AMERICAN
BATTERY TECHNOLOGY COMPANY
Consolidated
Statements of Cash Flows
(The
accompanying notes are an integral part of these consolidated financial statements)
AMERICAN
BATTERY TECHNOLOGY COMPANY
Notes
to the Consolidated Financial Statements
For
the fiscal years ended June 30, 2022, and June 30, 2021
1.
Organization and Nature of Operations
American
Battery Technology Company (“ABTC”) is a startup company in the lithium-ion battery industry that is working to increase
the domestic US production of battery materials, such as lithium, nickel, cobalt and manganese through its engagement in the exploration
of new primary resources of battery metals, in the development and commercialization of new technologies for the extraction of these
battery metals from primary resources, and in the commercialization of an internally developed integrated process for the recycling of
lithium-ion batteries. Through this three-pronged approach ABTC is working to both increase the domestic production of these battery
materials, and to ensure that as these materials reach their end of lives that the constituent elemental battery metals are returned
to the domestic manufacturing supply chain in a closed-loop fashion.
The
Company was incorporated under the laws of the State of Nevada on October 6, 2011, for the purpose of acquiring rights to mineral properties
with the eventual objective of being a producing mineral company. We have limited operating history and have not yet generated or realized
any revenues from our activities. Our principal executive offices are located at 100 Washington Ave., Suite 100, Reno, NV 89503.
Liquidity
and Capital Resources
During
the fiscal year ended June 30, 2022, the Company incurred a net loss of $33.5 million and used cash of $10.2 million for operating activities.
At June 30, 2022, the Company has an accumulated deficit of $138.6 million.
On
September 27, 2021, the Company secured net proceeds of $36.9 million to construct and commission its lithium-ion battery recycling pilot
plant, fund operations, and increase research and development activities. The Company believes its recent capital raise, and its current
cash holdings will be sufficient to meet its future working capital needs. The Company cannot give assurance that it can increase its
cash balances or limit its cash consumption and thus maintain sufficient cash balances for its planned operations. The Company may need
to raise additional capital in the future. However, the Company cannot assure that it will be able to raise additional capital on acceptable
terms, or at all. Management believes that the Company has sufficient capital and liquidity to fund its operations
for at least one year from the date of issuance of the accompanying financial statements.
These
consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2.
Summary of Significant Accounting Policies
a) Basis of Presentation and Principles of Consolidation
The
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 (inactive) and LithiumOre
Corporation (formerly Lithortech Resources Inc) and ABTC AG, LLC. All inter-company accounts and transactions have been eliminated upon
consolidation.
Certain prior year amounts have been reclassified for consistency with
the current year presentation. These reclassifications had no effect on the reported results of operations and cash flows for the year
ended June 30, 2021.
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, recoverability of long-lived assets and deferred income tax asset
valuation allowances.
The
Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by
the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between
the estimates and the actual results, future results of operations may be affected.
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
vehicles, equipment, and land. Vehicles and equipment are depreciated on a straight-line basis over their estimated value lives
ranging between 3
and 7
years.
AMERICAN
BATTERY TECHNOLOGY COMPANY
Notes
to the Consolidated Financial Statements
For
the fiscal years ended June 30, 2022 and June 30, 2021
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. The estimated fair value is determined using a discounted
cash flow analysis. 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) Intangible assets
Intangible
assets 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.
e) Loss per Share
The
Company computes net income (loss) per share in accordance with ASC 260 - Earnings per Share. ASC 260 requires presentation of both
basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net
income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during
the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock
method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and
convertible shares. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At June 30, 2022, the
Company had 40,310,611
potentially dilutive shares outstanding, consisting of 40,210,611
warrants and 100,000 restricted share units.
f) 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. At June 30, 2022 and 2021, the Company did not grant any stock options. The Company will
utilize the Black Scholes method when calculating stock-based compensation expense relating to stock option awards and warrants.
The
Company granted 100,00 restricted share units with a fair value of $0.1 million to an officer of the Company for the fiscal year ended
June 30, 2022. The Company records restricted share units in accordance with ASC 718.
g) 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 fiscal quarter 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. 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 June 30, 2022 and 2021, the Company
has not capitalized any such mineral property costs.
AMERICAN
BATTERY TECHNOLOGY COMPANY
Notes
to the Consolidated Financial Statements
For
the fiscal years ended June 30, 2022 and June 30, 2021
h) Advertising and Marketing Costs
The
Company expenses advertising and marketing development costs as incurred. No advertising costs were incurred for the fiscal years ended
June 30, 2022 and 2021.
i) Research and Development Costs
Research
is planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing
a new product or service (referred to as product) or a new process or technique (referred to as process) or in bringing about a significant
improvement to an existing product or process. The Company expenses research costs as incurred.
Development
is the translation of research findings or other knowledge into a plan or design for a new product or process or for a significant improvement
to an existing product or process whether intended for sale or use. It includes the conceptual formulation, design, and testing of product
alternatives, construction of prototypes, and operation of pilot plan.
The
Company records any government assistance received as a cost-offset under IAS 20 - Accounting for Government Grants and Disclosures of
Government Assistance. The Company received $0.1 million and nil in government assistance for the fiscal years
ended June 30, 2022 and 2021, respectively.
j) Leases
The
Company follows the guidance of ASC 842 - Leases, which requires an entity to recognize a right-of-use asset (“RoU”) 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 uses an implicit rate of interest to determine 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.
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-forward.
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. We are confident that all uncertain tax positions will
be reversed as the correct information returns are filed with the United States Internal Revenue Service.
We
recognize accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the consolidated statement
of operations.
Due
to the Company’s net loss position from inception to June 30, 2022, no provision for income taxes has been recorded. As a result
of the Company’s cumulative losses to date, there exists little assurance to the realization of the deferred tax asset. Accordingly,
a valuation allowance equal to the total deferred tax asset has been recorded at June 30, 2022 and 2021.
AMERICAN
BATTERY TECHNOLOGY COMPANY
Notes
to the Consolidated Financial Statements
For
the fiscal years ended June 30, 2022 and June 30, 2021
l) Accounting Pronouncements
In
August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-06, Debt—Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies
the accounting for convertible instruments. The guidance removes certain accounting models that separate the embedded conversion features
from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative
under ASC 815 or for convertible debt issued at a substantial premium. The ASU is effective for annual reporting periods beginning after
December 15, 2021, including interim reporting periods within those annual periods, with early adoption permitted no earlier than the
fiscal year beginning after December 15, 2020. This ASU is applicable to the Company’s fiscal year beginning July 1, 2022, though
the Company has no applicable contracts at June 30, 2022.
In
November 2021, FASB issued ASU No. 2021-10 - Government Assistance (Topic 832) - Disclosures by Business Entities about Government
Assistance. This ASU will improve the transparency of government assistance received by most business entities by requiring the
disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance
on a business entity’s financial statements. ASU No. 2021-10 is effective for financial statements issued for annual periods beginning
after December 15, 2021, with early application permitted. This ASU is applicable to the Company’s fiscal year beginning July 1,
2022. The Company intends to recognize government assistance as a cost-offset under IAS 20 - Accounting for Government Grants
and Disclosures of Government Assistance.
3.
Property and Equipment
Schedule
of Property and Equipment
| |
Building | | |
Equipment | | |
Vehicles | | |
Land | | |
Total | |
Cost: | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, June 30, 2021 | |
$ | - | | |
$ | 99,466 | | |
$ | 61,916 | | |
$ | 5,340,621 | | |
$ | 5,502,003 | |
Additions | |
| | | |
| 118,558 | | |
| - | | |
| 1,574,996 | | |
| 1,693,554 | |
Construction in process | |
| 10,798,780 | | |
| 1,134,377 | | |
| - | | |
| - | | |
| 11,933,157 | |
Impairment
loss | |
| - | | |
| - | | |
| - | | |
| (186,779 | ) | |
| (186,779 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, June 30, 2022 | |
$ | 10,798,780 | | |
$ | 1,352,401 | | |
$ | 61,916 | | |
$ | 6,728,838 | | |
$ | 18,941,935 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated
Depreciation: | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, June 30, 2021 | |
$ | - | | |
$ | 4,356 | | |
$ | 13,422 | | |
$ | - | | |
$ | 17,778 | |
Additions | |
| - | | |
| 30,660 | | |
| 16,602 | | |
| - | | |
| 47,262 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, June 30, 2022 | |
$ | - | | |
$ | 35,016 | | |
$ | 30,024 | | |
$ | - | | |
$ | 65,040 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Carrying
Amounts: | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, June 30, 2021 | |
$ | - | | |
$ | 95,110 | | |
| 48,494 | | |
$ | 5,340,621 | | |
$ | 5,484,225 | |
Balance, June 30, 2022 | |
$ | 10,798,780 | | |
$ | 1,317,385 | | |
| 31,892 | | |
$ | 6,728,838 | | |
$ | 18,876,895 | |
Construction
in process consists of both construction in process and equipment deposits for equipment currently in process.
In February 2021, the Company entered into
an agreement to purchase land with a fair value of $85,000 located in Tonopah, NV in exchange for an agreed-upon number of common shares
though the transaction had not cleared escrow. In September 2021, the Company later issued the shares whereby the stock price had increased.
To correct the carrying value, the Company recognized impairment expense of $186,779 for the fiscal year ended June 30, 2022 once title
transfer occurred.
4.
Intangible Assets
Schedule
of Intangible Assets
| |
Water
Rights | |
| |
| |
Balance, June 30, 2021 | |
$ | 1,643,160 | |
Additions | |
| 2,208,739 | |
| |
| | |
Balance, June 30, 2022 | |
$ | 3,851,899 | |
To
date, the Company has purchased water rights in the City of Fernley, Nevada for approximately $3.9 million. The water rights will be
used to ensure the Company’s lithium-ion battery recycling plant will have adequate water to operate at full capacity once construction
is complete. The water rights are treated in accordance with ASC 350, Intangible Assets,
and have an unlimited useful life upon assignment to a property through use of a will-serve, which has no expiration date.
5.
Related Party Transactions
During
the fiscal year ended June 30, 2022, the Company has extinguished $205,646 of related party liabilities. The transactions were extinguished through non-cash, legal settlements with two former executives. At June 30, 2022 and 2021 the Company
has $nil and $205,646 related party liabilities, respectively.
AMERICAN
BATTERY TECHNOLOGY COMPANY
Notes
to the Consolidated Financial Statements
For
the fiscal years ended June 30, 2022 and June 30, 2021
6.
Leases
A
lease provides the lessee the right to control the use of an identified asset for a period in exchange for consideration. Operating lease
right-of-use assets (“RoU assets”) are presented within the asset section of the Company’s Consolidated Balance Sheets,
while lease liabilities are included within the liability section of the Company’s Consolidated Balance Sheets at June 30, 2022.
RoU
assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the
Company’s obligation to make lease payments arising from the lease. The Company determines if an arrangement is a lease at inception.
RoU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease
term. Most operating leases contain renewal options that provide for rent increases based on prevailing market conditions. The terms
used to calculate the RoU assets for certain properties include the renewal options that the Company is reasonably certain to exercise.
The
discount rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or
when that is not readily determinable, the Company estimates a rate of 8.0% for the period ending June 30, 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 don’t exceed a year in length.
Total operating lease costs for the fiscal year ended June 30, 2022, were approximately $213,000. The Company does not have any finance
leases as of June 30, 2022 and 2021.
As
of June 30, 2022, short term lease liabilities of $99,005 are included in “Accounts payable and accrued expenses” on the
consolidated balance sheets. The table below presents total operating lease RoU assets and lease liabilities at June 30:
Schedule
of Operating Lease ROU Assets and Lease Liabilities
| |
2022
$ | | |
2021
$ | |
Operating lease right-of-use asset | |
$ | 244,203 | | |
$ | - | |
Operating lease liabilities | |
$ | 274,794 | | |
$ | - | |
The
table below presents the maturities of operating lease liabilities as of June 30, 2022:
Schedule
of Maturity of Operating Lease Liabilities
| |
| | |
June 30, 2023 | |
$ | 117,670 | |
June 30, 2024 | |
| 131,198 | |
June 30, 2025 | |
| 55,395 | |
Total lease payments | |
| 304,263 | |
Less: discount | |
| (29,469 | ) |
| |
| | |
Total operating lease
liabilities | |
$ | 274,794 | |
| |
| | |
Short-term operating lease liability | |
$ | 99,005 | |
Long-term operating lease liability | |
$ | 175,789 | |
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 June 30, 2022.
Schedule
of Weighted Average Remaining Lease Term for Operating Leases and Weighted Average Discount Rate
Weighted average lease term (years) | |
| 2.2 | |
Weighted average discount rate | |
| 8.0 | % |
AMERICAN
BATTERY TECHNOLOGY COMPANY
Notes
to the Consolidated Financial Statements
For
the fiscal years ended June 30, 2022 and June 30, 2021
7.
Derivative Liabilities
The
Company records the fair value of the conversion option of convertible debentures in accordance with ASC 815 - Derivatives and
Hedging. The fair value of the derivatives is generally calculated using a multi-nominal lattice model. The fair value of the derivative
liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statements of
operations.
For
the fiscal year ended June 30, 2021, the Company recognized an expense related to the change in fair value of derivative liabilities
of $19,655,296, offset by gain on settlement of debt of $18,683,279 for the same period. For the fiscal year ended June 30, 2022, the
Company did not record an expense associated with the change in fair market value of derivatives. The Company had no derivative liabilities
at June 30, 2022 and 2021.
8.
Stockholders’ Equity
Preferred Stock
The
Company has authorized three separate classes of Preferred Stock with an aggregate of 25,000,000 shares authorized. A description of each
share class is listed below.
Series
A Preferred Stock
The
Company has 500,000 shares of Series A Preferred Stock authorized with a par value of $0.001. The shares allow the holder to vote 1,000
shares for each share of Series A stock in any vote of the shareholders of the Company and the Board is authorized to issue such preferred
stock as is necessary. On August 25, 2021, the Board approved a resolution to retire all the outstanding Series A shares of Preferred
Stock. On January 27, 2022, the Company redeemed all outstanding shares of Series A Preferred Stock. The Company had Series A Preferred
Stock issued and outstanding of nil and 500,000 at June 30, 2022 and 2021, respectively.
Series
B Preferred Stock
At
June 30, 2022 and 2021, 2,000,000
shares of Series B Preferred Stock are authorized with a par value of $10.00,
and no
shares are issued.
Series
C Preferred Stock
The Company has 1,000,000 shares of Series
C Preferred Stock authorized with a par value of $10.00. The Company had nil and 207,700 shares issued and outstanding at June 30,
2022 and 2021, respectively.
On
December 18, 2020, the Company issued 48.29 units of Series C Preferred Stock (241,450 shares of Series C Preferred Stock) at $50,000
per unit for proceeds of $2,414,500. Each unit is comprised of 5,000 shares of Series C Preferred Stock, each convertible into 80 shares
of common stock, and a warrant to purchase 400,000 common shares of the Company at $0.25 per share until June 30, 2023. Each holder of
Series C Preferred Stock is entitled to receive a non-cumulative dividend at an 8% rate per share, per annum. The dividend shall
be payable at the Company’s option either in cash or in common shares of the Company. If paid in common shares, the Company shall
issue the number of common shares equal to the dividend amount divided by the stated value and then multiplied by eighty.
On
February 2, 2022, the Company issued a Mandatory Conversion Notice to the remaining Series C Preferred stockholders. The notice converts
all outstanding shares of Series C Preferred Stock to common stock at a conversion ratio of 80 shares of common stock for each share
of Series C Preferred Stock.
On
February 8, 2022, the Company issued $125,700
in dividend payments to Series C stockholders that held shares from date of issuance. No remaining dividends are expected to be paid
in relation to Series C Preferred Stock as there are no remaining shares of Series C Preferred Stock outstanding at June 30,
2022.
During
the fiscal year ended June 30, 2022, the Series C Preferred stockholders converted 207,700 shares of Series C Preferred Stock (par value
of $2,077,000) to 16,616,000 shares of common stock.
Common
Stock
At
June 30, 2022 and 2021, 1,200,000,000
shares of common stock are authorized, with a par value of $0.001.
Fiscal
year ended June 30, 2022
During
the period, the Company issued 16,616,000 common shares pursuant to the conversion of 207,700 shares of Series C Preferred Stock at a
conversion ratio of 80 shares of common stock for each share of Series C Preferred Stock.
During
the period, the Company issued 25,389,611 units for proceeds of $39,100,001 pursuant to a private placement issuance at $1.54 per share.
Each unit is comprised of one common share of the Company and one share purchase warrant, where each share purchase warrant is exercisable
into one common share of the Company at $1.75 per share for a period of five years from the issuance date. As part of the financing,
the Company paid $2,161,350 of share issuance costs and issued 1,955,000 warrants as a commission fee, which are exercisable at $1.54
per common share for a period of three years from the date of the issuance. The fair value of the commission warrants was $2,699,039
and was determined based on the Black-Scholes option pricing model assuming volatility of 166%, risk-free rate of 0.56%, expected life
of three years, and no expected forfeitures or dividends.
AMERICAN
BATTERY TECHNOLOGY COMPANY
Notes
to the Consolidated Financial Statements
For
the fiscal years ended June 30, 2022 and June 30, 2021
During
the period, the Company issued 15,228,711
common shares pursuant to the exercise of 15,000,000
share purchase warrants for proceeds of $937,500,
of which 250,000
share purchase warrants, pursuant to an aggregate cash exercise price of $18,750,
were exercised during the fiscal year ended June 30, 2021.
During
the period, the Company issued 14,378,728 common shares with a fair value of $20,429,944, including 5,805,101 common shares
with a fair value of $9,333,019 to former officers and directors of the Company and 3,011,218 common shares with a fair
value of $4,822,308 to current officers and directors of the Company. At June 30, 2022, the Company has shares of common stock
with a fair value of $75,000 for professional services due to employees, officers and board of directors
of the Company.
On April 2, 2021, the Company entered into
a second Purchase Agreement (“Tysadco Agreement 2”) with Tysadco Partners, LLC. Pursuant to the Agreement, Tysadco committed
to purchase, subject to certain restrictions and conditions, up to $75,000,000 worth of the Company’s common stock over a 24-month
period from the effectiveness of the registration statement. The Company shall have the right, but not the obligation, to direct Tysadco
to buy the lesser of $10 million or 200% of the average shares traded for the five days prior to the closing request date, at a purchase
price of 95% of the average of the 5-day median share price, with a minimum request of $25,000. On August 8, 2022, the Company issued
3,000,000 common shares pursuant to the Tysadco Agreement 2, for aggregate proceeds of $3,988,005.
On
January 27, 2022, the Company and a former executive agreed to cancel, for no consideration, 1,000,000
previously issued common shares.
On
May 23, 2022, the Company redeemed 4,000,000
common shares from a former executive of the Company for no consideration. These shares were previously issued via an arms-length
transaction between former executives of the Company.
On
May 23, 2022, the Company issued 800,000
common shares with a fair value of $560,000
pursuant to a legal settlement with a former executive.
On
June 13, 2022, the Company cancelled 1,000,000
common shares, pursuant to a legal settlement from a prior year. The share certificate was received and remitted to the transfer
agent during the fiscal year ended June 30, 2022.
On
June 13, 2022, the Company issued 1,891,930 shares with a fair value of $1,324,351 to employees under the 2021 Equity Retention Plan.
Fiscal
year ended June 30, 2021
During
the period, the Company issued 22,685,750 common shares with a fair value of $7,913,391 for the conversion of $2,002,876 of note payable,
$77,723 of accrued interest and fees and $21,429,714 of derivative liability resulting in a gain on settlement of $15,596,922.
During
the period, the Company issued 34,534,830
common shares with a fair value of $29,353,966
for professional services, including 7,041,790
shares with a fair value of $4,875,002 issued to former directors of the Company.
During the period, the Company issued
60,625,000
units for proceeds of $2,450,000 received during the fiscal year ended June 30, 2020. Each unit is comprised of one common share of the
Company and 0.8 share purchase warrant where each whole share purchase warrant can be exercised into one common share of the Company at
$0.075 per share until October 31, 2024.
During the period, the Company issued 47,570,677
common shares pursuant to the cashless exercise of share purchase warrants and 10,100,000 common shares pursuant to the exercise of share
purchase warrants for total proceeds of $862,500. The fair value of $73,470 for the warrants exercised was transferred to common shares
from additional paid-in capital. As of June 30, 2021, the Company has received an additional $18,750 for future issuances.
On October 8, 2020, the Company entered
into a Private Purchase Agreement with Tysadco Partners, LLC, a Delaware limited company (“Tysadco”). Pursuant to this agreement,
Tysadco purchased 12,000,000 common shares for aggregate proceeds of $1,200,000.
On
October 23, 2020, the Company entered into a Purchase Agreement (the “Tysadco Agreement”) with Tysadco. Pursuant
to the Agreement, Tysadco
committed to purchase, subject to certain restrictions and conditions, up to $10,000,000 worth of the Company’s common stock
over a period of 24 -month period from the effectiveness of the registration statement registering the resale of shares purchased by
Tysadco. The Company shall have the right, but not the obligation, to direct Tysadco to buy the lesser of $250,000 in
common stock per sale or 200% of the average shares traded for the 10 days prior to the closing request date, at a purchase price of
85% of the of the two lowest individual daily VWAPs during the five (5) trading days commencing on the first trading day following
delivery and clearing of the delivered shares, with a minimum request of $25,000. During the period, the Company issued four puts against the facility for 4,750,000 common shares for aggregate proceeds
of $9,823,451.
On
April 2, 2021, the Company entered into the Tysadco Agreement 2. During the period, the Company did not issue a put against the facility.
On April 28, 2021, the Company issued 9,090,910
common shares at $1.65 per share in a prospectus offering for proceeds of $15,000,000. As part of the offering, the Company incurred share
issuance costs of $1,300,000 which has been applied against additional paid-in capital.
AMERICAN
BATTERY TECHNOLOGY COMPANY
Notes
to the Consolidated Financial Statements
For
the fiscal years ended June 30, 2022 and June 30, 2021
9.
Share Purchase Warrants
| |
Number
of
Warrants | | |
Weighted
Average
Exercise Price | |
| |
| | |
| |
Balance, June 30, 2021 | |
| 27,866,000 | | |
$ | 0.09 | |
Issued | |
| 27,344,611 | | |
$ | 1.73 | |
Exercised | |
| (15,000,000 | ) | |
$ | (0.08 | ) |
Expired | |
| - | | |
$ | - | |
| |
| | | |
| | |
Balance, June 30, 2022 | |
| 40,210,611 | | |
$ | 1.21 | |
Additional
information regarding share purchase warrants as of June 30, 2022, is as follows:
Schedule
of Additional Information Regarding Share Purchase Warrants
| | |
Outstanding
and Exercisable | |
Exercise
Price | | |
Number
of Warrants | | |
Weighted-Average
Remaining
Contractual Life
(years) | |
| | |
| | |
| |
$ | 0.08 | | |
| 11,250,000 | | |
| 2.3 | |
$ | 0.25 | | |
| 1,616,000 | | |
| 1.5 | |
$ | 1.54 | | |
| 1,955,000 | | |
| 2.2 | |
$ | 1.75 | | |
| 25,389,611 | | |
| 4.2 | |
| | | |
| | | |
| | |
| | | |
| 40,210,611 | | |
| 3.5 | |
10.
Share Awards
The Company has established the 2021 Retention
Plan (“the Plan”) to issue shares in the effort to retain key executives, directors, and certain employees. The Plan allows
for several different types of awards to be granted, including but not limited to, restricted share units and share awards. Share awards
generally vest over a four-year period at a rate of 25% per annum.
For
the fiscal year ended June 30, 2022, the Company issued 100,000
restricted share units and 1,891,930 common share awards under the 2021 Equity Retention Plan. The Company recognized stock-based compensation expense of
$1,233,155
and $nil for the fiscal years ended June 30, 2022 and 2021, respectively.
11.
Supplemental Statement of Cash Flow Disclosures
Schedule
of Statement of Cash Flow Disclosures
| |
June
30, 2022
$ | | |
June
30, 2021
$ | |
| |
| | |
| |
Supplemental disclosures: | |
| | | |
| | |
| |
| | | |
| | |
Interest paid | |
| (20 | ) | |
| 63,216 | |
Income taxes paid | |
| – | | |
| – | |
| |
| | | |
| | |
Non-cash investing and financing activities: | |
| | | |
| | |
| |
| | | |
| | |
Construction costs in accounts
payable | |
| 752,736 | | |
| – | |
Fair value of commission
warrants issued | |
| 2,699,039 | | |
| – | |
Initial value of lease liabilities | |
| 311,570 | | |
| – | |
Common shares issued pursuant the conversion of preferred shares | |
| 16,616,000 | | |
| 5,900,000 | |
Discount on convertible
debenture | |
| – | | |
| 403,378 | |
Beneficial Conversion Feature | |
| – | | |
| 271,000 | |
Original issuance discount
on convertible debentures | |
| – | | |
| 51,000 | |
Common shares issued for
deposit for acquisition of property | |
| – | | |
| 271,780 | |
Common shares issued for
settlement of convertible debt | |
| – | | |
| 8,313,393 | |
AMERICAN
BATTERY TECHNOLOGY COMPANY
Notes
to the Consolidated Financial Statements
For
the fiscal years ended June 30, 2022 and June 30, 2021
12.
Income Taxes
The
Company has no income tax provision for the fiscal years ended June 30, 2022 and 2021. The statutory rate of 21% for U.S. federal income
tax is the only applicable tax rate used for the fiscal years ended June 30, 2022 and 2021. The statutory rate differs from the Company’s
current fiscal year provision due to the following:
Schedule
of Federal Income Tax provision
| |
June
30, 2022
$ | | |
June
30, 2021
$ | |
| |
| | |
| |
Statutory rate | |
| 21 | % | |
| 21 | % |
| |
| | | |
| | |
Computed expected tax recovery | |
| 7,043,392 | | |
| 8,769,613 | |
Change in fair value of derivative liabilities | |
| – | | |
| (4,127,612 | ) |
Gain/loss on settlement of debt | |
| – | | |
| 3,923,489 | |
Stock-based compensation | |
| (18,643 | ) | |
| (6,164,291 | ) |
Net operating loss adjustment | |
| (3,312,711 | ) | |
| (172,322 | ) |
Change in valuation allowance | |
| (1,382,301 | ) | |
| (1,625,555 | ) |
162(m) adjustment | |
| (2,264,757 | ) | |
| – | |
Other permanent tax
adjustments | |
| (64,980 | ) | |
| (603,322 | ) |
| |
| | | |
| | |
Income tax provision | |
| – | | |
| – | |
As
of June 30, 2022, the Company had accumulated $80.4 million of net operating losses (NOL) carried forward to offset taxable income in
future years. The Company currently has $7.0 of unused NOL’s that are set to begin to expire in 2036 to 2038, with the remainder
of approximately $73.4 million having no expiration date.
The
significant components of deferred income tax assets and liabilities at June 30 after applying enacted corporate income tax rates are
as follows.
Schedule of Deferred Income Tax Assets and Liabilities
| |
2022
$ | | |
2021
$ | |
| |
| | |
| |
Net operating losses carried forward | |
| 8,174,021 | | |
| 6,791,720 | |
Valuation allowance | |
| (8,174,021 | ) | |
| (6,791,720 | ) |
| |
| | | |
| | |
Net deferred tax asset | |
| – | | |
| – | |
The
Company has a sole uncertain tax position (“UTP”) for stock-based compensation for services included in open tax returns beginning with
the fiscal year ended September 30, 2016. The Company intends to remedy the UTP with the required information forms issued in a timely
matter prior to filing of the tax return for the fiscal year ended June 30, 2022.
The
unrecognized tax benefits for the Company are as follows as of June 30:
Schedule of Unrecognized Tax Benefits
| |
2022
$ | | |
2021
$ | |
| |
| | |
| |
Unrecognized tax benefits, beginning
of period | |
| 2,550,962 | | |
| 2,550,962 | |
Increases – tax
position in current period | |
| 6,164,291 | | |
| – | |
| |
| | | |
| | |
Unrecognized tax benefits,
end of period | |
| 8,715,253 | | |
| 2,550,962 | |
Under
Section 382 and 383 of the Internal Revenue Code of 1986, as amended, the Company’s ability to utilize carryforwards and other
tax attributes such as foreign tax credits, in any taxable fiscal year may be limited if the Company experiences, or has experienced,
an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups
of stockholders, who own at least 5% of the Company’s stock, increase their ownership percentage by more than 50 percentage points
over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. The Company
may, in the future experience one or more additional Section 382 “ownership changes.
AMERICAN
BATTERY TECHNOLOGY COMPANY
Notes
to the Consolidated Financial Statements
For
the fiscal years ended June 30, 2022 and June 30, 2021
The
CARES Act was enacted March 27, 2020. Among the business provisions, the CARES Act provided for various payroll tax incentives, changes
to net operating loss carryback and carryforward rules, business interest expense limitation increases, and bonus depreciation on qualified
improvement property. Additionally, the Consolidated Appropriations Act of 2021 was signed on December 27, 2020, which provided additional
COVID-19 relief provisions for businesses. The Company has evaluated the impact of both the Acts and has determined that any impact is
not material to its financial statements.
The Company files U.S. income tax returns with varying statutes of limitations. The tax returns for fiscal years ended September 30, 2016, to June
30, 2022, remain open to examination due to the carryover of unused NOL carryforwards and tax credits. The Company is not under examination
by any tax authority as of June 30, 2022.
The
Company has incurred federal income tax and payroll tax penalties of approximately $121,000 for the fiscal year ending June 30. 2021. The expense has been presented
within the consolidated statements of operations, general and administrative expenses.
13.
Commitments and Contingencies
From
time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.
Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may
harm business. Management is currently not aware of any such legal proceedings or claims that could have, individually or in the aggregate,
a material adverse effect on our business, financial condition, or operating results.
The
Company notified 1317038 Nevada Ltd of its intent to exercise its option to purchase the right to renew 305 unpatented lode claims in
Tonopah, Nevada. Under the terms of the agreement, the total payment due to 1317038 Nevada Ltd is $8.0 million, payable in two equal
installments and payable in either cash or stock, plus closing costs. The Company paid the initial installment in cash in July 2022.
The Company is scheduled to make the remaining payment in October 2022.
Operating
Leases
The Company leases its principal office location in Reno, Nevada. It also leases two adjacent Lab spaces in the University of Nevada, Reno on short
term leases. The principal office location lease expires on November 30, 2024 and the Lab leases expire on March 15, 2023. Consistent
with the guidance in ASC 842, The Company has recorded the principal office lease in its consolidated balance sheet as an operating lease. For
further information on operating lease commitments, refer to Note 6 - Leases.
Financial
Assurance:
Nevada
and other states, as well as federal regulations governing mine operations on federal land, require financial assurance to be provided
for the estimated costs of mine reclamation and closure, including groundwater quality protection programs. 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 June 30, 2022, The Company’s
financial assurance obligations associated with U.S. mine closure and reclamation/restoration cost estimate totaled $47,730, for which
the Company is legally required to satisfy its financial assurance obligations for its mining properties in Nevada.
14.
Subsequent Events
On
July 21, 2022, the Company exercised the option to purchase the rights to 305 unpatented lode claims in the Tonopah Flats Lithium
Project. Payment for the claims is due in two equal installments. Under the terms of the agreement, the Company has the option to
pay each installment in cash or stock. The Company elected to pay $4 million in cash for the first installment.
On
August 1, 2022, the Company entered into an employment agreement (“Agreement”) with the CEO, Ryan Melsert. The Agreement
is a two-year term and provides for an annual base salary of $425,000 per year. At Mr. Melsert’s request, a portion of this compensation
may be elected to be received as restricted stock units (RSUs) and the Annual Base Salary will be reduced to $325,000 per year from the
Employment Date of this Agreement through December 31, 2022 as the Company ramps up additional revenue-generating operations, in exchange
for 60,000 RSUs which fully vest on January 1, 2023. The agreement also provides for a cash bonus of 75% of the annual base salary, based
on the achievement of certain milestones, and other standard employment benefits. The Agreement also provides for, subject to approval
by the Board of Directors, an award of RSUs equal to $1,000,000 divided by the 20-day trailing volume-weighted average price prior to
the grant date, and $3,000,000-worth of warrants with a five-year expiration of a quantity and exercise price as calculated by Black-Scholes
at the time of grant, which shall be conditioned on Mr. Melsert achieving certain performance milestones as defined in the Agreement.
The 4-year vesting schedule for these RSUs and warrants is defined in the Agreement. The details surrounding the Bonus Equity Compensation
may be memorialized by the Board in a separate award agreement, subject to the Company 2021 Equity Retention Plan, at the discretion of
the Board.
On
August 5, 2022, the Company entered into a purchase and sale agreement to sell 92 mining claims in Railroad Valley for $100,000.
The
Company has evaluated subsequent events through the date the financial statements were available to be issued and has not identified
any additional subsequent events requiring adjustments to, or disclosures in, the accompanying financial statements.