Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

3 Months Ended

Sep. 30, 2024

Accounting Policies [Abstract]

Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

3. Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U. S. Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements.

The condensed consolidated balance sheet at September 30, 2024, and the condensed consolidated statements of operations, comprehensive income (loss), and changes in stockholders’ equity, and cash flows for the three months ended September 30, 2024 and 2023 are unaudited, but include all adjustments, consisting of normal recurring adjustments the Company considers necessary for a fair presentation of the financial position, operating results, and cash flows for the periods presented. The results for the three months ended September 30, 2024 are not necessarily indicative of results to be expected for the year ending June 30, 2025 or for any future interim period. The condensed consolidated balance sheet at June 30, 2024 has been derived from audited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2024 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 as filed with the SEC on September 23, 2024. The Company’s consolidated subsidiaries consist of 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.

The accompanying condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

As disclosed in the Company’s FY 2024 Form 10-K, subsequent to the issuance of the Company’s fiscal year 2023 consolidated financial statements, the Company identified errors in the application of Accounting Standards Codification (“ASC”) 710, “Compensation-General,” and ASC 718, “Compensation-Stock Compensation,” related to expense recognition for cash and equity awards that are subject to both service and performance conditions. ASC 710 and ASC 718 require recognition of compensation cost once achievement of the performance condition becomes probable as the requisite service is provided. Historically, the Company did not recognize compensation cost for certain cash and equity awards until the performance conditions in the form of milestones were achieved, and for the Company’s common share warrant performance-based awards, no compensation cost had previously been recognized when the performance conditions either became probable of achievement or were achieved. As the common share warrant and restricted stock unit (“RSU”) performance-based awards to executive officers and key employees are granted with a fixed dollar value and settled in a variable number of common share warrants or RSUs, these awards are liability-classified until the number of common share warrants or RSUs are fixed, and the corresponding compensation cost should be recorded to current or long-term liabilities, or additional paid-in capital, depending on expected timing of settlement of the award, once the performance conditions become probable of achievement.

The correction of this error resulted in an increase in compensation cost of $1.6 million as of and for the quarter ended September 30, 2023. As certain of these awards are liability-classified, the correction of this error resulted in an increase of $0.2 million in accounts payable and accrued liabilities for the current portion of the awards, and an increase of $1.4 million in additional paid-in capital for the awards where the number of common share warrants or RSUs are fixed as of September 30, 2023.

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

(unaudited)

The Company also identified an error in application of ASC 815, “Derivatives and Hedging,” related to the initial and subsequent recognition of a freestanding call option in the Company’s convertible notes that does not qualify for equity classification. ASC 815 requires bifurcation of the freestanding call option with subsequent changes in the fair value of the bifurcated derivative to be recorded in earnings. At issuance of the convertible notes, the Company should have recognized a derivative liability and a corresponding discount on the convertible notes resulting from bifurcation of the derivative, with subsequent changes in the fair value of the derivative liability and accretion of the discount recorded in earnings.

The correction of this error resulted in an increase in amortization and accretion of financing costs expense of less than $0.1 million for the quarter ended September 30, 2023.

The Company has evaluated the effects of the correction detailed in the tables below on the previously issued consolidated financial statements, individually and in the aggregate, in accordance with the guidance in ASC 250, “Accounting Changes and Error Corrections.” The Company has concluded such corrections to be immaterial to its previously issued consolidated financial statements. While management believes the effect of the error is immaterial to the Company’s previously issued consolidated financial statements as of and for the quarter ended September 30. 2023, the financial statement line items impacted by this error have been corrected.

The tables below reflect the sections of the Company’s consolidated financial statements that were impacted by the error.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

	Three months ended September 30, 2023
	As Reported			Adjustments			As Corrected
Operating expenses
General and administrative	$	2,948,846		$	105,152		$	3,053,998
Research and development		2,155,314			1,458,538			3,613,852
Exploration		1,279,782			70,138			1,349,920
Total operating expenses		6,383,942			1,633,828			8,017,770
Net loss before other income (expense)	$	(6,383,942	)	$	(1,633,828	)	$	(8,017,770	)
Other income (expense)
Amortization and accretion of financing costs	$	(706,731	)	$	(26,165	)	$	(732,896	)
Total other income (expense)		(848,042	)		(26,165	)		(874,207	)
Net loss attributable to common stockholders	$	(7,231,985	)	$	(1,659,992	)	$	(8,891,977	)
Net loss per share, basic and diluted	$	(0.16	)	$	(0.03	)	$	(0.19	)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Three months ended September 30, 2023
	As Reported			Adjustments			As Corrected
Stockholders’ Equity
Additional paid-in capital:
Stock-based compensation expense		1,921,442			1,447,827			3,369,269
Balance, September 30, 2023	$	226,317,285		$	1,955,760		$	228,273,045
Accumulated deficit
Net loss for period		(7,231,985	)		(1,659,992	)		(8,891,977	)
Balance, September 30, 2023	$	(167,205,560	)	$	(2,512,925	)	$	(169,718,485	)
Total stockholders’ equity
Balance, September 30, 2023	$	59,195,532		$	(557,166	)	$	58,638,366

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	Three months ended September 30, 2023
	As Reported			Adjustments			As Corrected
Operating Activities
Net loss attributable to stockholders	$	(7,231,985	)	$	(1,659,992	)	$	(8,891,977	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and accretion expense	$	256,459		$	26,165		$	282,624
Stock-based compensation		1,921,442			1,447,827			3,369,269
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities	$	228,071		$	186,000		$	414,071
Net cash used in operating activities	$	(4,758,984	)	$	-		$	(4,758,984	)

AMERICAN BATTERY TECHNOLOGY COMPANY

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Use of Estimates

The preparation of these condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting 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.

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 September 30, 2024 and June 30, 2024.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is an exit price concept that assumes an orderly transaction between willing market participants and is required to be based on assumptions that market participants would use in pricing an asset or a liability. Current accounting guidance establishes a three-tier fair value hierarchy as a basis for considering such assumptions and for classifying the inputs used in the valuation methodologies. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities that the reporting entity can assess at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability which include the Company’s assumptions regarding the data market participants would use in pricing the asset or liability based on the best information available under the circumstances.

The carrying values of the Company’s cash, accounts receivable, prepaid expenses and deposits, notes payable, accounts payable and accrued liabilities approximate fair value due to their short maturities.

The Company’s recurring fair value measurements include the valuation of the derivative liabilities for the bifurcated notes payable freestanding call and conversion options and for the liability-classified equity-linked contracts, both of which are classified as Level 3 of the fair value hierarchy. See Notes 6 and 11 for relevant fair value disclosures. Given use of unobservable inputs, there is inherently uncertainty that the inputs could reasonably have been different as of the reporting date.

The Company’s non-recurring fair value measurements include the valuation of the assets held-for-sale as of September 30, 2024. See Note 7 for relevant fair value disclosures.

Adoption of Recent Accounting Pronouncements

The Company continually assesses new accounting pronouncements to determine their applicability. When it is determined a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a review to determine the consequences of the change to its consolidated financial statements and assures there are sufficient controls in place to ascertain the Company’s consolidated financial statements properly reflect the change.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. The amendments in this ASU are effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which updates income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.

In November 2024, the FASB Issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this update require disclosures, in the notes to financial statements, of specified information about certain costs and expenses. The amendment clarifies which certain costs and expenses that are included in cost of sales and selling, general, and administrative expense categories that should be disclosed with qualitative descriptions of amounts that are not separately disaggregated quantitatively. Additionally, the amendment requires disclosure of total amounts of selling expenses and an entity’s definition of selling expense. The update will be effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.