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, 2021, 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. 19 The Company has been executing the necessary steps to prove the tech reports findings and has retained RESPEC Company LLC as its Geotech, Engineering and Resource Management partner to assist in the exploration of the Lisbon Valley brine extraction project. Leveraging their expertise, the Company will focus on several initiatives, some of which may include: ● Advancement of geotech, engineering, geology and fieldwork to complete Technical Reports on the Lisbon Project. ● Understanding Lisbon Valley brines, on and around owned leases. ● Develop a well plan to re-enter, sample, and test the “Superior Well”, that has a historical lithium concentration of 730 ppm (parts per million). ● Enter other prospective plugged and abandoned wells, taking brine samples and performing hydrological testing at each identified high potential zone to evaluate the properties of the clastic formation. ● As information is advanced, prepare technical reports following the NI 43-101 Standards of Disclosure for Mineral Projects, initially a Preliminary Economic Assessment (PEA) and longer term, a Preliminary Feasibility Study (PFS). ● Test the collected brines for lithium, but also for previously identified high value elements such as cobalt, manganese, magnesium, and suites of metals in the alkaline earth metals, transition metals, and halogens group. ● Based on the results of the Superior well, develop area resource estimates. The Lisbon Valley of Utah also provides many added benefits: ● Historically rich industrial and natural resource extraction area. ● A developed infrastructure including high voltage electrical, proximity to major roadways and rail spurs. ● State and local agency support through the Utah Division of Oil, Gas and Mining and the Trust Land Administration (SITLA) Results of Operations Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021 Revenue For the three months ended September 30, 2022 and 2021, the Company had no revenue. General and Administrative Expenses General and administrative expenses for the three months ended September 30, 2022 were $331,735, an increase of $248,483 or 298%, compared to $83,252 for the three months ended September 30, 2021. The increase in general and administrative expenses was mainly due to increase in professional fees. In the second quarter of 2022, the Company activated consulting teams to pursue additional land acquisitions, and to begin the State and Federal permitting process for project development work. In addition, the Company initiated construction strategies based on reports from RESPEC, the Company’s engineering partner, for geological modeling and drill entry design and related planning. Change in Fair Value of Derivative Liabilities During the three months ended September 30, 2022, the Company recorded no change in 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. 20 Interest Expense Interest expense for the three months ended September 30, 2022 was $ 175,133, as compared to $240,921 during the three months ended September 30, 2021. Net Loss As a result of the foregoing, the net loss for the three months ended September 30, 2022 was $506,868 as compared to $1,535,605 during the three months ended September 30, 2021. Nine months Ended September 30, 2022 Compared to Nine months Ended September 30, 2021 Revenue For the nine months ended September 30, 2022 and 2021, the Company had no revenue. General and Administrative Expenses General and administrative expenses for the nine months ended September 30, 2022 were $821,995, an increase of $565,096 or 220%, compared to $256,899 for the nine months ended September 30, 2021. The increase in general and administrative expenses was mainly due to increase in professional fees. In the second quarter of 2022, the Company activated consulting teams to pursue additional land acquisitions, and to begin the State and Federal permitting process for project development work. In addition, the Company initiated construction strategies based on reports from RESPEC, the Company’s engineering partner, for geological modeling and drill entry design and related planning. Change in Fair Value of Derivative Liabilities During the nine months ended September 30, 2022, the Company recorded a gain on the change in fair value of derivative liabilities of $211,345, as compared to a gain on the change in fair value of derivative liabilities of $871,388 during the nine months ended September 30, 2021. Interest Expense Interest expense for the nine months ended September 30, 2022 was $537,938, as compared to $645,880 during the nine months ended September 30, 2021. Net Loss As a result of the foregoing, the net loss for the nine months ended September 30, 2022 was $1,148,588 as compared to the net income of $30,704 during the nine months ended September 30, 2021. Liquidity and Capital Resources The accompanying consolidated financial statements have been prepared on a going concern basis. The Company had net loss of $1,148,588 during the nine months ended September 30, 2022, has accumulated losses totaling $17,516,577, and has a working capital deficit of $9,570,979 at September 30, 2022. 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 nine months ended September 30, 2022, the Company used $720,338 of cash in operating activities as a result of the Company’s net loss of $1,148,588, offset by share-based compensation of $11,080, change in fair market value of derivative liability of $211,345, and net changes in operating assets and liabilities of $628,515. 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 $30,704, 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 $669,226. 21 Investing Activities During the nine months ended September 30, 2022 and 2021, the Company had no investing activities. Financing Activities During the nine months ended September 30, 2022, financing activities provided $765,000, resulting from $590,000 in proceeds from convertible notes, $200,000 in proceeds from promissory notes, and $50,000 in proceeds from issuance of preferred stock, offset by $75,000 in repayments of convertible notes. 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. 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. 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, 2022 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. 22 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.