AMERICAN BATTERY MATERIALS, INC. 10-K

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS Certain statements contained herein constitute “forward-looking statements”. 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 this Annual Report, 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 environmental, social, and corporate governance (ESG) initiatives, we aim to bring a vertically-integrated solution to market. On November 5, 2021, the Company acquired the rights to 102 Federal Mining Claims located in San Juan County, Utah for the purchase price of $100,000. The acquisition decision was driven by historical mineral data from seven (7) existing wells with brine aquifer access, supporting what we believe to be a commercially viable project. The historical data show a substantial concentration of Lithium Brine in the targeted area. Results of Operations Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Revenue For the year ended December 31, 2021 and 2020, the Company had no revenue. General and Administrative Expenses General and administrative expenses for the year ended December 31, 2021 were $393,376, an increase of $147,565 or 60%, compared to $245,811 for the year ended December 31, 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 year ended December 31, 2021, the Company recorded a gain on the change in fair value of derivative liabilities of $2,871,910, as compared to a loss of $3,069,702 during the year ended December 31, 2020. 9 Gain on Settlement of Liabilities During the year ended December 31, 2021, creditors forgave aggregate amount of $19,959 associated with accrued expenses and $26,062 related to notes payable. In addition, the Company recorded a gain on capital lease settlement of $16,074, resulting in total gain on settlement of liabilities of $62,095. During the year ended December 31, 2020, the Company recorded a gain on settlement of liabilities of $11,000. Loss on Sale of Asset During the year ended December 31, 2020, the Company recorded loss on sale of assets of $12,074. No such losses were noted during the year ended December 31, 2021. Loss on Asset Write-off During the year ended December 31, 2021, the Company recorded asset impairment charges of $17,500. No such impairments were noted during the year ended December 31, 2020. Amortization of Debt Discount and Deferred Financing Costs Amortization of debt discount and deferred financing costs for the year ended December 31, 2021 were $0, compared to $4,432 for the year ended December 31, 2020 due to the discounts being fully amortized prior to December 31, 2020. Interest Expense Interest expense for the year ended December 31, 2021 was $760,663, as compared to $611,294 during the year ended December 31, 2020. Net Loss As a result of the foregoing, the net income for the year ended December 31, 2021 was $1,762,466 as compared to a net loss of $3,932,313 incurred during the year ended December 31, 2020. Liquidity and Capital Resources The accompanying consolidated financial statements have been prepared on a going concern basis. The Company had net income of $1,762,466 during the year ended December 31, 2021, has accumulated losses totaling $16,367,989, and has a working capital deficit of $8,016,326 at December 31, 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 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 year ended December 31, 2021, the Company used $392,445 of cash in operating activities as a result of the Company’s net income of $1,762,466, offset by share-based compensation of $6,296, change in fair market value of derivative liability of $2,871,910, gain on settlement of liabilities of $62,095, write-off of assets of $17,500, and net changes in operating assets and liabilities of $755,298. During the year ended December 31, 2020, the Company used $40,394 of cash in operating activities primarily as a result of the Company’s net loss of $3,932,313, offset by change in fair value of derivative liabilities of $3,069,702, loss on sale of asset of $12,074, share-based compensation of $5,772, $4,432 in amortization and accretion of debt discount, gain on settlement of liabilities of $11,000, and net changes in operating assets and liabilities of $810,939. Investing Activities During the year ended December 31, 2021, the Company purchased $100,000 in mineral claims. During the year ended December 31, 2020, investing activities provided $18,000 in cash in proceeds from sale of property and equipment. Financing Activities During the year ended December 31, 2021, financing activities provided $477,150, resulting from $885,000 in proceeds from convertible notes, offset by $82,000 in repayments of capital lease obligations, $300,850 in repayments of convertible notes, and $25,000 in repayments of promissory notes. During the year ended December 31, 2020, financing activities provided $45,980, resulting from $76,500 in proceeds from convertible notes, $15,000 repayments of promissory notes and $15,520 in repayments of capital lease obligations. 10 Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements. 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. 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 December 31, 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, restricted cash, 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 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required by smaller companies. 11