuable | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 500,000 | 500 | 281,450 | 2,814,500 | 502,622,746 | 502,622 | 84,517,981 | 28,750 | (94,408,024 | ) | (6,543,671 | ) | ||||||||||||||||||||||||||||
| Shares issued for services | - | - | 2,510,036 | 2,510 | 4,457,182 | (35,000 | ) | 4,424,692 | ||||||||||||||||||||||||||||||||
| Shares issued for exercise of warrants | - | - | 30,716,118 | 30,715 | 500,535 | 531,250 | ||||||||||||||||||||||||||||||||||
| Shares issued pursuant to note conversion | - | - | 1,400,779 | 1,400 | 5,326,525 | 5,327,925 | ||||||||||||||||||||||||||||||||||
| Shares issued pursuant to Series C preferred shares conversion | - | (41,250 | ) | (412,500 | ) | 3,300,000 | 3,300 | 409,200 | ||||||||||||||||||||||||||||||||
| Shares issued pursuant to share purchase agreement | - | - | 4,250,000 | 4,250 | 9,227,388 | 9,231,638 | ||||||||||||||||||||||||||||||||||
| Share subscriptions received | - | - | - | 100,000 | 100,000 | |||||||||||||||||||||||||||||||||||
| Beneficial conversion feature on convertible debt | - | - | 69,252 | 69 | 271,710 | 271,779 | ||||||||||||||||||||||||||||||||||
| Dividends declared | - | - | - | (51,270 | ) | (51,270 | ) | |||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | (4,936,086 | ) | (4,936,086 | ) | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | 500,000 | 500 | 240,200 | 2,402,000 | 544,868,931 | 544,866 | 104,710,521 | 93,750 | (99,395,380 | ) | 8,356,257 | |||||||||||||||||||||||||||||
| 6 |
For the nine months ended March 31, 2022
| Series A Preferred Shares | Series A Preferred Par Amount | Series C Preferred Shares | Series C Preferred Par Amount | Common Shares | Par Amount | Additional Paid-In Capital | Common Stock Issuable | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | 500,000 | 500 | 207,700 | 2,077,000 | 573,267,632 | 573,268 | 121,615,738 | 247,750 | (105,073,651 | ) | 19,440,605 | |||||||||||||||||||||||||||||
| Shares issued for services | - | - | 14,128,728 | 14,128 | 20,323,815 | (221,500 | ) | 20,116,443 | ||||||||||||||||||||||||||||||||
| Cancellation of previously issued shares | - | - | (1,000,000 | ) | (1,000 | ) | (2,029,000 | ) | (2,030,000 | ) | ||||||||||||||||||||||||||||||
| Shares issued for exercise of warrants | - | - | 14,293,366 | 14,293 | 923,207 | (18,750 | ) | 918,750 | ||||||||||||||||||||||||||||||||
| Shares issued from private placement, net of issuance costs | - | - | 25,389,611 | 25,390 | 36,913,261 | 36,938,651 | ||||||||||||||||||||||||||||||||||
| Shares issued pursuant to Series C preferred shares conversion | - | (207,700 | ) | (2,077,000 | ) | 16,616,000 | 16,616 | 2,060,384 | ||||||||||||||||||||||||||||||||
| Redemption of Series A preferred shares | (500,000 | ) | (500 | ) | - | - | 500 | |||||||||||||||||||||||||||||||||
| Shares issued pursuant to share purchase agreement | - | - | 3,000,000 | 3,000 | 3,985,005 | 3,988,005 | ||||||||||||||||||||||||||||||||||
| Dividends declared | - | - | - | (21,755 | ) | (21,755 | ) | |||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | (26,689,316 | ) | (26,689,316 | ) | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | 645,695,337 | 645,695 | 183,792,910 | 7,500 | (131,784,722 | ) | 52,661,383 | |||||||||||||||||||||||||||||||||
For the nine months ended March 31, 2021
| Series A Preferred Shares | Series A Preferred Par Amount | Series C Preferred Shares | Series C Preferred Par Amount | Common Shares | Par Amount | Additional Paid-In Capital | Common Stock Issuable | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||
| Balance, June 30, 2020 | 300,000 | 300 | 365,191,213 | 365,191 | 55,452,951 | 2,450,000 | (63,208,946 | ) | (4,940,504 | ) | ||||||||||||||||||||||||||||||
| Shares issued for services | 200 | - | 33,650,036 | 33,650 | 27,038,312 | 27,072,162 | ||||||||||||||||||||||||||||||||||
| Shares issued for exercise of warrants | - | - | 43,097,680 | 43,096 | 488,154 | 531,250 | ||||||||||||||||||||||||||||||||||
| Shares issued from private placement, net of issuance costs | - | 241,450 | 2,414,500 | 60,625,000 | 60,625 | 2,389,375 | (2,450,000 | ) | 2,414,500 | |||||||||||||||||||||||||||||||
| Shares issued pursuant to note conversion | - | 40,000 | 400,000 | 22,685,750 | 22,685 | 7,890,707 | 8,313,392 | |||||||||||||||||||||||||||||||||
| Shares issued pursuant to Series C preferred shares conversion | - | (41,250 | ) | (412,500 | ) | 3,300,000 | 3,300 | 409,200 | ||||||||||||||||||||||||||||||||
| Shares issued pursuant to share purchase agreement | - | - | 16,250,000 | 16,250 | 10,415,388 | 10,431,638 | ||||||||||||||||||||||||||||||||||
| Shares issued pursuant to property purchase agreement | - | - | 69,252 | 69 | 271,710 | 271,779 | ||||||||||||||||||||||||||||||||||
| Share subscriptions received | - | - | - | 93,750 | 93,750 | |||||||||||||||||||||||||||||||||||
| Share purchase warrants issued | - | - | - | 83,724 | 83,724 | |||||||||||||||||||||||||||||||||||
| Beneficial conversion feature on convertible debt | - | - | 271,000 | 271,000 | ||||||||||||||||||||||||||||||||||||
| Dividends declared | - | - | - | (59,139 | ) | (59,139 | ) | |||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | (36,127,295 | ) | (36,127,295 | ) | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | 500,000 | 500 | 240,200 | 2,402,000 | 544,868,931 | 544,866 | 104,710,521 | 93,750 | (99,395,380 | ) | 8,356,257 | |||||||||||||||||||||||||||||
(The accompanying notes are an integral part of these condensed consolidated unaudited financial statements)
| 7 |
AMERICAN BATTERY TECHNOLOGY COMPANY
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine months ended March 31, 2022 | Nine months ended March 31, 2021 | |||||||
| Operating Activities | ||||||||
| Net loss, attributable to stockholders | $ | (26,689,316 | ) | $ | (36,127,295 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Accretion expense | 2,803,429 | |||||||
| Depreciation expense | 36,818 | 7,741 | ||||||
| Right-of-use asset amortization | 38,121 | |||||||
| Net change in operating lease liability | (21,384 | ) | ||||||
| Change in fair value of derivative liability | 19,655,296 | |||||||
| Discount on convertible notes payable | 73,500 | |||||||
| Gain on settlement of debt | (18,683,279 | ) | ||||||
| Shares issued for services | 18,086,443 | 27,072,162 | ||||||
| Loss on impairment | 186,779 | |||||||
| Settlement of mining claims in stock | (50,000 | ) | ||||||
| Unrealized loss on investment | 5,376 | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and deposits | 891,287 | (184,253 | ) | |||||
| Accounts payable and accrued liabilities | 254,676 | 561,498 | ||||||
| Due to related parties | (419,303 | ) | ||||||
| Net Cash Used in Operating Activities | (7,261,200 | ) | (5,240,504 | ) | ||||
| Investing Activities | ||||||||
| Acquisition of property and equipment | (8,805,942 | ) | (907,380 | ) | ||||
| Purchase of water rights | (2,172,750 | ) | (817,000 | ) | ||||
| Net Cash Used In Investing Activities | (10,978,692 | ) | (1,724,380 | ) | ||||
| Financing Activities | ||||||||
| Dividends paid | (125,700 | ) | ||||||
| Proceeds from issuance of convertible notes payable | 1,350,000 | |||||||
| Repayment of convertible note payable | (1,761,397 | ) | ||||||
| Repayment of note payable | (59,236 | ) | ||||||
| Proceeds from share purchase agreement | 10,431,638 | |||||||
| Proceeds from exercise of share purchase warrants | 918,750 | 614,974 | ||||||
| Proceeds from issuance of common shares | 43,088,006 | 2,508,250 | ||||||
| Share issuance costs | (2,161,350 | ) | ||||||
| Net Cash Provided by Financing Activities | 41,719,706 | 13,084,229 | ||||||
| Change in Cash | 23,479,814 | 6,119,345 | ||||||
| Cash – Beginning | 12,843,502 | 829,924 | ||||||
| Cash – End | $ | 36,323,316 | $ | 6,949,269 | ||||
| Supplemental disclosures | ||||||||
| Interest paid | 10,102 | |||||||
| Non-cash investing and financing activities | ||||||||
| Fair value of preferred shares redeemed | 100 | |||||||
| Noncash construction costs in accounts payable | 1,674,888 | |||||||
| Initial value of lease liabilities | 311,570 | |||||||
| Discount on convertible debt | 403,378 | |||||||
| Original issuance discount on convertible debt | 51,000 | |||||||
| Beneficial conversion feature on convertible debt | 271,000 | |||||||
| Common shares issued for conversion of debt | 7,913,392 | |||||||
| Preferred shares issued for conversion of debt | 400,000 | |||||||
| Common shares issued for conversion of preferred shares | 2,216,000 | 412,500 | ||||||
| Common shares issued for acquisition of property | 271,779 | |||||||
| Fair value of commission warrants issued | 2,699,039 | |||||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements)
| 8 |
AMERICAN BATTERY TECHNOLOGY COMPANY
Notes to the Condensed Consolidated Financial Statements
For the period ended March 31, 2022
(unaudited)
1. Organization and Nature of Operations
American Battery Technology Company (“ABTC”) is a startup company in the lithium-ion battery industry that is working to increase the domestic US production of battery materials, such as lithium, nickel, cobalt and manganese 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. Through this three-pronged approach ABTC is working to both increase the domestic production of these battery materials, and to ensure that as these materials reach their end of lives that the constituent elemental battery metals are returned to the domestic 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. We have limited operating history and have not yet generated or realized any revenues from our activities. Our principal executive offices are located at 100 Washington Ave., Suite 100, Reno, NV 89503.
Liquidity and Capital Resources
During the nine months ended March 31, 2022, the Company incurred a net loss of $26.7 million and used cash of $7.3 million for operating activities. At March 31, 2022, the Company has an accumulated deficit of $131.8 million.
On September 27, 2021, the Company secured net proceeds of $36,938,651 to construct and commission its lithium-ion battery recycling pilot plant, fund operations, and increase research and development activities. The Company believes its recent capital raise, and its current cash holdings will be sufficient to meet its future working capital needs. The Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash balances for its planned operations. The Company may need to raise additional capital in the future. However, the Company cannot assure that it will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, management believes that the Company has sufficient capital and liquidity to fund its operations for at least one year from the date of issuance of the accompanying financial statements.
These 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 and Principles of Consolidation |
The condensed consolidated 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.
These condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Oroplata Exploraciones E Ingenieria SRL (inactive) and LithiumOre Corporation (formerly Lithortech Resources Inc) and ABTC AG, LLC. All inter-company accounts and transactions have been eliminated upon consolidation.
| b) | Interim Financial Statements |
These condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The interim financial statements and notes thereto should be read in conjunction with the Company’s latest Annual Report on Form 10-K for the fiscal year ended June 30, 2021. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
| c) | Use of Estimates |
The preparation of these condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the fair value of stock-based compensation, recoverability of long-lived assets and deferred income tax asset valuation allowances.
The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
| 9 |
AMERICAN BATTERY TECHNOLOGY COMPANY
Notes to the Condensed Consolidated Financial Statements
For the period ended March 31, 2022
(unaudited)
2. Summary of Significant Accounting Policies (continued)
| d) | Loss per Share |
The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and convertible shares. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At March 31, 2022, the Company had share purchase warrants outstanding exercisable into common shares that are dilutive in nature.
| e) | Recent Accounting Pronouncements |
In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments. The guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative under ASC 815 or for convertible debt issued at a substantial premium. The ASU is effective for annual reporting periods beginning after December 15, 2021, including interim reporting periods within those annual periods, with early adoption permitted no earlier than the fiscal year beginning after December 15, 2020. The Company is currently evaluating the timing and method of adoption and the related impact of the new guidance on the earnings per share and on its financial statements.
In November 2021, FASB issued ASU No. 2021-10 “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.” This ASU will improve the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity’s financial statements. ASU No. 2021-10 is effective for financial statements issued for annual periods beginning after December 15, 2021, with early application permitted. This ASU is applicable to the Company’s fiscal year beginning July 1, 2022. The Company is currently evaluating the timing and method of adoption and the related impact of the new guidance on the earnings per share and on its financial statements.
3. Property and Equipment
| Building | Equipment | Vehicles | Land | Total | ||||||||||||||||
| Cost: | ||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | 99,466 | $ | 61,916 | $ | 5,340,621 | $ | 5,502,003 | |||||||||||
| Additions | 38,327 | 1,571,322 | 1,609,649 | |||||||||||||||||
| Construction in process | 7,732,151 | 1,139,030 | 8,871,181 | |||||||||||||||||
| Impairment loss | (186,779 | ) | (186,779 | ) | ||||||||||||||||
| Balance, March 31, 2022 | $ | 7,732,151 | $ | 1,276,823 | $ | 61,916 | $ | 6,725,164 | $ | 15,796,054 | ||||||||||
| Accumulated Depreciation: | ||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | 4,356 | $ | 13,422 | $ | $ | 17,778 | ||||||||||||
| Additions | 27,808 | 9,010 | 36,818 | |||||||||||||||||
| Balance, March 31, 2022 | $ | $ | 32,164 | $ | 22,432 | $ | $ | 54,596 | ||||||||||||
| Carrying Amounts: | ||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | 95,110 | 48,494 | $ | 5,340,621 | $ | 5,484,225 | ||||||||||||
| Balance, March 31, 2022 | $ | 7,732,151 | $ | 1,244,659 | 39,484 | $ | 6,725,164 | $ | 15,741,458 | |||||||||||
The building and equipment expenditures are currently under construction and are not available for use.
The Company has impaired the carrying value of land purchased February 2021 in Tonopah, NV. The Company adjusted the carrying value of the land to that of the closing price stated in the agreement ($85,000). The impairment is due to the change in value of the stock from the time the agreement was originally executed to the time the stock was transferred into the mutual escrow account. The execution of the contract in full, including title transfer, did not occur until September 2021. The Company has adjusted the carrying value of the land using the agreed-upon contract price of the parcel at inception of the contract. Loss on impairment of $186,779 is recognized in general and administrative expenses for the nine months ended March 31, 2022.
| 10 |
AMERICAN BATTERY TECHNOLOGY COMPANY
Notes to the Condensed Consolidated Financial Statements
For the period ended March 31, 2022
(unaudited)
4. Intangible Assets
| Water Rights | ||||
| Balance, June 30, 2021 | $ | 1,643,160 | ||
| Additions | 2,172,750 | |||
| Impairment loss | ||||
| Balance, March 31, 2022 | $ | 3,815,910 | ||
To date, the Company has purchased water rights in the City of Fernley, Nevada for $3,815,910. The water rights will be used to ensure the Company’s lithium-ion battery recycling plant will have adequate water to operate at full capacity once construction is complete. The water rights are treated in accordance with ASC 350, Intangible Assets, and have an unlimited useful life given that there are no expiration dates on the water rights acquired by the Company.
5. Related Party Transactions
As of March 31, 2022, the Company owes $205,646 (June 30, 2021 - $205,646) to two former executives of the Company for advances made to the Company to fund day-to-day operations. The amounts owing are unsecured, non-interest bearing, and due on demand.
6. Leases
A lease provides the lessee the right to control the use of an identified asset for a period in exchange for consideration. Operating lease right-of-use assets (“ROU assets”) are presented within the asset section of the Company’s Consolidated Balance Sheets, while lease liabilities are included within the liability section of the Company’s Consolidated Balance Sheets as of March 31, 2022.
ROU assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Most operating leases contain renewal options that provide for rent increases based on prevailing market conditions. The terms used to calculate the ROU assets for certain properties include the renewal options that the Company is reasonably certain to exercise.
The discount rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or when that is not readily determinable, the Company estimates a rate of 8.0% for the period ending March 31, 2022 based on historical lending agreements. ROU assets include any lease payments required to be made prior to commencement and exclude lease incentives. Both ROU assets and lease liabilities exclude variable payments not based on an index or rate, which are treated as period costs. The Company’s lease agreements do not contain significant residual value guarantees, restrictions, or covenants.
The Company occupies office facilities under lease agreements that expire at various dates. The Company does not have any significant finance leases. Total operating lease costs for the nine months ended March 31, 2022 were $38,121.
As of March 31, 2022, short term lease liabilities of $86,105 are included in “Accounts payable and accrued expenses” on the consolidated balance sheets. The table below presents total operating lease ROU assets and lease liabilities at:
March 31, 2022 | June 30, 2021 | |||||||
| Operating lease right-of-use asset | $ | 273,449 | $ | |||||
| Operating lease liabilities | $ | 290,186 | $ | |||||
The table below presents the maturities of operating lease liabilities as of March 31, 2022:
| March 31, 2023 | $ | 106,591 | ||
| March 31, 2024 | 130,148 | |||
| March 31, 2025 | 88,631 | |||
| Total lease payments | 325,370 | |||
| Less: discount | (35,184 | ) | ||
| Total operating lease liabilities | $ | 290,186 |
The table below presents the weighted average remaining lease term for operating leases and weighted average discount rate used in calculating operating lease right-of-use asset as of March 31, 2022.
| Weighted average lease term (years) | 2.6 | |||
| Weighted average discount rate | 8.0 | % |
| 11 |
AMERICAN BATTERY TECHNOLOGY COMPANY
Notes to the Condensed Consolidated Financial Statements
For the period ended March 31, 2022
(unaudited)
7. Derivative Liabilities
The Company records the fair value of the conversion option of 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 condensed consolidated statements of operations.
For the nine months ended March 31, 2022, the Company did not record an expense associated with the change in fair market value of derivatives because the Company had no derivative liability at March 31, 2022 and June 30, 2021. For the nine months ended March 31, 2021, the Company recognized an expense related to the change in fair value of derivative liabilities of $19,655,296, offset by gain on settlement of debt of $18,683,279 for the same period.
8. Stockholders’ Equity
The Company’s authorized common stock consists of shares of common stock, with par value of $.
Series A Preferred Stock
The Company has shares of Series A Preferred Stock authorized with a par value of $. The shares allow the holder to vote 1,000 shares for each share of Series A stock in any vote of the shareholders of the Company and the Board is authorized to issue such preferred stock as is necessary. On August 25, 2021, the Board approved a resolution to retire all the outstanding Series A shares of Preferred Stock. On January 27, 2022, the Company redeemed all outstanding shares of Series A Preferred Stock. The Company had Series A Preferred Stock issued and outstanding of and as of March 31, 2022 and June 30, 2021, respectively.
Series B Preferred Stock
As of March 31, 2022 and June 30, 2021, shares authorized with a par value of $, shares issued.
Series C Preferred Stock
On December 18, 2020, the Company issued 48.29 units of Series C Preferred Stock (shares of Series C preferred stock) at $50,000 per unit for proceeds of $2,414,500. Each unit is comprised of 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 $0.25 per share until March 31, 2023. Each holder is entitled to receive a non-cumulative dividend at an 8% rate per share, per annum. 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 issue the number of common shares equal to the dividend amount divided by the stated value and then multiplied by eighty.
In addition, on December 18, 2020, the Company issued 8 units of Series C Preferred Stock ( shares 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.
During the nine months ended March 31, 2022, the Series C Preferred Stockholders converted shares of Series C Preferred Stock (par value of $2,077,000) to shares of common stock.
On February 2, 2022 the Company issued a Mandatory Conversion Notice to the remaining Series C Preferred stockholders. The notice converts all outstanding shares of Series C Preferred Stock to common stock at a conversion ratio of shares of common stock for each share of Series C Preferred Stock.
On February 8, 2022 the Company issued $125,700 in dividend payments to Series C stockholders that held shares from date of issuance. No remaining dividends are expected to be paid in relation to Series C Preferred Stock as there are no remaining Series C Preferred Stock outstanding as of March 31, 2022.
Common Stock
Nine months ended March 31, 2022
During the period, the Company issued common shares pursuant to the conversion of shares of Series C Preferred Stock at a conversion ratio of shares of common stock for each share of Series C Preferred Stock.
During the period, the Company issued units for proceeds of $39,100,001 pursuant to a private placement issuance at $ per share. Each unit is comprised of one common share of the Company and one share purchase warrant, where each share purchase warrant is exercisable into one common share of the Company at $1.75 per share for a period of five years from the issuance date. As part of the financing, the Company paid $2,161,350 of share issuance costs and issued 1,955,000 warrants as a commission fee, which are exercisable at $ per common share for a period of three years from the date of the issuance. The fair value of the commission warrants was $2,699,039 and was determined based on the Black-Scholes option pricing model assuming volatility of %, risk-free rate of %, expected life of , and no expected forfeitures or dividends.
During the period, the Company issued common shares pursuant the exercise of 14,000,000 share purchase warrants for proceeds of $, of which 250,000 share purchase warrants, pursuant an aggregate cash exercise price of $18,750, exercised during the fiscal year ended June 30, 2021.
During the period, the Company issued common shares pursuant the Share Purchase Agreement, effective April 2, 2021, for aggregate proceeds of $3,988,005.
During the period, the Company issued common shares for services with a fair value of $18,086,443, including common shares with a fair value of $11,993,327 to officers and directors of the Company. As of March 31, 2022, the Company has shares of common stock issuable for professional services with a fair value of $7,500 for professional services to a current director of the Company.
On January 27, 2022, the Company issued shares pursuant a cashless exercise of 750,000 share purchase warrants.
On January 27, 2022, the Company and a former executive agreed to cancel, for no consideration, previously issued shares with an initial value of $2,030,000. The Company has recorded a contra-expense related to the cancelled shares.
| 12 |
AMERICAN BATTERY TECHNOLOGY COMPANY
Notes to the Condensed Consolidated Financial Statements
For the period ended March 31, 2022
(unaudited)
8. Stockholders’ Equity (continued)
Common Stock (continued)
Nine months ended March 31, 2021
During the period, the Company issued common shares with a fair value of $7,913,391 for the conversion of $2,002,876 of note payable, $77,723 of accrued interest and fees and $21,429,714 of derivative liability resulting in a gain on settlement of $15,596,922.
During the period, the Company issued common shares for services with a fair value of $27,072,162 for professional services, including shares issued to former directors of the Company with a fair value of $4,837,500.
On October 6, 2020, the Company entered into a Purchase Agreement (the “Agreement”) with Tysadco Partners LLC, a Delaware limited company (“Tysadco”). Pursuant to the Agreement,
During the period, the Company issued 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 period, the Company issued common shares pursuant to the cashless exercise of share purchase warrants and common shares pursuant to the exercise of share purchase warrants for total proceeds of $531,250. As of March 31, 2021, the Company had received additional $for future issuance of common shares.
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Balance, June 30, 2021 | 27,866,000 | $ | 0.09 | |||||
| Issued | 27,344,611 | $ | 1.73 | |||||
| Exercised | (14,000,000 | ) | $ | 0.08 | ||||
| Expired | $ | |||||||
| Balance, March 31, 2022 | 41,210,611 | $ | 1.18 | |||||
| Outstanding and Exercisable | ||||||||
| Range of Exercise Prices | Number of Warrants | Weighted Average Remaining Contractual Life (years) | ||||||
| 12,250,000 | ||||||||
| 1,616,000 | ||||||||
| 1,955,000 | ||||||||
| 25,389,611 | ||||||||
| 41,210,611 | 3.7 | |||||||
The Company has established a restricted share unit (RSU) incentive plan for executives, directors, and certain employees. Awards generally vest over a -year period at a rate of % per annum commencing on the first anniversary of the grant date.
stock-based compensation has been recorded in relation to the 2021 Equity Incentive Stock Plan for the nine months ended March 31, 2022 and nine months ended March 31, 2021.
11. Commitments and Contingencies
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Management is currently not aware of any such legal proceedings or claims that could have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results.
| 13 |
AMERICAN BATTERY TECHNOLOGY COMPANY
Notes to the Condensed Consolidated Financial Statements
For the period ended March 31, 2022
(unaudited)
11. Commitments and Contingencies (Continued)
Operating Leases
We lease our principal office location in Reno, Nevada. We also lease two adjacent Lab spaces in the University of Nevada, Reno on short term leases. The principal office location lease expires on November 30, 2024 and the Lab leases expire on March 15, 2023. Consistent with the guidance in ASC 842, we have recorded the principal office lease in our consolidated balance sheet as an operating lease. For further information on operating lease commitments, refer to Note 6 - Leases.
Financial Assurance:
Nevada and other states, as well as federal regulations governing mine operations on federal land, require financial assurance to be provided for the estimated costs of mine reclamation and closure, including groundwater quality protection programs. ABTC has satisfied financial assurance requirements using a combination of cash bonds and surety bonds. The amount of financial assurance ABTC is required to provide will vary with changes in laws, regulations, reclamation and closure requirements, and cost estimates. At March 31, 2022, ABTC’s financial assurance obligations associated with U.S. mine closure and reclamation/restoration cost estimate totaled $47,730, for which the Company is legally required to satisfy its financial assurance obligations for its mining properties in Nevada.
12. Subsequent Events
The Company has evaluated subsequent events through the date the financial statements were available to be issued and has not identified any additional subsequent events requiring adjustments to, or disclosures in the accompanying condensed financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 material manufacturers, 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 material manufacturing and material refining portions of the supply chain. This has led to an imbalance within the domestic US supply chain and has caused most of the 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 2021” report, the US Geological Survey estimated that less than 1% of each of these critical and strategic battery metals (lithium, nickel, cobalt, and manganese) produced globally in 2021 were produced within the US.
American Battery Technology Company (“ABTC”) is a technology development and commercialization company in the lithium-ion battery industry that is working to increase the domestic US production of these low-cost and low-environmental impact battery materials 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 ABTC is working to both increase the domestic production of these battery metals through the acquisition and exploration of mining claims, and to ensure that as these materials reach their end of lives that the constituent elemental metals are returned to the domestic manufacturing supply chain in a closed-loop fashion.
To implement this business strategy, the company is currently constructing its first integrated lithium-ion battery recycling facility, which will take in waste and end-of-life battery materials from the electric vehicle, stationary storage, and consumer electronics industries. The construction, commissioning, and operations of this facility are of the highest priority to the company, and as such it has significantly increased the resources devoted to its execution including the further internal hiring of technical staff, expansion of laboratory facilities, and purchasing of equipment. Correspondingly, while the company has traditionally enlisted the services of many external advisors and consultants, the company has conducted a thorough review and has ended service agreements that are not critical to the execution of this mission. The net impact of this increase in internal technical resources, and decrease in external consulting services, has resulted in an $9.0 million reduction in the value of shares issued for services for the nine months ended March 31, 2022 from the nine months ended March 31, 2021.
Additionally, the Company is accelerating the demonstration and commercialization of its internally developed low-cost and low-environmental impact processing train for the manufacturing of battery grade lithium hydroxide from Nevada-based sedimentary claystone resources. The Company has been awarded a grant cooperative agreement from the US Department of Energy Advanced Manufacturing Office through the Critical Materials Innovation program to support the construction and operation of a multi-ton per day integrated continuous demonstration system to support the scale-up and commercialization of these technologies. The company has secured approximately 10,340 acres of mining leases of lithium-bearing sedimentary claystone resources near Tonopah, NV to facilitate the high-volume commercialization and scale-up of these efforts.
Financial Highlights:
| ● | Cash was $36.3 million as of March 31, 2022 |
| ● | Cash provided by financing activities for the nine months ended March 31, 2022 was $41.7 million |
| ● | Cash used for the acquisition of property, construction, equipment and water rights for the nine months ended March 31, 2022 was $11.0 million |
| ● | Cash used in operations for the nine months ended March 31, 2022 was $7.3 million, up 39% year-over-year |
| ● | Total operating costs for the nine months ended March 31, 2022 were $26.9 million, down 15% year-over-year |
| ● | The Company recognized other income for the nine months ended of $239,000, consisting of rental income, grant awards and gain on sale of mining claims. |
| ● | As of March 31, 2022 the Company has redeemed and converted all outstanding preferred shares |
Components of Statements of Operations
Operating Expenses
Exploration costs consist primarily of expenditures related to the drilling, travel and soil sampling costs in the exploration of new primary resources of battery metals.
General and administrative expenses consist of office expense, legal, salaries and benefits and laboratory costs. The Company has recognized non-cash expenses related to shares issued for professional services of $4.4 million during the three months ended March 31, 2021, and $1.4 million for the three months ended March 31, 2022. The Company also recognized a non-cash credit of $2.0 million due to the forfeiture of 2,000,000 million shares reclaimed from a former executive. The Company has recognized non-cash expenses related to shares issued for professional services of $18.1 million during the nine months ended March 31, 2022 compared to $27.1 million during the nine months ended March 31, 2021.
During the nine months ended March 31, 2022, the Company incurred $26.9 million of operating expenses compared to $31.8 million of operating expenses during the nine months ended March 31, 2021.
Other Income (Expense)
The Company recorded other income of $239,000 during the nine months ended March 31, 2022 compared to other expenses of $4.3 million during the nine months ended March 31, 2021.
The Company recognized a gain of $153,393 related to the sale of mining claims it holds deed to in Railroad Valley, NV during the three months ended March 31, 2022. The gain has been included in operating activities given the operating nature of the mining claims sold by the Company.
Net Loss
During the nine months ended March 31, 2022, the Company incurred a net loss of $26.7 million or $0.04 loss per share compared to a net loss of $36.1 million or $0.08 loss per share during the nine months ended March 31, 2021.
Liquidity and Capital Resources
At March 31, 2022, the Company had cash of $36.3 million and total assets of $56.6 million compared to cash of $12.8 million and total assets of $21.3 million at June 30, 2021. The increase in cash is due to the Company having received net proceeds of $43.1 million from private placements and $1.0 million of proceeds from exercises of share purchase warrants. The increase in total assets was due to the increase in cash of $23.5 million and increase in property and equipment and intangible assets of $12.7 million relating to additional acquisitions of land, construction in progress, equipment and water rights which will be used for the Company’s future pilot plant operations.
| 15 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources (continued)
The Company had total current liabilities of $3.7 million at March 31, 2022, compared to $1.8 million at June 30, 2021. The increase in current liabilities is due to an increase in accounts payable and accrued liabilities based on largely on an increase in capital expenditures, an increase in accounts payable and accrued liabilities and day-to-day operating expenditures.
As of March 31, 2022, the Company had working capital of $33.0 million compared to a working capital of $12.3 million at June 30, 2021. The increase in working capital was primarily attributed to the inflow of financing activity during the nine months ended March 31, 2022.
Cash Flows
Cash from Operating Activities.
During the nine months ended March 31, 2022, the Company used $7.3 million of cash for operating activities as compared to $5.2 million during the nine months ended March 31, 2021. The increase in the use of cash for operating activities was due to an increase in operating activities in the current period including an increase in recruiting, employment, legal and accounting costs.
Cash from Investing Activities
During the nine months ended March 31, 2022, the Company paid $11.0 million on expenditures related to the construction, procurement of equipment and water rights necessary to construct and commission its lithium-ion battery recycling Pilot Plant. This is in comparison to the acquisition costs of $1.7 million for the nine months ended March 31, 2021. The increase in the investing activities is due to the Company continuing to invest in the construction of its Pilot Plant where the necessary demonstrations will occur, as well as the continued acquisition of water rights and land in the Northern Nevada region to support further operations of the Company. The Company expects to see additional increases in investing activities as these projects progress to meet management expectations.
Cash from Financing Activities
During the nine months ended March 31, 2022, the Company had net cash provided by financing activities of $41.7 million compared to $13.1 million for the nine months ended March 31, 2021.
On September 27, 2021, the Company entered into a securities purchase agreement for the purchase and sale of an aggregate of 25,389,611 shares of the Company’s common stock and warrants to purchase an aggregate of up to 25,389,611 shares of common stock in a registered direct offering at a combined purchase price of $1.54 per share and warrant, for net proceeds to the Company of $36.9 million. The warrants are immediately exercisable and may be exercised at any time until September 29, 2026, at an exercise price of $1.75 per share.
The Company engaged a placement agent in connection with the offering and agreed to pay the placement agent a cash fee of 5% of the gross proceeds the Company receives in the offering. In addition, the Company agreed to issue to the placement agent warrants to purchase shares equal to 5% of the gross proceeds sold under the securities purchase agreement or warrants to purchase up to an aggregate of 1,955,000 shares. The placement agent warrants generally will have the same terms as the investor warrants, except they will expire September 29, 2024, at an exercise price of $1.54.
On August 5, 2021, the Company elected to exercise its rights pursuant to the Purchase Agreement dated April 2, 2021, to issue 3,000,000 shares for net proceeds to the Company of $4.0 million.
During the nine months ended March 31, 2022, the Company received $1.0 million of proceeds from the exercise of share purchase warrants.
Off-Balance Sheet Arrangements
As of March 31, 2022, we had no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
| 16 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on our management’s evaluation (with the participation of the individuals serving as our principal executive officer and principal financial officer) of our disclosure controls and procedures as required by Rules 13a-15 and 15d-15 under the Exchange Act, each of the individuals serving as our principal executive officer and principal financial officer has concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2022, the end of the period covered by this report. As set forth below, the Company is addressing the issues underlying this conclusion.
Management’s Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including the individuals serving as our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.
Management assessed the effectiveness of our internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based on this assessment, our management concluded that, as of March 31, 2022, our internal control over financial reporting was not effective based on those criteria due to material weaknesses in our internal control over financial reporting described below.
Material Weakness in Internal Control over Financial Reporting
We did not maintain adequate documentation evidencing the operating effectiveness of certain control activities and did not maintain proper levels of supervision and review of complex accounting matters. We did not maintain appropriate segregation of duties related to accounting processes.
The control deficiencies create a reasonable possibility that a material misstatement to the financial statements will not be prevented or detected on a timely basis, and there we concluded that the deficiencies represent material weaknesses in our internal control over financial reporting and our internal control over financial reporting was not effective as of March 31, 2022.
Remediation Plan
We continue to enhance our internal control over financial reporting to remediate the material weakness described above. We are committed to ensuring that our internal control over financial reporting is designed and operating effectively.
Our remediation process includes, but not limited to:
| ● | Successful hiring of additional personnel with the expertise necessary to improve the financial reporting function | |
| ● | Successful implementation of a more comprehensive ERP solution that include accounting modules that integrate internal controls into the accounting process | |
| ● | Providing guidance, education and training to employees relating to our accounting policies and procedures | |
| ● | Further developing and documenting detailed policies and procedures regarding business processes for significant accounts, critical accounting policies and critical accounting estimates | |
| ● | Establishing effective general controls over IT systems to ensure that information produced can be relied upon by process level controls |
We have engaged a firm that specializes in Cyber and IT protection to further enhance the protection of our financial information, employee information, proprietary methods and strategic partnerships.
We expect to remediate these material weaknesses during fiscal 2022. However, there is no guarantee that such material weaknesses will be remediated during fiscal 2022 and we may discover additional material weaknesses that may require additional time and resources to remediate.
| 17 |
ITEM 4. CONTROLS AND PROCEDURES. (CONTINUED)
Attestation Report on Internal Control over Financial Reporting.
This Interim Report on Form 10-Q does not include an attestation report of our independent registered public accounting firm due to the deferral allowed for smaller reporting companies.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the period covered by this Interim Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Although we have altered some work routines due to the COVID-19 pandemic, the changes in our work environment, including remote work arrangements, have not materially impacted our internal controls over financial reporting and have not adversely affected the Company’s ability to maintain operations.
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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.
On April 6, 2021, Alford served a complaint against the Company and its transfer agent, Action Stock Transfer, for failure to remove a restricted legend from 4,000,000 common shares held in Alford’s name and alleged damages to Alford for such failure. The complaint was filed in Utah state court. The Company responded with a motion to stay the proceedings until after the Nevada proceedings are completed. The motion was granted by the court to stay the proceedings until October 1, 2021. On September 15, 2021, the Company filed a motion to extend the stay in light of the continuance of the trial date of the November proceeding. The litigation in both matters above is currently on hold while the parties attempt to negotiate a settlement.
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.
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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the nine months ended March 31, 2022, the Company issued 12,500,000 common shares pursuant the cash exercise of 12,750,000 share purchase warrants for proceeds of $956,250, of which 250,000 share purchase warrants, pursuant an aggregate cash exercise price of $18,750, exercised during the prior year ended June 30, 2021.
During the nine months ended March 31, 2022, the Company issued 1,793,366 common shares for the cashless exercise of 1,250,000 share purchase warrants, of which 677,300 common shares pursuant to the cashless exercise of 800,000 share purchase warrants, exercised during the prior year ended June 30, 2021.
During the nine months ended March 31, 2022, the Company issued 13,128,728 common shares for services with a fair value of $18,086,443, including 8,566,319 common shares with a fair value of $11,993,327 to officers and directors of the Company. As of March 31, 2022, the Company has approximately 6,410 shares of common stock issuable for professional services with a fair value of $7,500 for professional services as compensation to a board member of the Company.
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:
| Exhibit | Description | Filed Herein | Incorporated Date | By Form |
Reference Exhibit | |||||
| 31.1 | Certification of Chief Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | x | ||||||||
| 31.2 | Certification of Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | x | ||||||||
| 32.1 | Certification of Chief Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | x | ||||||||
| 32.2 | Certification of Chief Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | x | ||||||||
| 101 | INS Inline XBRL Instant Document. | x | ||||||||
| 101 | SCH Inline XBRL Taxonomy Extension Schema Document | x | ||||||||
| 101 | CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document | x | ||||||||
| 101 | LAB Inline XRBL Taxonomy Label Linkbase Document | x | ||||||||
| 101 | PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document | x | ||||||||
| 101 | DEF Inline XBRL Taxonomy Extension Definition Linkbase Document | x | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | x |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AMERICAN BATTERY TECHNOLOGY COMPANY (Registrant) | ||
| Date: May 16, 2022 | By: | /s/ Ryan Melsert |
| Ryan Melsert | ||
| Chief Executive Officer | ||
| Director | ||
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