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 expectations about the strength of the global demand for lithium; ● Lithium prices may experience fluctuations due to market dynamics and economic conditions; ● The sustainability of industries relying on lithium may be influenced by factors such as consumer preferences and regulatory requirements; ● Expected benefits from business activities, such as the expectation that we will derive revenue from lithium extraction; ● Higher than expected capital costs due to, among other things, supply chain disruptions, higher transportation costs, and inflation; ● Anticipated production costs and production estimates. 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. This Management’s Discussion and Analysis is a supplement to our financial statements, including notes, referenced elsewhere in this Annual Report, and is provided to enhance your understanding of our operations and financial condition. Due to rounding, some parts of this discussion may not sum or calculate precisely to the totals and percentages provided in the tables. Overview We are a U.S. based renewable energy company focused on the extraction, refinement and distribution of technical minerals in an environmentally responsible manner. We 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, we spent a portion of 2020 restructuring and retiring certain corporate debt and obligations, and focusing on implementing a new operational direction. Through the corporate reorganization and repositioning process, we found ourselves with the unique opportunity to acquire mining claims that historically reported high levels of lithium and other technical minerals. We hired and affiliated ourselves with industry veterans that bring decades of experience, credibility and relationships. 28 On November 5, 2021, we acquired the rights to 102 federal mining claims located in the Lisbon Valley of Utah for $100,000 plus the future payment of royalties based on a percentage of the net revenue from the sale of lithium produced from a portion of the mining property. The acquisition was driven by historical mineral data from seven existing wells with brine aquifer access. We have not yet commenced any mining operations, and we are an exploration stage issuer, as defined in SEC Regulation S-K, Item 1300 (“Regulation S-K 1300”). An independent third-party technical report indicated that further investment and development in the claims was warranted, although no determination has been made whether we have any reserves of minerals. Similarly, no determination has been made whether mineralization could be economically and legally produced or extracted. We have no mineral reserves as defined by Regulation S-K 1300 and have had no mining revenue to date. We have been moving forward with our strategy of employing advanced brine extractive technology methodologies and have been in talks with numerous extraction providers. Selective mineral extraction is clearly the most cost-effective and ESG friendly approach currently available. Technologies are being utilized that can extract the desired minerals and metals from the brine and then re-inject the brines back down into the aquafer. The prospective partners have been provided the analytical results from the technical reports, but will soon provide current results, analytical, geotech modeling, aquifer modeling, recharge, flows, and depth. We will need funding to support continuing operations and support our growth strategy, and we will need to finance operations by offering any combination of equity offerings, debt financing, collaborations, strategic alliances, or other licensing arrangements. There is no assurance we will be able to raise sufficient capital to finance our operations. Corporate Actions On October 20, 2022 we, following receipt of written approval from stockholders acting without a meeting and holding at least the minimum number of votes that would be necessary to authorize or take such action at a meeting, filed an amendment to our certificate of incorporation to (i) change the name of our company to “American Battery Materials, Inc.” (the “Name Change”); and (ii) increase the total number of authorized shares of our common stock, par value $0.001 per share, from 600,000,000 to 4,500,000,000 (the “Authorized Share Increase”). The Name Change was processed by FINRA and was effective on May 1, 2023, at which time our trading symbol was also changed to BLTH. The Authorized Share Increase was effective as of October 20, 2022. On October 20, 2022, in addition to the Name Change and the Authorized Share Increase, the holder of 63.86% of the outstanding shares of stock of our company entitled to vote took action by written consent and without a meeting, pursuant to Delaware General Corporate Law Section 228, and adopted and approved the following actions: 1. Future amendment of our certificate of incorporation to implement a decrease in the authorized shares of our common stock from 4,500,000,000 to a number of not less than 10,000,000 and not more than 2,000,000,000 (the “Authorized Share Reduction”), at any time prior to October 20, 2023 (the “Anniversary Date”), with the Board having the discretion to determine whether or not the Authorized Share Reduction is to be effected, and if effected, the exact number of the Authorized Share Reduction within the above range. 2. Future amendment of our certificate of incorporation to implement a reverse stock split of our common stock by a ratio of not less than 1-for-10 and not more than 1-for-1,000 (the “Reverse Split”), at any time prior to the Anniversary Date, with the Board having the discretion to determine whether or not the Reverse Split is to be effected, and if effected, the exact ratio for the Reverse Split within the above range. On April 25, 2023, we formed Mountain Sage Minerals LLC, a Utah limited liability company. We will look to expand our holdings in the Lisbon Valley area with the acquisition of additional mineral claims and joint venture opportunities through this new entity. 29 On June 1, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Seaport Global Acquisition II Corp. (“SGII”), and Lithium Merger Sub, Inc., a wholly owned subsidiary of SGII. SGII is a blank check company, also referred to as a special purpose acquisition company, formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. Following material changes to the transaction proposed by SGII making the transaction untenable to us, on November 20, 2023, SGII notified us that it had elected to terminate the Merger Agreement. On August 4, 2023, the Company filed an Amendment to the Certificate of Incorporation (the “Amendment”) in order to effect a reverse stock split in the ratio of 1-for-300 (the “Reverse Split”). The Company and its shareholders holding a majority of the issued and outstanding shares of stock of the Company entitled to vote previously approved a reverse stock split for not less than 1-for-10 and not more than 1-for-1,000, at any time prior to October 20, 2023, with the Company’s Board having the discretion to determine whether or not the Reverse Split is to be effected, and if effected, the exact ratio for the Reverse Split within the above range. On August 1, 2023, the Company’s unanimously approved the Reverse Split and authorized the filing of the Amendment. On December 8, 2023, the company effectuated the reverse split of the common stock by a ratio of one-for-300 (the “Reverse Split”). All per share amounts and number of shares in the consolidated financial statements and related notes have been retroactively restated to reflect the Reverse Split. 30 Results of Operations Year Ended December 31, 2023, Compared to Year Ended December 31, 2022 Revenue For the years ended December 31, 2023, and 2022, the Company had no revenue. Operating Expenses General and administrative expenses for the year ended December 31, 2023, were $2,453,700, an increase of $1,318,612 or 116%, compared to $1,135,088 for the year ended December 31, 2022. The increase in operating expenses was mainly due to an increase in professional fees, mining maintenance fees and stock compensation expenses. 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 year ended December 31, 2022, the Company recorded a gain on the change in fair value of derivative liabilities of $211,345. The underlying convertible notes were converted during the fourth quarter of 2022, resulting in no derivative liabilities during the year ended December 31, 2023. Gain on Settlement of Liabilities During the year ended December 31, 2023, the Company recorded a gain on settlement of liabilities of $441,041, consisting of $7,008 in principal and $60,976 in interest forgiven by noteholders, and $373,057 in aged payables write-off. During the year ended December 31, 2022, creditors forgave $32,019 in notes payable, which has been recorded as a gain on settlement. Fair value of stock issued for note modification During the year ended December 31, 2023, the Company recorded a fair value of stock issued for note modification of $168,856. No such transactions were noted during the year ended December 31, 2022. Interest Expense Interest expense for the year ended December 31, 2023, was $203,287, as compared to $595,124 during the year ended December 31, 2022, due to the conversion of convertible notes payable. Net Loss As a result of the foregoing, the net loss for the year ended December 31, 2023, was $2,384,802 as compared to the net loss of $1,486,848 during the year ended December 31, 2022. 31 Liquidity and Capital Resources We require cash to fund our operating expenses and working capital requirements, including outlays for capital expenditures. The accompanying consolidated financial statements have been prepared on a going concern basis. The Company had a net loss of $2,384,802 during the year ended December 31, 2023, had accumulated losses totaling $20,239,639, and a working capital deficit of $3,222,893 as of December 31, 2023. 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. Since we acquired our first mining claims in November 2021, we have faced an increasingly challenging liquidity situation that has limited our ability to execute on our operating plan. 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. Sources of additional capital through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or revolving credit facilities. We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. Unless we can attract additional investment, our operating as a going concern is in doubt. If we are unable to obtain sufficient amounts of additional capital, we may have to cease filing the required reports and cease operations completely. If we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock. Cash Flows from Operating Activities During the year ended December 31, 2023, the Company used $2,278,206 of cash in operating activities as a result of the Company’s net loss of $2,384,802, increased by gain on debt settlement of $441,041 and amortization of debt discount of $28,497, and offset by fair value of options issued for note modification of $168,856, share-based compensation of $275,465, and net changes in operating assets and liabilities of $131,813. During the year ended December 31, 2022, the Company used $910,709 of cash in operating activities as a result of the Company’s net loss of $1,486,848, offset by share-based compensation of $62,080, net changes in operating assets and liabilities of $757,423, and increased by gain on change in fair market value of derivative liability of $211,345 and gain on settlement of debt of $32,019. Cash Flows from Investing Activities During the year ended December 31, 2023, the Company expended $106,000 for staking activities related to new federal mining claims located in the Lisbon Valley of Utah. During the year ended December 31, 2022, the Company had no investing activities. 32 Cash Flows from Financing Activities During the year ended December 31, 2023, financing activities provided $2,349,000, resulting from $2,025,000 in proceeds from convertible notes, $100,000 in proceeds from promissory notes, and $224,000 in proceeds from the exercise of warrants. During the year ended December 31, 2022, financing activities provided $945,000, resulting from $590,000 in proceeds from convertible notes, $250,000 in proceeds from promissory notes, $130,000 in proceeds from the exercise of warrants, and $50,000 in proceeds from issuance of preferred stock, offset by $75,000 in repayments of convertible notes. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not required by smaller companies. 33