AMERICAN BATTERY MATERIALS, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements Certain statements contained herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “1995 Reform Act”). BoxScore Brands, Inc. desires to avail itself of certain “safe harbor” provisions of the 1995 Reform Act and is therefore including this special note to enable us to do so. Except for the historical information contained herein, this report contains forward-looking statements (identified by the words “estimate,” “project,” “anticipate,” “plan,” “expect,” “intend,” “believe,” “hope,” “strategy” and similar expressions), which are based on our current expectations and speak only as of the date made. These forward-looking statements are subject to various risks, uncertainties and factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements, including, without limitation, those discussed under Part I, Item 1A “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2020, and those described herein that could cause actual results to differ materially from the results anticipated in the forward-looking statements, and the following: ● Our limited operating history with our business model; ● The low cash balance and limited financing currently available to us. We may in the near future have a number of obligations that we will be unable to meet without generating additional income or raising additional capital; ● Further cost reductions or curtailment in future operations due to our low cash balance and negative cash flow; ● Our ability to effect a financing transaction to fund our operations which could adversely affect the value of our stock; ● Our limited cash resources may not be sufficient to fund continuing losses from operations; ● The failure of our products and services to achieve market acceptance; and ● The inability to compete in our market, especially against established industry competitors with greater market presence and financial resources. The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our results of operations and financial condition, and should be read in conjunction with the consolidated financial statements and footnotes that appear elsewhere in this report. Overview BoxScore Brands, Inc. (formerly U-Vend Inc.) (the “Company”) formerly developed, marketed and distributed various self-serve electronic kiosks and mall/airport co-branded islands throughout North America. Due to the nationwide shutdown related to the COVID-19 pandemic, the Company spent a portion of 2020 restructuring and retiring certain corporate debt and obligations. The Company focused on implementing a new operational direction. After a thorough evaluation process, the Company found that there is a substantial long-term demand for specific commodities relating to battery and new energy technologies. This presents a timely and unique opportunity based on rising demand characteristics. By capitalizing on market trends and current sustainable energy government mandates and ESG initiatives, we will focus on bringing a vertically-integrated solution to market. Results of Operations Three months Ended September 30, 2021 Compared to Three months Ended September 30, 2020 Revenue For the three months ended September 30, 2021 and 2020, the Company had no revenue. 18 General and Administrative Expenses General and administrative expenses for the three months ended September 30, 2021 were $83,253, an increase of $23,881 or 40%, compared to $59,372 for the three months ended September 30, 2021. The increase in general and administrative expenses was mainly due to increase in professional fees. Gain on Fair Value of Derivative Liabilities During the three months ended September 30, 2021, the Company recorded a loss on the change in fair value of derivative liabilities of $1,242,201, as compared to $75,960 during the three months ended September 30, 2020. Amortization of Debt Discount and Deferred Financing Costs Amortization of debt discount and deferred financing costs for the three months ended September 30, 2021 were $0, compared to $372 for the three months ended September 30, 2020 due to the discounts being fully amortized prior to December 31, 2020. Interest Expense Interest expense for the three months ended September 30, 2021 was $240,921, as compared to $155,459 during the three months ended September 30, 2020. Net Loss As a result of the foregoing, the net loss for the three months ended September 30, 2021 was $1,535,606 as compared to $280,163 incurred during the three months ended September 30, 2020. Nine months Ended September 30, 2021 Compared to Nine months Ended September 30, 2020 Revenue For the nine months ended September 30, 2021 and 2020, the Company had no revenue. General and Administrative Expenses General and administrative expenses for the nine months ended September 30, 2021 were $256,900, an increase of $82,644 or 47%, compared to $174,256 for the nine months ended September 30, 2021. The increase in general and administrative expenses was mainly due to increase in wages and professional fees. Gain on Fair Value of Derivative Liabilities During the nine months ended September 30, 2021, the Company recorded a gain on the change in fair value of derivative liabilities of $871,388, as compared to a loss of $75,960 during the nine months ended September 30, 2020. Amortization of Debt Discount and Deferred Financing Costs Amortization of debt discount and deferred financing costs for the nine months ended September 30, 2021 were $0, compared to $4,432 for the nine months ended September 30, 2020. Interest Expense Interest expense for the nine months ended September 30, 2021 was $645,880, as compared to $461,597 during the nine months ended September 30, 2020. 19 Net Loss As a result of the foregoing, the net income for the nine months ended September 30, 2021 was $30,7034 as compared to a net loss $717,319 incurred during the nine months ended September 30, 2020. Liquidity and Capital Resources The accompanying consolidated financial statements have been prepared on a going concern basis. The Company had net income of $30,703 during the nine months ended September 30, 2021, has accumulated losses totaling $18,099,752, and has a working capital deficit of $7,931,610 at September 30, 2021. These factors, among others, indicate that the Company may be unable to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Company will need to raise additional financing in order to fund the its operations for the next 12 months, and to allow the Company to continue the development of its business plans and satisfy its obligations on a timely basis. Should additional financing not be available, the Company will have to negotiate with its lenders to extend the repayment dates of its indebtedness. There can be no assurance that the Company will be able to successfully restructure its debt obligations in the event it fails to obtain additional financing. Operating Activities During the nine months ended September 30, 2021, the Company used $228,831 of cash in operating activities as a result of the Company’s net income of $30,703, offset by share-based compensation of $4,722, change in fair market value of derivative liability of $871,388, gain on settlement of liabilities of $62,095, and net changes in operating assets and liabilities of $669,227. During the nine months ended September 30, 2020, the Company used $17,980 of cash in operating activities primarily as a result of the Company’s net loss of $717,319, offset by loss on sale of asset of $12,074, share-based compensation of $4,198, $4,432 in amortization and accretion of debt discount, gain on settlement of liability of $11,000, change in fair market value of derivative liability of $75,960, and net changes in operating assets and liabilities of $613,675. Investing Activities During the nine months ended September 30, 2021, the Company had no investing activities. During the nine months ended September 30, 2020, investing activities provided $18,000 in cash in proceeds from sale of property and equipment. Financing Activities During the nine months ended September 30, 2021, financing activities provided $210,900, resulting from $615,000 in proceeds from convertible notes, offset by $82,000 in repayments of capital lease obligations, $297,100 in repayments of convertible notes, and $25,000 in repayments of promissory notes. During the nine months ended September 30, 2020, we used $20 in financing activities, resulting from $15,500 in proceeds from convertible notes and $15,520 in repayments of capital lease obligations. Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, an effect on its financial condition, financial statements, revenues or expenses. Inflation Although the Company’s operations are influenced by general economic conditions, it does not believe that inflation had a material effect on its results of operations during the last two years as it is generally able to pass the increase in material and labor costs to its customers or absorb them as it improves the efficiency of its operations. 20 Critical Accounting Policies The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. The consolidated financial statements as of September 30, 2021 describe the significant accounting policies and methods used in the preparation of the consolidated financial statements. Actual results could differ from those estimates and be based on events different from those assumptions. Future events and their effects cannot be predicted with certainty; estimating therefore, requires the exercise of judgment. Thus, accounting estimates change as new events occur, as more experience is acquired or as additional information is obtained. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of our consolidated financial statements: Fair Value of Financial Instruments For certain of the Company’s financial instruments, including cash and equivalents, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows: ● Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis ● Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that the Company values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace. ● Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity). Level 3 instruments include derivative warrant instruments. The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 1 or Level 2. Derivative Financial Instruments The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Certain warrants issued by the Company contain terms that result in the warrants being classified as derivative liabilities for accounting purposes. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not required for smaller reporting companies. 21