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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 quarterly period ended December 31, 2023

 

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 Street, Suite 100, Reno, NV 89503
(Address of principal executive offices, including zip code)

 

(775) 473-4744
(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which Registered
Common stock, $0.001 par value   ABAT   The Nasdaq Stock Market LLC

 

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 quarter 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 quarter 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in 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 quarter 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

 

As of February 12, 2024, 51,884,931 shares of common stock, $0.001 par value per share were outstanding.

 

 

 

 
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This quarterly report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). All statements included in this Report, other than statements of historical facts, that address activities, conditions, events, or developments with respect to our financial condition, results of operations, business prospects or economic performance that we expect, believe, or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements. The forward-looking statements are contained principally in the “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this Report. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates”, “believes”, “seeks”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predicts”, “projects”, “should”, “would” and similar expressions intended to identify forward-looking statements.

 

Forward-looking statements appear throughout this report, and include statements about such matters as: anticipated operating results; relationships with our customers; consumer demand; financial resources and condition; changes in revenues; changes in profitability; changes in accounting treatment; cost of sales; selling, general and administrative expenses; interest expense; the ability to produce the liquidity or enter into agreements to acquire the capital necessary to continue our operations and take advantage of opportunities; legal proceedings and claims.

 

Forward-looking statements reflect our current views with respect to future events and are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments, and other factors that we believe are appropriate under the circumstances. We caution you that forward-looking statements are not guarantees of future performance and these statements are subject to known and unknown risks and uncertainties, which may cause our actual results or performance to be materially different from any future results or performance expressed or implied by the forward-looking statements.

 

Also, forward-looking statements represent our estimates and assumptions only as of the date of this Report. You should read this Report and the documents that we reference and file as exhibits to this Report completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements in this report speak only as of the filing of this Report. Except as required by applicable securities laws, we assume no obligation to update any prior forward-looking statements.

 

PRESENTATION OF INFORMATION

 

Except as otherwise indicated by the context, references in this Report to “we”, “us”, “our” and the “Company” are to the combined business of American Battery Technology Company and its consolidated subsidiaries.

 

This Report includes our unaudited consolidated financial statements as of and for the period ended December 31, 2023 and 2022. These financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”). All financial information in this Report is presented in US dollars, unless otherwise indicated, and should be read in conjunction with our unaudited consolidated financial statements and the notes included in this Report.

 

2
 

 

TABLE OF CONTENTS

 

PART I
     
ITEM 1 Financial Statements 4
     
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
     
ITEM 3 Quantitative and Qualitative Disclosures about Market Risk 28
     
ITEM 4 Controls and Procedures 28
     
PART II. OTHER INFORMATION
   
ITEM 1 Legal Proceedings 29
     
ITEM 1A Risk Factors 29
     
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 29
     
ITEM 3. Defaults Upon Senior Securities 29
   
ITEM 4. Mine Safety Disclosure 29
     
ITEM 5. Other Information 29
     
ITEM 6. Exhibits 30

 

3
 

 

ITEM 1. FINANCIAL STATEMENTS

 

The accompanying condensed consolidated financial statements (unaudited) 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 six months ended December 31, 2023, are not necessarily indicative of the results that can be expected for the fiscal year ending June 30, 2024.

 

Condensed Consolidated Balance Sheets (unaudited) 5
Condensed Consolidated Statements of Operations (unaudited) 6
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) 7
Condensed Consolidated Statements of Cash Flows (unaudited) 9
Notes to the Condensed Consolidated Financial Statements (unaudited) 10

 

4
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Condensed Consolidated Balance Sheets (unaudited)

 

   December 31, 2023   June 30, 2023 
ASSETS          
           
Current assets          
           
Cash  $7,646,784   $2,320,149 
Investments   79,254    11,250 
Inventory (Note 3)   614,441    125,204 
Grants receivable (Note 4)   646,627    320,457 
Prepaid expenses and deposits   834,146    1,625,980 
Subscription receivable   1,504,156    350,550 
Other current assets   242,850     
           
Total current assets   11,568,258    4,753,590 
           
Other deposits (Note 5)   279,878    27,740,587 
Property, plant and equipment, net (Note 6)   63,949,713    29,946,099 
Mining properties (Note 7)   8,392,978    8,223,323 
Intangible assets (Note 8)   4,585,410    3,851,899 
Right-of-use asset (Note 11)   92,629    143,154 
           
Total assets  $88,868,866   $74,658,652 
           
LIABILITIES & STOCKHOLDERS’ EQUITY          
           
Current liabilities          
           
Accounts payable and accrued liabilities (Note 9)  $6,020,731   $7,389,864 
Notes payable, current (Note 10)   16,274,850    6,000,000 
           
Total current liabilities   22,295,580    13,389,864 
           
Notes payable, non-current (Note 10)   -    54,304 
           
Total liabilities   22,295,580    13,444,168 
           
Commitments and contingencies (Note 16)        
           
STOCKHOLDERS’ EQUITY          
           
Series A Preferred Stock Authorized: 33,334 preferred shares, par value of $0.001 per share; Issued and outstanding: nil preferred shares as of December 31, 2023 and June 30, 2023.        
           
Series B Preferred Stock Authorized: 133,334 preferred shares, par value of $10.00 per share; Issued and outstanding: nil preferred shares as of December 31, 2023 and June 30, 2023.        
           
Series C Preferred Stock Authorized: 66,667 preferred shares, par value of $10.00 per share; Issued and outstanding: nil preferred shares as of December 31, 2023 and June 30, 2023.        
           
Common Stock Authorized: 80,000,000 common shares, par value of $0.001 per share; Issued and outstanding: 49,343,225 and 45,888,131 common shares as of December 31, 2023 and June 30, 2023, respectively   49,345    45,887 
           
Additional paid-in capital   243,020,935    222,626,865 
Common stock issuable   -    (1,484,693)
Accumulated deficit   (176,496,995)   (159,973,575)
           
Total stockholders’ equity   66,573,285    61,214,484 
           
Total liabilities and stockholders’ equity  $88,868,866   $74,658,652 

 

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

 

5
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Condensed Consolidated Statements of Operations (unaudited)

 

   Three months ended
December 31, 2023
   Three months ended
December 31, 2022
   Six months ended
December 31, 2023
   Six months ended
December 31, 2022
 
Operating expenses                    
                     
General and administrative  $4,310,452   $3,899,068   $7,259,298   $5,907,235 
Research and development   3,148,873    1,735,471    5,304,187    1,955,287 
Exploration costs   771,523    546,010    2,051,305    895,163 
                     
Total operating expenses   8,230,848    6,180,549    14,614,790    8,757,685 
                     
Net loss before other income (expense)   (8,230,848)   (6,180,549)   (14,614,790)   (8,757,685)
                     
Other income (expense)                    
                     
Interest expense   (7,647)       (142,636)    
Amortization and accretion of financing costs   (1,053,766)        (1,760,497)     
Gain on sale of mining claims   -        -    98,919 
Unrealized gain (loss) on investment   826    (20,078)   (5,497)   (14,658)
Other income   -    3,657    -    42,000 
                     
Total other income (expense)   (1,060,587)   (16,421)   (1,908,630)   126,261 
                     
Net loss  $(9,291,435)  $(6,196,970)  $(16,523,420)  $(8,631,424)
                     
Net loss per share, basic and diluted  $(0.19)  $(0.14)  $(0.35)  $(0.20)
                     
Weighted average shares outstanding   47,760,809    43,202,414    47,357,879    43,152,476 

 

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

 

6
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

 

Three months ended December 31, 2023:

 

   Number   Amount   Capital   Issuable   Deficit   Total 
   Common Shares   Additional Paid-In   Common Stock   Accumulated     
   Number   Amount   Capital   Issuable   Deficit   Total 
                         
Balance, September 30, 2023   46,304,354   $46,306   $226,317,285   $37,500   $(167,205,560)  $59,195,531 
                               
Vesting of share-based awards   180,811    181    (181)   -    -    - 
                               
Stock-based compensation expense   -    -    3,836,466    -    -    3,836,466 
                               
Shares issued pursuant to share purchase agreement, net of issuance costs   2,799,973    2,800    12,829,925    -    -    12,832,725 
                               
Shares issued pursuant to warrant exercises   58,087    58    37,440    (37,500)   -    (2)
                               
Net loss for the period   -    -    -    -    (9,291,435)   (9,291,435)
                               
Balance, December 31, 2023   49,343,225   $49,345   $243,020,935   $-   $(176,496,995)  $66,573,285 

 

Three months ended December 31, 2022:

 

   Common Shares   Additional Paid-In   Common Stock   Subscription   Accumulated     
   Number   Amount   Capital   Issuable   Receivable   Deficit   Total 
                             
Balance, September 30, 2022   49,942,576   $42,943   $188,247,545   $98,605    -   $(141,069,822)  $47,319,271 
                                    
Shares issued for professional services   10,009    10    103,579    (90,515)           13,074 
Vesting of share-based awards   121,813    122    (122)                
Stock-based compensation expense           3,427,244                 3,427,244 
Shares issued from purchase agreements, net of issuance costs   266,667    267    2,007,707        (654,267)       1,353,707 
                                    
Net loss for the period                       (6,196,970)   (6,196,970)
                                    
Balance, December 31, 2022   43,341,064   $43,342   $193,785,953   $8,090   $(654,267)  $(147,266,792)  $45,916,326 

 

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

 

7
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

 

Six months ended December 31, 2023:

 

   Common Shares   Additional Paid-In   Common Stock   Accumulated     
   Number   Amount   Capital   Issuable   Deficit   Total 
                         
Balance, June 30, 2023   45,888,131   $45,887   $222,626,865   $(1,484,693)  $(159,973,575)  $61,214,484 
                               
Shares issued for professional services   1,326    1    15,174    (15,307)       (132)
                               
Vesting of share-based awards   312,953    316    (316)            
                               
Stock-based compensation expense           5,757,908            5,757,908 
                               
Shares issued pursuant to rounding of share reverse split   59,164    59    (59)            
                               
Shares reclaimed pursuant to asset acquisition   (128,206)   (128)   (1,255,650)   1,500,000        244,222 
                               
Shares issued pursuant to share purchase agreement, net of issuance costs   3,106,225    3,106    15,839,619            15,842,725 
                               
Shares issued pursuant to warrant exercises   103,632    104    37,394            37,498 
                               
Net loss for the period                   (16,523,420)   (16,523,420)
                               
Balance, December 31, 2023   49,343,225   $49,345   $243,020,935   $   $(176,496,995)  $66,573,285 

 

Six months ended December 31, 2022:

 

   Common Shares   Additional Paid-In   Common Stock   Subscription   Accumulated     
   Number   Amount   Capital   Issuable   Receivable   Deficit   Total 
                             
Balance, June 30, 2022   42,942,576   $42,943   $188,151,484   $75,000       $(138,635,368)  $49,634,059 
                                    
Shares issued for professional services   10,009    10    103,579    (66,910)           36,679 
Vesting of share-based awards   121,813    122    (122)               - 
Stock-based compensation expense   -    -    3,523,305                3,523,305 
Shares issued from private placement, net of issuance costs   266,667    267    2,007,707        (654,267)       1,353,707 
                                    
Net loss for the period                        (8,631,424)   (8,631,424)
                                    
Balance, December 31, 2022   43,341,064   $43,342   $193,785,953   $8,090   $(654,267)  $(147,266,792)  $45,916,326 

 

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

 

8
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Condensed Consolidated Statements of Cash Flows (unaudited)

 

   Six months ended.
December 31, 2023
   Six months ended.
December 31, 2022
 
         
Operating Activities          
           
Net loss attributable to stockholders  $(16,523,420)  $(8,631,424)
           
Adjustments to reconcile net loss to net cash used in operating activities:          
           
Depreciation expense   81,410    35,981 
Accretion of financing costs   1,760,497    - 
Amortization of right-of-use asset   50,525    50,525 
Unrealized loss on investment   5,497    14,658 
Stock-based compensation   5,757,908    3,523,305 
Shares issued for professional services   (132)   36,679 
           
Changes in operating assets and liabilities:          
           
Inventory   (489,237)    
Grants receivable   (326,170)   (15,343)
Prepaid expenses and deposits   416,234    (149,393)
Other current assets   (316,351)    
Accounts payable and accrued liabilities   2,223,865    (2,172,877)
Net change in operating lease liability   (59,326)   (58,658)
           
Net Cash Used in Operating Activities   (7,418,700)   (7,366,547)
           
Investing Activities          
           
Other acquisition deposits   (279,878)    
Acquisition of property, equipment, and water rights   (10,888,840)   (2,171,599)
Acquisition cost reimbursements from government grants   469,972     
Purchase of mining properties   (169,714)   (8,007,362)
           
Net Cash Used in Investing Activities   (10,868,460)   (10,178,961)
           
Financing Activities          
           
Proceeds from exercise of share purchase warrants   37,498     
Principal paid on notes payable   (11,400,000)    
Proceeds from notes payable, net of issuance costs   20,287,118     
Proceeds from share purchase agreements, net of issuance costs   14,689,178     
           
Net Cash Provided by Financing Activities   23,613,794     
           
Increase (decrease) in Cash   5,326,635    (17,545,508)
           
Cash – Beginning of Period   2,320,149    28,989,166 
           
Cash – End of Period  $7,646,784   $11,443,658 
           
Supplemental disclosures (Note 15)          

 

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

 

9
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

1. Organization and Nature of Operations

 

American Battery Technology Company (“the Company”) is a new entrant in the lithium-ion battery industry that is working to increase the domestic U.S. 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 the Company 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 objective of being a producing mineral company. ABTC began operations of its first lithium-ion battery recycling facility in October 2023 and has a limited operating history, and as of December 31, 2023 had not generated or realized significant revenues from its activities. The principal executive offices are located at 100 Washington Ave., Suite 100, Reno, NV 89503.

 

Liquidity and Capital Resources

 

During the six months ended December 31, 2023, the Company incurred a net loss of $16.5 million and used cash of $7.4 million for operating activities. At December 31, 2023, the Company has a cash balance of $7.6 million and an accumulated deficit of $176 million.

 

The continuation of the Company as a going concern is dependent upon generating profit from its operations and its ability to obtain debt or equity financing. There is no assurance that the Company will be able to generate sufficient profits, obtain such financings, or obtain them on favorable terms, which could limit its operations. Any such financing activities are subject to market conditions. These uncertainties cause substantial doubt to exist as to the Company’s ability to continue as a going concern for 12 months from issuance of these 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. These adjustments could be material.

 

The going concern assessment excludes the Company’s undrawn amounts from the common stock purchase agreement with Tysadco, which provides a source of liquidity that enables equity financing as needed. Additionally, one of the ways to continue to support the company’s liquidity position might include entering an at-the-market (“ATM”) offering or similar program from time to time.

 

Based on our current operating plan, unless we generate income from the operations of our facilities and Government Grant Awards, raise additional capital (debt or equity), or obtain waivers from complying with such financial covenants, it is possible that we will be unable to maintain our financial covenants under our existing Note agreement, which could result in an event of default, causing an acceleration of the outstanding balances. If we do raise additional capital through public or private equity offerings, as opposed to debt or additional Note issuances, the ownership interest of our existing stockholders may be diluted.

 

2. Summary of Significant Accounting Policies

 

a) Basis of Presentation and Principles of Consolidation

 

The 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 consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Oroplata Exploraciones E Ingenieria SRL (dissolved), LithiumOre Corporation (formerly Lithortech Resources Inc), ABMC AG, LLC (dissolved) and Aqua Metals Transfer LLC. All inter-company accounts and transactions have been eliminated upon consolidation.

 

On September 11, 2023, the Company effected a one-for-fifteen reverse-stock-split with respect to the authorized, issued, and outstanding shares of common stock and preferred stock. All share and per-share amounts included in this Form 10-Q are presented as if the stock split had been effective from the beginning of the earliest period presented.

 

b) Use of Estimates

 

The preparation of these 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 periods. The Company regularly evaluates estimates and assumptions related to the fair value of stock-based compensation, valuation and recoverability of long-lived assets and intangible assets subject to impairment testing, 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 may be affected.

 

10
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

2. Summary of Significant Accounting Policies (continued)

 

c) Long-Lived Assets

 

Long-lived assets, such as property and equipment, mineral properties, and purchased intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable in accordance with Accounting Standards Codification (“ASC”) topic 360, Property, Plant, and Equipment. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. The Company’s long-lived assets consist of buildings, vehicles, equipment, and land. Buildings, vehicles and equipment are depreciated on a straight-line basis over their estimated value lives ranging between three and thirty years.

 

The recoverability of assets is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by an asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount exceeds the estimated fair value of the asset. Any impairment in value is recognized as an expense in the period when the impairment occurs.

 

Expenses for major repairs and maintenance which extend the useful lives of property and equipment are capitalized. All other maintenance expenses, including planned major maintenance activities, are expensed as incurred. Gains or losses from property disposals are included in income or loss from operations.

 

d) Mining Properties

 

Costs of lease, exploration, carrying and retaining unproven mineral properties are expensed as incurred. The Company expenses all mineral exploration costs as incurred as it is still in the exploration stage. If the Company identifies proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it will enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs are amortized on a units-of-production basis over the proven and probable reserves following the commencement of production. Interest expense allocable to the cost of developing mining properties and to construct new facilities is capitalized until assets are ready for their intended use.

 

To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all exploration costs are being expensed.

 

ASC 930-805, “Extractive Activities-Mining: Business Combinations,” states that mineral rights consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include mineral rights which are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented mining claims.

 

e) Intangible Assets

 

Intangible assets consist of water rights that have indefinite useful lives are tested annually for impairment, or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value. Annually, or when there is a triggering event, the Company first performs a qualitative assessment by evaluating all relevant events and circumstances to determine if it is more likely than not that the indefinite-lived intangible assets are impaired; this includes considering any potential effect on significant inputs to determining the fair value of the indefinite-lived intangible assets. When it is more likely than not that an indefinite-lived intangible asset is impaired, then the Company calculates the fair value of the intangible asset and performs a quantitative impairment test.

 

11
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

2. Summary of Significant Accounting Policies (continued)

 

f) 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) attributable to common stockholders (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 awards. At December 31, 2023, the Company had 10,545,281 potentially dilutive shares outstanding, consisting of 1,942,363 from convertible notes, 5,731,666 from warrants and 2,871,252 from share awards outstanding. As the Company has reported losses for all periods presented, all potentially dilutive securities are anti-dilutive, and accordingly, basic net loss per share equaled diluted net loss per share.

 

g) Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Stock Compensation,” using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. The Company utilizes the Black Scholes method when calculating stock-based compensation expense relating to stock option awards and warrants.

 

The Company records the stock-based compensation expense attributed to share awards in accordance with US GAAP using the graded-vesting method. The Company amortizes the grant date fair value over the respective vesting period, beginning with recognition on the date of grant.

 

h) Exploration Costs

 

Mineral property acquisition costs are capitalized as incurred. Exploration and evaluation costs are expensed as incurred until proven and probable reserves are established. The Company assesses the carrying costs for impairment under ASC 360, “Property, Plant, and Equipment,” at each period end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property are capitalized on a prospective basis. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. As of December 31, 2023 and 2022, the Company has not capitalized any such mineral property costs.

 

i) Research and Development Costs

 

Research and development (“R&D”) costs are accounted for in accordance with ASC 730, “Research and Development.” ASC 730-10-25 requires that all R&D costs be recognized as an expense as incurred. However, some costs associated with R&D activities that have an alternative future use (e.g., materials, equipment, facilities) may be capitalizable.

 

The Company has been awarded federal grant awards for specific R&D programs. Under ASU No. 2021-10 “Government Assistance,” the Company recognizes invoiced government funds as an offset to R&D costs in the period the qualifying costs are incurred. As the federal grants receivable are not deemed to have any significant realization risk, the Company believes this best reflects the expected net expenditures associated with these programs.

 

12
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

2. Summary of Significant Accounting Policies (continued)

 

j) Leases

 

The Company follows the guidance of ASC 842, “Leases,” which requires an entity to recognize a right-of-use (“ROU”) asset and a lease liability for virtually all leases. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company determines the present value of lease payments utilizing its incremental borrowing rate, as the implicit rate of interest in the respective leases is not readily determinable. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be.

 

The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less. The Company recognizes the lease payments associated with its short-term office space leases as an expense on a straight-line basis over the lease term. Variable lease payments associated with these leases are recognized and presented in the same manner as for all other Company leases.

 

k) Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes.” The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards.

 

Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

Any uncertain tax position liabilities have been applied against the deferred tax balance given that there is a sufficient net operating loss to cover any penalties and fees associated with the uncertain tax position. The Company assesses each of its identified uncertain positions and determines whether any potential penalties and interest liability should be accrued at the balance sheet dates.

 

Due to the Company’s cumulative loss position since inception, the likelihood of deferred tax assets being realized does not meet the more likely than not assessment guidelines. Accordingly, a valuation allowance equal to the deferred tax asset has been recorded at December 31, 2023 and June 30, 2023.

 

l) Accounting Pronouncements

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this update expands segment disclosures by requiring disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. This update is effective for our annual report for fiscal year 2025, for interim period reporting beginning in fiscal year 2026, with early adoption permitted, and will be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the timing of adoption and impact of this ASU on our Consolidated Financial Statements and related disclosures.

 

13
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures. The amendments further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This ASU is effective for our annual report for fiscal year 2026, with early adoption permitted, and should be applied either prospectively or retrospectively. We are currently evaluating the timing of adoption and impact of this ASU on our Consolidated Financial Statements and related disclosures.

 

m) Derivative Financial Instruments

 

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the issuance date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations.

 

n) Convertible Notes

 

The Company evaluates all conversion, repurchase and redemption features contained in a debt instrument to determine if there are any embedded features that require bifurcation as a derivative. The Company accounts for its convertible notes as a long-term liability, with the current portion reclassified to a short-term liability, equal to the proceeds received from issuance, including any embedded conversion features, net of the unamortized debt discount and offering costs in the accompanying unaudited consolidated balance sheets. The debt issuance and offering costs are amortized over the term of the convertible notes, using the effective interest method, as interest expense in the accompanying unaudited consolidated statements of operations.

 

o) Inventory

 

Inventory is stated at the lower of cost or market (net realizable value). The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and writes down any excess and obsolete inventories to their net realizable value in the period in which the impairment is first identified.

 

p) Cash and Cash Equivalents

 

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of December 31, 2023 or June 30, 2023.

 

q) Fair Value of Financial Instruments

 

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the ASC 820, “Fair Value Measurements”, equals or approximates the carrying amounts represented in the balance sheets.

 

r) Fair Value of Financial Instruments

 

Other Current Assets are comprised of payroll tax credits related to research and development activities per IRS form 6765.

 

s) Accrued Claims and Contingencies

 

The Company is subject to various claims and contingencies related to lawsuits. A liability is recorded for claims, legal costs or other contingencies when the risk of loss is probable and reasonable estimable. The required reserves may change due to new developments in each period.

 

14
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

3. Inventories

 

The Company’s inventory as of December 31, 2023 and June 30, 2023 relates to the lithium-ion battery recycling operations and was comprised of raw materials in the form of battery feedstock and finished goods in the form of black mass and other metals. Inventories are valued at the lower of average cost or net realizable value. The carrying value of inventory includes those costs to acquire battery feedstock and any related carrying and processing costs incurred by the Company.

 

   December 31, 2023   June 30, 2023 
Raw materials  $546,455   $125,204 
Finished goods   67,985    - 
Total  $614,441   $125,204 

 

4. Government Grant Awards

 

Grants receivable represent qualifying costs incurred where there is reasonable assurance that the conditions of the grant have been met but the corresponding funds have not been received as of the reporting date. As collections from the federal government have been and are expected to continue to be timely, no allowance for doubtful accounts has been established. If amounts become uncollectible, they will be charged to operations. Grants receivable were $646,627 and $320,457 as of December 31, 2023 and June 30, 2023, respectively. The Company recognizes invoiced government funds as an offset to R&D costs in the period the qualifying costs are incurred.

 

On August 16, 2021, the Company received a contract award for a 30-month project with a total budget of $2.0 million from the United States Advanced Battery Consortium (the “USABC grant”) as part of a competitively bid project, through which the Company will receive reimbursement for up to $500,000 of eligible expenditures. The objective of the contract award is for the commercial-scale development and demonstration of an integrated lithium-ion battery recycling system, the production of battery cathode grade metal products, the synthesis of high energy density active cathode material from these recycled battery metals, and the fabrication of large format automotive battery cells from these recycled materials and the testing of these cells against otherwise identical cells made from virgin sourced metals. The Company began receiving funds related to this award during the fiscal year ended June 30, 2023. As of December 31, 2023, the cumulative funds invoiced for this grant totaled $459,392, which represents 92% of the total eligible reimbursements.

 

On January 20, 2021, the U.S. Department of Energy (“DOE”) announced that the Company had been selected for award negotiation for a three-year project with a total budget of $4.5 million for the field demonstration of its selective leaching, targeted purification, and electro-chemical production of battery grade lithium hydroxide from domestic claystone resources technology. Through this grant award the Company is eligible to receive reimbursement of up to 50% of eligible expenditures, or up to $2.3 million. The prime agreement contract for this grant (the “AMMTO grant”) was issued with a project start date of October 1, 2021. The Company began receiving funds related to this award during the fiscal year ended June 30, 2022. As of December 31, 2023, the cumulative funds invoiced for this grant totaled $1,299,427, which represents 56% of the total eligible reimbursements.

 

On October 21, 2022, the U.S. DOE announced that the Company had been selected for award negotiation for a five-year project with a total budget of $115.5 million to design, construct, and commission a first-of-kind lithium hydroxide refinery using Nevada-based claystone as the feedstock to expand domestic manufacturing of battery grade lithium hydroxide for lithium-ion batteries for electric vehicles, with a focus on domestic processing of materials and components that are currently imported from foreign countries. Through this grant award the Company is eligible to receive reimbursement of up to 50% of eligible expenditures, up to $57.7 million. The prime agreement contract for this grant was issued with a project start date of September 1, 2023. The Company began receiving funds related to this award during the period ended December 31, 2023. As of December 31, 2023, the cumulative funds invoiced for this grant totaled $793,147, which represents 1% of the total eligible reimbursements.

 

On November 17, 2022, the U.S. DOE announced that the Company had been selected for award negotiation for a three-year project with a total budget of $20.0 million to demonstrate and commercialize next generation techniques for its lithium-ion battery recycling processes to produce low-cost and low-environmental impact domestic battery materials. Through this grant award the Company is eligible to receive reimbursement of up to 50% of eligible expenditures, up to $10.0 million. The prime agreement contract for this grant was issued with a project start date of October 1, 2023. The Company began receiving funds related to this award during the period ended December 31, 2023. As of December 31, 2023, the cumulative funds invoiced for this grant totaled $184,228, which represents 2% of the total eligible reimbursements.

 

5. Other Deposits

 

On March 1, 2023, the Company and Linico Corporation (“Linico”) entered into an Asset Purchase Agreement (“APA”) whereby the Company acquired specific tangible equipment and personal property for an aggregate purchase price of $6.0 million. Contemporaneously with the signing of the APA, the Company and Linico entered into another agreement, the Membership Interest Purchase Agreement (“MIPA”), whereby the Company would acquire 100% of the membership interests in Aqua Metals Transfer, LLC, principally real property consisting of land and a building in the Tahoe-Reno Industrial Center (TRIC) at 2500 Peru Drive, McCarran, Nevada, for an aggregate purchase price of $21.6 million. The purchase was finalized on August 11, 2023 at which time the aggregate total of $27.6 million worth of deposits was bifurcated into both real and personal property assets, inclusive of both agreements (See Note 6).

 

On June 30, 2023, the Company and Linico entered into an amendment to the MIPA. Pursuant to the terms of the amended agreement, the parties agreed to (i) remove the requirement that $1.5 million of the purchase price be held in escrow for the settlement of indemnification claims, (ii) transfer back to the Company 128,206 common shares, previously issued by the Company, in exchange for the elimination of such indemnification escrow, (iii) add a purchase price adjustment to the extent that, as of four months after the registration statement on Form S-3 filed by the Company is declared effective by the SEC, the value of the portion of the purchase price comprised of shares does not equal at least $6.0 million, (iv) provide for an interim water rights agreement through the final purchase price payment date, (iv) advance the closing date to as soon as practicable after the declaration of effectiveness of the resale registration statement on Form S-3, and (v) remove the deadline to close the acquisition by June 30, 2023.

 

15
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

6. Property, Plant and Equipment

 

The table below presents the property and equipment as of December 31, 2023 and June 30, 2023:

 

   Land   Building   Equipment   Total 
Cost:                    
                     
Balance, June 30, 2023  $6,728,838   $17,508,486   $5,870,496   $30,107,820 
Additions   4,126,883    22,327,246    7,630,943    34,085,023 
                     
Balance, December 31, 2023  $10,855,671   $39,835,732   $13,501,439   $64,192,843 
                     
Accumulated Depreciation:                    
                     
Balance, June 30, 2023  $-   $-   $161,721   $161,721 
Additions   -    -    81,409    81,409 
                     
Balance, December 31, 2023  $-   $-   $243,130   $243,130 
                     
Carrying Amounts:                    
Balance, June 30, 2023  $6,728,838   $17,508,486   $5,708,775   $29,946,099 
Balance, December 31, 2023  $10,855,671   $39,835,732   $13,258,309   $63,949,713 

 

On August 11, 2023, the Company finalized the purchase of its commercial-scale battery recycling facility located in the TRIC, as indicated in Note 5. At that time, the aggregate total of $27.6 million deposits was reclassified to Property, Plant and Equipment, along with acquisition costs. completion of the recycling facility valuation The Company has installed industrial utility equipment on site to accelerate the first commercial scale implementation of its internally developed lithium-ion battery recycling technologies.

 

7. Mining Properties

 

On July 21, 2022, the Company exercised the option to purchase the rights to unpatented lode claims in the Tonopah, Nevada. Since that time, the Company has worked with third parties to conduct drill programs and analysis in order to verify the grade and continuity of the mining claims. Over 50% of the inferred mineral resource have been upgraded to measured and indicated classifications. The Company is still in the exploration stage and expenses all mineral exploration costs. If the Company identifies proven and probable reserves and develops an economic plan for operating a mine, it will enter the development stage and capitalize future costs until production is established.

 

8. Intangible Assets

 

On September 12, 2023, the Company acquired approximately 40.52-acre feet of water rights from the Thomas C. Woodward Living Trust, valued at $101,300. The water rights are treated in accordance with ASC 350, “Intangible Assets,” and have an unlimited useful life subject to beneficial use.

 

The Company’s acquisition of the commercial-scale battery recycling facility at the TRIC included water rights valued at $0.6 million and are described as an eighteen and forty-five one-hundredths (18.45) acre-foot/annually portion of the Truckee-Carson Irrigation District, Serial Number 1081-A-1. These are appurtenant to a certain real property located in Storey County, Nevada, described as Storey County Assessor Parcel Number 021-37-104 and have an unlimited useful life upon assignment to a property through use of a will-serve, which has no expiration date.

 

The table below presents total intangible assets at:

 

   December 31, 2023   June 30, 2023 
Water rights  $4,585,410   $3,851,899 

 

16
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

9. Accounts Payable and Accrued Liabilities

 

The table below presents total accounts payable and accrued liabilities at:

 

   December 31, 2023   June 30, 2023 
Trade payables  $3,883,841   $1,831,686 
Accrued fixed assets   818,892    4,404,034 
Accrued expenses   1,200,867    1,032,660 
Right-of-use liability, current   117,131    121,484 
Total accounts payable and accrued liabilities  $6,020,731   $7,389,864 

 

10. Notes Payable

 

On May 17, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with Mercuria Investments US, Inc. for pre-payment on the purchase of the Company’s recycled battery metal products. As such, inventory serves as collateral for outstanding balances. The Credit Agreement provides for an aggregate loan amount of up to $20 million, comprised of (i) an initial term loan in the aggregate principal amount of $6 million and (ii) delayed draw term loan commitments in an aggregate amount equal to $14 million. Borrowings under the Credit Agreement carry interest calculated as the secured overnight financing rate published on the Federal Reserve Bank of New York’s website, plus the applicable credit spread adjustment, based on the elected interest period, plus an applicable margin rate of 6%. The agreement contains provisions that allow the Company to remit principal and interest payments via future delivery of its initial recycling byproduct, black mass.

 

On August 30, 2023, the Company caused the repayment in full of all indebtedness, liabilities and other obligations under, and terminated, its former credit agreement, dated as of May 17, 2023 by and among the Company, as Borrower, and Mercuria Investments US, Inc., as Agent. The Company did not incur any material early termination penalties because of such termination of the credit agreement. The Company remains engaged with Mercuria Investments US, Inc. in a marketing and presale capacity.

 

On August 29, 2023, the Company and High Trail (the “Buyers”) entered into a Securities Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company sold to the Buyers up to $51.0 million of a new series of senior secured convertible notes (the “Notes”). To date, $25.0 million has been received and $5.4 million has been repaid. The remaining $26 million under the facility includes $13.5 million with the condition that the Company started trading on the Nasdaq Capital Market, had $250,000 in sales, and establish an ATM or ELOC, and another $12.5 million at the discretion of the Buyers. Buyers may request partial redemptions of up to an aggregate of $1,800,000 on the 15th of each month or may convert the Notes into shares of common stock of the Company (“Conversion Shares”) at a conversion rate of 110% of the last reported sales price on the date of the agreement to acquire such Notes. The Notes bear zero coupon, mature on September 1, 2025, require a minimum of $5.0 million maintained in cash and cash equivalents, and are secured by certain real property and cash and investment accounts of the Company. The Notes contain features that are either entirely within the Company’s control or based on events management considers the probability of occurring to be extremely remote. These features which are required to be bifurcated under ASC 815, “Derivatives and Hedging,” would likely have minimal or no value, and therefore deemed to not be material to the Condensed Consolidated Financial Statements.

 

Note discount and issuance costs totaled $4.7 million and reduced the carrying value of the convertible notes as a debt discount. The carrying value, net of debt discount, is being accreted over the term of the convertible notes from date of issuance to date of full repayment, expected to be in October 2023 based on partial redemption payments, using the effective interest rate method. For the six months ended December 31, 2023, amortization of debt discount and issuance costs totaled $1.3 million.

 

The table below presents the net carrying amounts of the Notes as of:

 

   December 31, 2023   June 30, 2023 
Principle outstanding  $19,683,333   $- 
Unamortized debt discount and issuance costs   (3,408,484)   - 
Net carrying value  $16,274,850   $- 

 

The table below presents the maturities of notes payable as of December 31, 2023:

 

      
December 31, 2024  $19,683,333 
December 31, 2025   - 
Total note payments   19,683,333 
Less: unamortized debt discount and issuance costs   (3,408,484)
Total notes payable  $16,274,850 
      
Notes payable, current  $19,683,333 
Notes payable, non-current  $- 

 

17
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

11. 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 at December 31, 2023 and June 30, 2023.

 

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 six months ending December 31, 2023 and 2022, based primarily on historical lending agreements. RoU assets include lease payments required to be made prior to commencement and exclude lease incentives. Both RoU assets and the related lease liability 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, many of which do not exceed a year in length. Total operating lease costs for the six months ended December 31, 2023 and 2022, were approximately $50,525 and $50,525. The Company does not have any finance leases as of December 31, 2023 and 2022.

 

As of December 31, 2023, current lease liabilities of $117,131 are included in “Accounts payable and accrued liabilities” on the consolidated balance sheets. The table below presents total operating lease RoU assets and lease liabilities at December 31, 2023 and June 30, 2023:

 

   December 31,2023   June 30, 2023 
Operating lease right-of-use asset  $92,629   $143,154 
Operating lease liabilities  $117,131   $175,788 

 

The table below presents the maturities of operating lease liabilities as of December 31, 2023:

 

      
December 31, 2024  $121,868 
December 31, 2025   - 
Total lease payments   121,868 
Less: discount   (4,737)
      
Total operating lease liabilities  $117,131 
      
Operating lease liabilities, current  $117,131 
Operating lease liabilities, non-current  $- 

 

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 December 31, 2023.

 

Weighted average lease term (years)  1.33 
Weighted average discount rate  8.00%

 

18
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

12. Stockholders’ Equity

 

On September 21, 2023, the Company’s common stock began trading on the Nasdaq Capital Market under the symbol “ABAT.” The Company was previously traded on the OTCQX Markets under the symbol “ABML.”

 

Preferred Stock

 

Our amended and restated articles of incorporation authorize shares of preferred stock and provide that shares of preferred stock may be issued from time to time in one or more series. Our board of directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our board of directors will be able to, without stockholder approval, issue shares of preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of our board of directors to issue shares of preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management.

 

To date, the Company has authorized a total of 1,666,667 shares of preferred stock. Of this amount the Company has designated a total of 233,334 shares to three classes of preferred stock, Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock. As of June 30, 2023 and December 31, 2023, no shares of any of these classes are issued and outstanding. A description of each class of preferred stock is listed below.

 

Series A Preferred Stock

 

The Company has 33,334 shares of Series A Preferred Stock authorized with a par value of $0.001, per share. The Company had nil shares of Series A Preferred Stock issued and outstanding at December 31, 2023 and June 30, 2023.

 

Series B Preferred Stock

 

The Company has 133,334 shares of Series B Preferred Stock authorized with a par value of $10.00, per share. The Company had nil shares of Series B Preferred Stock issued and outstanding at December 31, 2023 and June 30, 2023.

 

Series C Preferred Stock

 

The Company has 66,667 shares of Series C Preferred Stock authorized with a par value of $10.00, per share. The Company had nil shares of Series C Preferred Stock issued and outstanding at December 31, 2023 and June 30, 2023.

 

Common Stock

 

The Company has 80.0 million shares of common stock authorized, with a par value of $0.001, per share.

 

On September 11, 2023, in preparation for listing on the Nasdaq Capital Market, the Company implemented a one-for-fifteen (1-for-15) reverse split of our common stock. Prior to the reverse stock split the Company had 692,068,218 shares of common stock issued and outstanding, and after the reverse stock split, the Company had approximately 46,137,882 shares of common stock issued and outstanding. Immediately after the reverse stock split, each stockholder’s percentage ownership interest in the Company and proportional voting power remained unchanged aside from rounding fractional shares into whole shares, resulting in an additional 59,164 common shares issued. The reverse stock split did not change the par value of the common stock or preferred stock.

 

19
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

12. Stockholders’ Equity (continued)

 

Common Stock (continued)

 

Six months ended December 31, 2023:

 

During the period the Company issued 1,326 common shares that were previously listed as issuable as of June 30, 2023. These shares for professional services relate to previously earned board compensation.

 

During the period, the Company issued 312,953 common shares with an issuance date fair value of $2.9 million to executives, directors and employees pursuant to share award service and performance achievements.

 

On July 28, 2023, the Company recorded an increase of $0.2 million to stockholders’ equity for the change in fair value between the balance sheet date of June 30, 2023 and the fair value on the date the shares were returned. These shares were pursuant to the Company modifying its building purchase agreement to nullify a $1.5 million indemnification requirement and reclaim 128,205 shares that it had previously issued to the Selling Stockholder (See Note 5).

 

During the period, the Company filed a prospectus supplements related to the offer and sale from time to time of up to 6,666,667 common shares directly by the Company at market prices, to Tysadco Partners, LLC, a Delaware limited liability company, pursuant to the terms of written sales agreement(s) (“Tysadco Agreement”). Pursuant to the Tysadco Agreement, the Company may offer and sell up to 6,666,667 common shares of the Company at a purchase price of 95% of the weighted-average price, with a minimum request of 33,333 shares. During the period, the Company sold 3,106,225 common shares for total proceeds of $15.8 million, of which, $1.5 million is recorded as a subscription receivable on the condensed balance sheet at December 31, 2023. This amount was received in January 2024.

 

During the period, the Company issued 45,545 common shares pursuant to cashless exercise of 50,000 share purchase warrants exercised as of June 30, 2023. During the period, the Company received cash proceeds of $37,500 pursuant to 33,334 share purchase warrants. Also during the period, the Company issued 24,753 common shares pursuant to cashless exercise of 33,333 share purchase warrants.

 

During the period, the Company recognized stock-based compensation expense of approximately $5.8 million, which was an increase to additional paid-in capital, a component of stockholders’ equity. Of the amount, approximately $1.9 million was recognized for officers and directors of the Company.

 

Six months ended December 31, 2022:

 

During the period, the Company issued 121,813 common shares pursuant the vesting of restricted share units issued to employees and directors of the Company. Of the vested shares, 56,667 common shares with a fair value of approximately $490,000 were issued to officers of the Company.

 

During the period, the Company issued 266,667 common shares pursuant the Share Purchase Agreement, effective April 2, 2021. The Company received proceeds of $2.0 million after December 31, 2022. Of this amount $1.4 million was reflected in current assets and $0.6 million as a component of stockholders’ equity at December 31, 2022.

 

During the period the Company issued 10,009 common shares for professional services, with a fair value of approximately $104,000.

 

During the period, the Company recognized stock-based compensation expense of approximately $3.5 million, which was an increase to additional paid-in capital, a component of stockholders’ equity. Of the amount, approximately $1.6 million was recognized for officers and directors of the Company.

 

20
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

13. Share Purchase Warrants

 

During the six months ended December 31, 2023, there were 58,087 common shares issued related to warrants exercised, of which 24,753 were issued pursuant to a cashless exercise of 33,333 share purchase warrants. In addition, there were 68,974 warrants granted related to stock-based compensation.

 

   Number of
Warrants
   Weighted Average
Exercise Price
 
         
Balance, June 30, 2023   5,729,360   $14.53 
Granted   68,974   $6.53 
Exercised   (66,668)  $(1.13)
Expired      $ 
Balance, December 31, 2023   5,731,666   $14.59 

 

Additional information regarding share purchase warrants as of December 31, 2023, is as follows:

 

   Outstanding and Exercisable  
Range of Exercise Prices  Number of Warrants   Weighted Average Remaining Contractual Life (years) 
         
$1.13 - $3.75   741,076    0.09 
$6.53 - $13.13   3,167,615    1.43 
$23.10 - $26.25   1,822,975    0.83 
    5,731,666    2.41 

 

14. Share Awards

 

The Company has established the 2021 Retention Plan (“the Retention Plan”) to issue shares in the effort to retain key executives, directors, and employees. The Retention Plan allows for several different types of awards to be granted, including but not limited to, restricted share units and restricted share awards, collectively referred to as “share awards”. Share awards generally have the same expense characteristics under US GAAP and generally vest over a four-year period at a rate of 25% per annum.

 

Under the Retention Plan, the Company is authorized to issue shares of common stock to employees and non-employees up to ten percent (10%) of the total number of shares of common stock outstanding as of December 31, 2022, on a fully diluted basis. The Company adjusts the authorized shares under the plan each December 31, while the Retention Plan remains in effect.

 

During the six months ended December 31, 2023 and 2022, the Company granted 1.4 million and 1.8 million share awards, respectively. As of December 31, 2023 several grant performance targets for the fiscal year ended June 30, 2024 have been defined via employee and retention agreements. These performance targets have not yet been achieved by employees and officers thus, the Company has deferred any stock-based compensation recognition until such achievements are probable of achievement and approval by the board of directors has occurred.

 

21
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

14. Share Awards (continued)

 

The table below depict the share award activity for the period ended December 31, 2023:

 

   Units   Weighted-
Average
Grant Date
Fair Value
per Unit
 
         
Unvested share awards at June 30, 2023   1,736,376   $8.35 
Granted   1,364,648   $5.17 
Vested   (229,772)  $6.77 
Other        
Forfeitures      $ 
Unvested awards at December 31, 2023   2,871,252   $6.97 

 

As awards are granted, stock-based compensation equivalent to the fair market value on the date of grant is expensed over the requisite service period, using the graded vesting attribution method as acceptable under ASC 718, “Stock-Based Compensation.”

 

The Company recognized stock-based compensation expense of $5.8 million and $3.5 million for the periods ended December 31, 2023 and 2022, respectively. Of these amounts, $1.8 million and $1.6 million, respectively, were related to officers and directors of the Company.

 

As of December 31, 2023 and June 30, 2023, there were approximately $11.6 million and $8.7 million of unamortized expenses relating to outstanding share awards to be recognized over a remaining weighted-average period of 4.0 years and 3.2 years, respectively.

 

The table below presents the stock-based compensation expense per respective line item on the consolidated statements of operations for the six months ended December 31:

 

   2023   2022 
         
General and administrative  $2,605,382   $2,460,584 
Research and development   2,659,061    759,681 
Exploration   493,781    303,040 
Stock-based compensation expense  $5,758,224   $3,523,305 

 

Executive officers and selected other key employees are eligible to receive common share performance-based awards, as determined by the board of directors. The payouts, in the form of share awards, vary based on the degree to which corporate operating objectives are met. These performance-based awards typically include a service-based requirement, which are generally four-years. No granting of these awards occurs until performance thresholds are achieved. The Company has granted 0.06 million and nil performance-based awards to officers and employees of the Company for the period ended December 31, 2023 and 2022, respectively. The Company grants awards at the time of reaching such performance targets.

 

22
 

 

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

For the period ended December 31, 2023

(unaudited)

 

15. Supplemental Statement of Cash Flow Disclosures

 

For the six months ended December 31:

 

   2023   2022 
         
Supplemental disclosures:          
           
Interest paid  $14,462   $- 
           
Non-cash investing and financing activities:          
           
Deposits capitalized as investing activities   27,103,351    150,000 

 

16. 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. Except as otherwise identified herein, management is currently not aware of any such legal proceedings or claims that could have, individually or in aggregate, a material adverse effect on our business, financial condition, or operating results.

 

Operating Leases

 

The Company leases its principal office location in Reno, Nevada. It also leases lab space at 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 November 30, 2024. Consistent with the guidance in ASC 842, The Company has recorded the principal office lease in its consolidated balance sheet as an operating lease. For further information on operating lease commitments, see Note 11 – 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. The Company has satisfied financial assurance requirements using a combination of cash bonds and surety bonds. The amount of financial assurance The Company is required to provide will vary with changes in laws, regulations, reclamation and closure requirements, and cost estimates. At December 31, 2023, The Company’s financial assurance obligations associated with U.S. mine closure and reclamation/restoration cost estimate totaled $59,646, for which the Company is legally required to satisfy its financial assurance obligations for its mining properties in Tonopah, Nevada. The Company was previously released of all of its liability in the Railroad Valley region of Nevada.

 

17. Subsequent Events

 

Pursuant to the Tysadco Agreement, subsequent to December 31, 2023, the Company has issued 2,208,149 common shares for net proceeds of $6.5 million.

 

XX

 

23
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

The following discussion of the Company’s financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this Form 10-K. The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. The Company may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and undue reliance should not be placed on the Company’s forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements except as required by applicable securities laws.

 

Overview

 

American Battery Technology Company (the “Company”) is a new entrant in the lithium–ion battery industry that is working to increase the domestic U.S. production of battery materials, such as lithium, nickel, cobalt, and manganese through its exploration of new domestic-US primary resources of battery metals, development and commercialization of new technologies for the extraction of these battery metals from primary resources, and commercialization of an internally developed integrated process for the recycling of lithium–ion batteries. Through this three–pronged approach the Company is working to both increase the domestic production of these battery materials, and to ensure spent batteries have their elemental battery metals returned to the domestic manufacturing supply chain in an economical, environmentally-conscious, closed–loop fashion.

 

To implement this business strategy, the Company has constructed and is now operating its first integrated lithium–ion battery recycling facility, which takes in waste and end–of–life battery materials from the electric vehicle, stationary storage, and consumer electronics industries. The ramp-up 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. The Company has been awarded a competitively bid grant from the U.S. Advanced Battery Consortium to support a $2 million project to accelerate the development and demonstration of the technologies within this integrated lithium–ion battery recycling facility. The Company has also been awarded an additional grant from the U.S. Department of Energy to support a $20 million project under the Bipartisan Infrastructure Law to validate, test, and deploy three next-generation disruptive advanced separation and processing recycling technologies.

 

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 U.S. Department of Energy’s Advanced Manufacturing and Materials Technologies Office through the Critical Materials Innovation program to support a $4.5 million project for 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 also been awarded an additional grant award under the Bipartisan Infrastructure Law to support a $115 million project to design, construct, and commission a first-of-kind commercial-scale refinery to produce 30,000 MT of battery-grade lithium hydroxide per year from this resource.

 

Financial Highlights:

 

  In October 2023, the Company commenced commercial scale operations at its first integrated lithium-ion battery recycling facility near Reno, NV. Once fully ramped, this facility has the capacity to process approximately 20,000 MT/year of battery materials and to produce multiple streams of battery grade metals and other byproducts.
  The prime agreement contract for the Company’s grant to support its $115M project for its commercial-scale lithium hydroxide refinery was issued with a project start date of September 1, 2023. The Company began receiving funds related to this award during the period ended December 31, 2023.
  The prime agreement contract for the Company’s grant to support its $20M project for its next-generation advanced battery recycling technologies was issued with a project start date of October 1, 2023. The Company began receiving funds related to this award during the period ended December 31, 2023.
  Government grant funding increased to $1.7 million for the six months ended December 31, 2023 compared to $0.4 million during the same period of the prior year. Out of the current period’s $1.7 million in grant funding, $0.5 million was recorded as an offset to fixed assets, as reimbursements related to equipment purchases, and $1.2 million was recorded as an offset to research and development costs within the statement of operations.
  As of December 31, 2023, the Company had total cash on hand of $7.6 million.
  Cash used for the acquisition of property, construction, equipment, mineral rights and water rights for the six months ended December 31, 2023 was $10.9 million. Cash used in the same period of the prior year totaled $10.2 million for water rights and equipment.
  Cash used in operations for the six months ended December 31, 2023 was $7.4 million, which was in line with the $7.4 million use of cash during the six months ended December 31, 2022.
  Government grant funding increased to $1.7 million for the six months ended December 31, 2023 compared to $0.4 million during the same period of the prior year.
  On August 29, 2023, the Company entered into a Securities Purchase Agreement for up to $51.0 million of a new series of senior secured convertible notes. To date, $25.0 million of these notes have been issued, and the remaining notes may be issued to expand operations in the future.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

 

Components of Statements of Operations

 

Operating Expenses

 

During the six months ended December 31, 2023, the Company incurred $14.6 million of operating expenses compared to $8.8 million during the six months ended December 31, 2022. The increase is primarily due to the items described below.

 

General and administrative expenses consist of stock-based compensation, office expenses, legal, recruitment, business development, public relations, and general facility expenses. For the six months ended December 31, 2023, general and administrative expenses were $7.3 million, an increase of $1.4 million over the same period in the prior year. The Company recognized a $2.3 million in non-cash stock-based compensation expense, while other general and administrative expenses decreased by $0.9 million largely due to payroll tax credits related to research & development activities.

 

Research and development expenses consist primarily of laboratory leases, supplies, salaries, stock-based compensation, and employee benefits. Research and development expenses for the six months ended December 31, 2023 and 2022 were $5.3 million and $2.0 million, respectively. The increase is primarily due to increased employee headcount. These costs are partially offset by federal grant funds for awards that it has contracted with various federal agencies. The Company recognized an offset to its research and development costs of $1.2 million and $0.4 million related to these awards for the six months ended December 31, 2023 and 2022, respectively.

 

Exploration costs consist primarily of drilling, assay, claim fees, personnel, stock-based compensation, office and warehouse costs, travel, and other costs related to exploration of claims in central Nevada. Exploration expenses totaled $2.1 million for the six months ended December 31, 2023 compared to $0.9 million during the same period in the prior year. The increase year-over-year resulted principally from increased drilling, assaying and engineering costs to further define and potentially upgrade the geological classification of the mineral rights.

 

Other Income (Expense)

 

During the six months ended December 31, 2023, the Company recorded other expense of $1.9 million, including $0.1 million for interest expense and $1.8 million for amortization of debt financing costs. During the six months ended December 31, 2022, the Company recorded other income of $0.1 million largely related to the sale of mining claims it previously held in Railroad Valley, Nevada.

 

Net Loss

 

During the six months ended December 31, 2023, the Company incurred a net loss of $16.5 million or $0.35 loss per share compared to a net loss of $8.6 million, or $0.20 loss per share, during the six months ended December 31, 2022.

 

Liquidity and Capital Resources

 

At December 31, 2023, the Company had cash of $7.6 million and total assets of $88.9 million compared to cash of $2.3 million and total assets of $74.7 million at June 30, 2023. The increase in cash is due to the Company having received net proceeds of $5.3 million from Tysadco financing transactions.

 

The Company had total current liabilities of $22.3 million at December 31, 2023, compared to $13.4 million at June 30, 2023. The increase related to new convertible notes debt, offset by Mercuria debt fully repaid and payments on the convertible notes.

 

As of December 31, 2023 the Company had a working capital deficiency of $10.7 million compared to a working capital deficiency of $8.6 million at June 30, 2023. The higher level of working capital deficiency is largely attributed to the current classification of the convertible notes, as well as acquisitions of property and equipment and cash used in operating activities, partially offset by an increase in cash generated from financing activities during the six months ended December 31, 2023.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

 

Cash Flows

 

For the six months ended December 31:

 

   2023   2022 
Cash used in operating activities  $(7,418,700)  $(7,366,547)
Cash used in investing activities   (10,868,460)   (10,178,961)
Cash provided by financing activities   23,613,794    - 
Net increase (decrease) in cash during the period   5,326,635    (17,545,508)

 

Cash from Operating Activities.

 

During the six months ended December 31, 2023, the Company used $7.4 million of cash for operating activities, which was in line with the $7.4 million cash used during the six months ended December 31, 2022. The increase included cash costs for engineering, research and development as well as increased exploration expenses. Increased research and development costs were to support the development of the Company’s process for the recycling of lithium-ion batteries and for the extraction of lithium from the Company’s lithium claystone mining claims. The Company has also seen a steady increase in exploration activity expenses as it works to continue upgrading the geological category of its claims in the Tonopah, Nevada region.

 

Cash from Investing Activities

 

During the six months ended December 31, 2023, the Company used cash in investing activities of $10.9 million, consisting primarily of $10.0 million related to property and equipment for its recycling facilities. This is in comparison to cash used in investing activities of $10.2 million for the six months ended December 31, 2022, consisting primarily of $8.0 million for mineral rights.

 

Cash from Financing Activities

 

During the six months ended December 31, 2023, the Company had net cash provided by financing activities of $23.6 million. This represents the need for capital while the Company ramps up the recycling plant, develops its lithium ore pilot plant, and upgrades the geological category of its Tonopah claims through additional studies and assessments.

 

During the six months ended December 31, 2023, the Company issued 3,106,225 shares of common stock pursuant to purchase agreements for net proceeds of $15.8 million, of which, $1.5 million was received after December 31, 2023.

 

Working Capital

 

For the six months ended September 30:

 

   2023   2022 
Current assets  $11,568,258   $4,753,590 
Current liabilities  $22,295,581   $13,389,864 
Working capital  $(10,727,323)  $(8,636,274 

 

Future Financing

 

We will continue to rely on sales of our common shares, debt, or other financing to fund our business operations as needed beyond any revenue generated from internal operations and the government grants that offset research & development expenses, and capital expenditures. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the securities or arrange for debt or other financing to fund planned operating activities, acquisitions and exploration activities.

 

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Critical Accounting Estimates

 

Our condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions.

 

While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies” in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the accounting policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

 

Derivative Financial Instruments

 

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the issuance date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations.

 

Fair Value of Financial Instruments

 

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the ASC 820, “Fair Value Measurements”, equals or approximates the carrying amounts represented in the balance sheets.

 

Convertible Notes

 

The Company evaluates all conversion, repurchase and redemption features contained in a debt instrument to determine if there are any embedded features that require bifurcation as a derivative. The Company accounts for its convertible notes as a long-term liability, with the current portion reclassified to a short-term liability, equal to the proceeds received from issuance, including any embedded conversion features, net of the unamortized debt discount and offering costs in the accompanying unaudited consolidated balance sheets. The debt issuance and offering costs are amortized over the term of the convertible notes, using the effective interest method, as interest expense in the accompanying unaudited consolidated statements of operations.

 

Long-Lived Assets

 

Long-lived assets, such as property, plant and equipment, mineral properties, and purchased intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable in accordance with Accounting Standards Codification (“ASC”) topic 360, Property, Plant, and Equipment. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. The Company’s long-lived assets consist of buildings, vehicles, equipment, and land. Buildings, vehicles and equipment are depreciated on a straight-line basis over their estimated value lives ranging between three and thirty years.

 

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The recoverability of assets is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by an asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount exceeds the estimated fair value of the asset. Any impairment in value is recognized as an expense in the period when the impairment occurs.

 

Expenses for major repairs and maintenance which extend the useful lives of property, plant and equipment are capitalized. All other maintenance expenses, including planned major maintenance activities, are expensed as incurred. Gains or losses from property disposals are included in income or loss from operations.

 

Off-Balance Sheet Arrangements

 

As of December 31, 2023, 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 expenses or capital resources that are material to stockholders.

 

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.

 

The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2023, the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2023, the Company’s disclosure controls and procedures are not effective, based on the material weakness described below, to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the required time periods and are designed to ensure that information required to be disclosed in its reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Material Weakness in Internal Control over Financial Reporting

 

We did not maintain appropriate segregation of duties related to accounting processes. This material weakness creates a reasonable possibility that a material misstatement to the financial statements will not be prevented or detected on a timely basis, and we concluded that the deficiency represents a material weakness in our internal control over financial reporting and our internal control over financial reporting was not effective as of December 31, 2023.

 

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 controls 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 controls 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, management concluded that, as of December 31, 2023, our internal control over financial reporting was deemed not to be effective, based on the criteria therein. The material weakness presiding over our internal controls as it relates to financial reporting is described below.

 

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ITEM 4. CONTROLS AND PROCEDURES (CONTINUED)

 

Remediation Plan

 

During the year ended June 30, 2023, we enhanced our internal control over financial reporting and remediated material weaknesses including lack of adequate documentation evidencing operating effectiveness of internal controls and controls relating to the supervision and review of complex accounting matters. These material weaknesses were previously presented in our financial statements for the fiscal years ended June 30, 2022 and 2021.

 

The steps below were implemented, and as a result we have remediated the material weaknesses, aside from segregation of duties.

 

  Successful hiring of additional personnel with the expertise necessary to improve the financial reporting function
  Complete the implementation of a robust Enterprise Resource Planning (ERP) solution that provides the necessary segregation and approval workstreams necessary to mitigate control weaknesses in key accounting processes and procedures
  Provide additional guidance, education and training to employees relating to our accounting procedures with a continued focus on its segregation-of-duties as the Company hires more accounting personnel
  Further develop and document detailed accounting policies for significant accounts, accounting estimates and presentation of complex items, as is required by US GAAP
  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 are committed to ensuring that our internal control over financial reporting is designed and operating effectively. We expect to remediate this material weakness during the period ending June 30, 2024. However, there is no guarantee that such material weaknesses will be remediated during the year, and we may discover additional material weaknesses that may require additional time and resources to remediate.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the fiscal quarter 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.

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

Please refer to “Item 1. Legal Proceedings” in our 2023 Form 10-Q for the six months ended December 31, 2022, for information regarding material pending legal proceedings. In addition to those material legal proceedings, on January 21, 2024, Kimberly Eckert filed a Charge of Discrimination with the Nevada Equal Rights Commission, alleging that that the Company discriminated against her due to her sex (female) in violation of Title VII of the Civil Rights Act of 1964, as amended. There have been no additional material legal proceedings and no other material developments in the legal proceedings previously disclosed.

 

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

 

ITEM 1A. RISK FACTORS

 

There were no material changes from the risk factors set forth under Part I, Business; Item 1A, Risk Factors in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023, as filed with the SEC on September 28, 2023.

 

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

 

None.

 

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

 

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

 

Exhibit   Description   Filed Herein  

Incorporated

Date

 

By

Form

 

Reference

Exhibit

31.1   Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer   x            
31.2   Rule 13a-14(a)/ 15d-14(a) Certification of Chief Financial Officer   x            
32.1   Section 1350 Certification of Chief Executive Officer*                
32.2   Section 1350 Certification of Chief Financial Officer*                
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            

 

*Furnished herewith.

 

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