American Battery Technology pany(ABAT) - 2019 Q4 - Annual Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company reported no revenue for the nine months ended June 30, 2019, with a net loss of $10.15 million, a significant increase from the $3.83 million loss in the prior-year period, raising substantial doubt about its ability to continue as a going concern Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2019 ($) | September 30, 2018 ($) | | :--- | :--- | :--- | | Cash | 16,690 | 122,769 | | Total Assets | 93,225 | 308,769 | | Total Current Liabilities | 4,546,733 | 2,741,281 | | Derivative Liability | 2,982,931 | 800,973 | | Total Stockholders' Deficit | (4,453,508) | (2,432,512) | Consolidated Statements of Operations Highlights (Unaudited, Nine Months Ended June 30) | Account | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | | Revenues | - | - | | Exploration Costs | 713,667 | 27,049 | | General and Administrative | 8,378,319 | 3,691,464 | | Net Loss | (10,153,706) | (3,830,792) | | Net Loss Per Share | (0.09) | (0.05) | Consolidated Statements of Cash Flows Highlights (Unaudited, Nine Months Ended June 30) | Activity | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | (2,394,695) | (526,230) | | Net Cash Provided By Financing Activities | 2,288,616 | 609,500 | | Change in Cash | (106,079) | 83,270 | | Cash – End of Period | 16,690 | 92,411 | - The company has substantial doubt about its ability to continue as a going concern due to having no revenue, a working capital deficit of $4,488,758, and an accumulated deficit of $47,419,040 as of June 30, 2019, with its continuation depending on obtaining necessary financing[26] Notes to the Consolidated Financial Statements The notes detail the company's significant reliance on issuing convertible notes payable to fund operations, which has resulted in a large derivative liability of nearly $3.0 million - The company entered into a significant number of convertible note agreements throughout late 2018 and the first half of 2019 to fund operations, with many notes featuring conversion prices at a steep discount to the market trading price, leading to the recognition of large derivative liabilities[50][60][72] - As of June 30, 2019, the company had a derivative liability of $2,982,931, a substantial increase from $800,973 at September 30, 2018, arising from the conversion features of its convertible debentures and revalued each period[91][93] - During the nine months ended June 30, 2019, the company issued 23,050,000 common shares for services valued at $6,379,560 and 9,603,519 shares for the conversion of notes payable[15] - As of June 30, 2019, the company owed related parties a total of $593,855, primarily for accrued management fees and advances to the current CEO, former CEO, and directors[10][84][86] - Subsequent to the quarter's end, in July and August 2019, the company issued a total of 1,950,000 common shares for consulting services and 2,766,240 shares to convert $326,100 of convertible notes[114] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management describes the company as a pre-revenue, exploration-stage entity focused on lithium deposits in Nevada, with a significant increase in net loss attributed to higher exploration costs and general and administrative expenses, largely from non-cash stock-based compensation for services - The company is a start-up lithium exploration mining company with no revenue, focusing on 1,300 mining claims on 26,000 acres in the Western Nevada Basin, and recently changed its name from Oroplata Resources, Inc. to American Battery Metals Corporation[117][119][122] - The company qualifies as an "emerging growth company" under the JOBS Act and has elected to take advantage of reduced disclosure requirements[124] Results of Operations The company generated no revenue, with operating expenses increasing to $9.1 million from $3.7 million year-over-year for the nine months ended June 30, 2019, driven by higher exploration costs and a significant rise in G&A expenses, primarily due to issuing more common shares for services Operating Expense Comparison (Nine Months Ended June 30) | Expense Category | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | | Operating Expenses | 9,091,986 | 3,718,513 | | Interest & Accretion Expense | 1,391,127 | 99,837 | | Net Loss | 10,153,706 | 3,830,792 | - The increase in operating expenses for the nine months ended June 30, 2019, was primarily due to issuing more common shares for services ($6,402,610 in 2019 vs. $2,937,250 in 2018) and increased exploration and overhead costs[132] Liquidity and Capital Resources As of June 30, 2019, the company's financial position weakened significantly, with cash at only $16,690 and a working capital deficit of $4.49 million, caused by high operating expenditures funded by issuing new convertible notes Key Liquidity Metrics | Metric | June 30, 2019 ($) | September 30, 2018 ($) | | :--- | :--- | :--- | | Cash | 16,690 | 122,769 | | Working Capital Deficit | (4,488,758) | (2,432,512) | | Total Current Liabilities | 4,546,733 | 2,741,281 | - The increase in liabilities is primarily due to a $2.18 million increase in derivative liabilities associated with the conversion features of a higher number of convertible notes issued[136] - During the nine months ended June 30, 2019, the company received $3,559,750 from issuing convertible notes and repaid $1,271,134 of notes payable[143] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section is not applicable as the company is a smaller reporting company - Not Applicable[153] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2019, with no material changes to internal controls over financial reporting identified during the quarter - Based on an evaluation as of June 30, 2019, management concluded that the company's disclosure controls and procedures were not effective[154] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2019, that have materially affected, or are reasonably likely to materially affect, internal controls[155] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ongoing litigation against its former CEO, Craig Alford, concerning allegedly fraudulent share issuances, and a shareholder lawsuit regarding the removal of a restrictive legend on securities - The company is in litigation against former CEO Craig Alford regarding 16 million common shares believed to be fraudulently issued, and has successfully cancelled 11 million of these shares[158] - A shareholder filed a lawsuit against the company in March 2019, seeking the removal of a securities law restrictive legend and related damages[158] Item 1A. Risk Factors As a smaller reporting company, the company is not required to provide information for this item - The company is a smaller reporting company and is not required to provide the information under this item[160] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the quarter, the company engaged in numerous unregistered sales of equity securities to raise working capital, including issuing multiple convertible promissory notes to various capital firms with conversion prices at a significant discount to the market price - The company issued a series of convertible promissory notes between April and June 2019 to various investment firms to raise capital[161][164][176] - A common feature of the convertible notes is a conversion price set at a substantial discount to the market price, typically 61% to 68% of the lowest trading price over a recent 10 or 20-day period[161][169][171] - On April 23, 2019, the company issued 300,000 common shares valued at $74,250 for consulting services[163] - All securities were issued under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D, with proceeds used for working capital[179] Item 3. Defaults Upon Senior Securities None reported - None[180] Item 4. Mine Safety Disclosure Not applicable - Not Applicable[180] Item 5. Other Information None reported - None[180] Item 6. Exhibits This section lists the exhibits filed with the quarterly report, primarily consisting of numerous Securities Purchase Agreements and their corresponding Convertible Promissory Notes from the detailed financing activities, along with CEO certifications and XBRL data files - The report includes numerous exhibits (10.1 through 10.24) detailing the securities purchase agreements and convertible promissory notes entered into during the quarter[182][183] - Certifications by the CEO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits 31.1 and 32.1[183]