AMERICAN BATTERY MATERIALS, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis is intended to help you understand our results of operations and financial condition as of September 30, 2024 and for the nine months ended September 30, 2024 and 2023 . This discussion and analysis is provided as a supplement to and should be read in conjunction with our condensed consolidated financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q . This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part 1, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023 . Cautionary Statement The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. Our actual results may differ materially from those anticipated in the following discussion, as a result of a variety of risks and uncertainties, including those described under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023. Forward-Looking Statements Certain statements contained herein constitute “forward-looking statements”. Except for the historical information contained herein, this Quarterly Report on Form 10-Q 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 our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on April 1, 2024 and those described herein that could cause actual results to differ materially from the results anticipated in the forward-looking statements. Factors That May Adversely Affect our Results of Operations Our results of operations may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, any ongoing effects of the Covid-19 pandemic, including resurgences and the emergence of new variants and geopolitical instability, such as the military conflict in Ukraine and the Middle East. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude, or the extent to which they may negatively impact our business. Objective The objective of our Management’s Discussion and Analysis of Financial Condition and Results of Operations is to provide users of our financial statements with the following: ● a narrative explanation from the perspective of management of our financial condition, results of operations, cash flows, liquidity and certain other factors that may affect future results; ● useful context to the financial statements; and ● information that allows assessment of the relationship between our past performance and future performance. This Management’s Discussion and Analysis is a supplement to, and should be read together with, our financial statements, including notes, referenced elsewhere in this 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. The following discussion and analysis provide 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 Quarterly Report on Form 10-Q. 13 Overview and Outlook 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 crucial to produce batteries used in many technology products and markets. We hired and affiliated ourselves with industry veterans that bring decades of experience, credibility and relationships. 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 are defined as an exploration stage issuer, under SEC Regulation S-K Item 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 Item 1300 and have had no mining revenue to date. In July 2023, we acquired and staked additional lithium mining claims adjacent to our Lisbon Valley Project in Utah. The new claims have been registered with the BLM. We now own a total of 743 placer claims over 14,320 acres (approximately 22 square miles), comprised of the 102 original mining claims and 641 new claims. On April 25, 2023, we formed Mountain Sage Minerals, LLC, a Utah limited liability company. We plan to expand our holdings in the Lisbon Valley area with the acquisition of additional mineral claims and joint venture opportunities through this entity. 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. As a result of the Merger Agreement, we would have become a wholly owned subsidiary of SGII. 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. 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 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 aquifer. 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. Results of Operations Three months ended September 30, 2024, Compared to Three months ended September 30, 2023 Revenue For the three months ended September 30, 2024, and 2023, our company had no revenue. Operating Expenses General and administrative expenses for the three months ended September 30, 2024, were $506,019, a decrease of $118,933 or 19%, compared to $624,952 for the three months ended September 30, 2023. The decrease in operating expenses was mainly due to a decrease in professional fees. In the three months ended September 30, 2023 the higher operating expenses were attributable to costs incurred for staking new claims in Utah, exploration well permitting, development of technical reports and geological modeling, and legal fees associated with the SPAC business combination Interest Expense Interest expense for the three months ended September 30, 2024, was $121,245, as compared to $47,554 during the three months ended September 30, 2023. 14 Net Loss As a result of the foregoing, the net loss for the three months ended September 30, 2024, was $627,264 as compared to the net loss of $943,024 during the three months ended September 30, 2023. Nine months ended September 30, 2024, Compared to Nine months ended September 30, 2023 Revenue For the nine months ended September 30, 2024, and 2023, our company had no revenue. Operating Expenses General and administrative expenses for the nine months ended September 30, 2024, were $1,215,845, a decrease of $949,649 or 44%, compared to $2,165,494 for the nine months ended September 30, 2023. The decrease in operating expenses was mainly due to a decrease in professional fees. In the nine months ended September 30, 2023 the higher operating expenses were attributable to costs incurred for staking new claims in Utah, exploration well permitting, development of technical reports and geological modeling, and legal fees associated with the SPAC business combination Gain (Loss) on Settlement of Liabilities During the nine months ended September 30, 2024, our company recorded a loss on settlement of liabilities of $516,083. During the nine months ended September 30, 2023, our company recorded a gain on settlement of liabilities of $67,984, consisting of $7,008 in principal and $60,976 in interest forgiven by creditors. Fair Value of Stock Issued for Note Modification During the nine months ended September 30, 2024, our company recorded a fair value of stock issued for note modification of $14,382. During the nine months ended September 30, 2023, the Company recorded a fair value of stock issued for note modification of $168,856. Extension fees due to SPAC Sponsor During the nine months ended September 30, 2023, the Company recorded $101,662 of extension fees due to SPAC Sponsor. No such transactions were noted during the nine months ended September 30, 2024. Interest Expense Interest expense for the nine months ended September 30, 2024, was $295,572, as compared to $94,771 during the nine months ended September 30, 2023. Net Loss As a result of the foregoing, the net loss for the nine months ended September 30, 2024, was $2,041,882 as compared to the net loss of $2,462,799 during the nine months ended September 30, 2023. 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. Our company had a net loss of $2,041,882 during the nine months ended September 30, 2024, had accumulated losses totaling $22,281,521, and a working capital deficit of $5,236,132 as of September 30, 2024. These factors, among others, indicate that our 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 our operating plan. Our company will need to raise additional financing in order to fund its operations for the next 12 months and to allow us to continue the development of its business plans and satisfy its obligations on a timely basis. Should additional financing not be available, we will have to negotiate with its lenders to extend the repayment dates of its indebtedness. There can be no assurance that our 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. 15 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 nine months ended September 30, 2024, our company used $585,876 of cash in operating activities as a result of our net loss of $2,041,882, offset by loss on debt settlement of $516,083 and amortization of debt discount of $28,497, fair value of stock issued for note modification of $14,382, share-based compensation of $14,261, and net changes in operating assets and liabilities of $882,783. During the nine months ended September 30, 2023, the Company used $1,911,600 of cash in operating activities as a result of the Company’s net loss of $2,462,799, increased by gain on debt settlement of $67,984 and amortization of debt discount of $89,876, and offset by fair value of options issued for note modification of $168,856, share-based compensation of $446,113, and net changes in operating assets and liabilities of $94,090. Cash Flows from Investing Activities During the nine months ended September 30, 2024, our company had no investing activities. During the nine months ended September 30, 2023, the Company expended $106,000 for staking activities related to new federal mining claims located in the Lisbon Valley of Utah. Cash Flows from Financing Activities During the nine months ended September 30, 2024, financing activities provided $581,733 resulting from $135,000 in proceeds from convertible notes and $671,733 in proceeds from promissory notes, offset by repayment of promissory notes of $225,000. During the nine months ended September 30, 2023, financing activities provided $2,314,000, resulting from $2,025,000 in proceeds from convertible notes, $100,000 in proceeds from promissory notes, and $189,000 in proceeds from the exercise of warrants. Amendments to Outstanding Promissory Notes On various dates from April 1 to April 8, 2024, with an effective date as of March 29, 2024, we entered into the following transactions regarding our outstanding promissory notes: ● Pursuant to a Convertible Note Amendment Agreement with each of five investors holding convertible notes in the aggregate principal amount of $ 1,750,000 with accrued interest of $125,646, each of these investors agreed to (a) extend the maturity date of their note to the earlier of (i) September 30, 2024 or (ii) the closing of an “uplisting” transaction in which our common stock is traded on a national securities exchange and (b) impose a limitation on their conversions so that the investor will not effect a conversion under its note until the earlier of (i) the uplisting transaction closing or (ii) July 1, 2024. ● Pursuant to a Convertible Note Amendment Agreement with one investor holding a convertible note in the principal amount of $50,000 with accrued interest of $3,583, the investor agreed to: (a) extend the maturity date of its note to the earlier of (i) March 31, 2025 or (ii) the closing of an uplisting transaction in which our common stock is traded on a national securities exchange and (b) impose a limitation on its conversions so that the investor will not effect a conversion under its note until the earlier of (i) the uplisting transaction closing or (ii) the maturity date. ● Pursuant to a Promissory Note Amendment Agreement with one investor holding a promissory note in the principal amount of $25,000 with accrued interest of $2,971, the investor agreed to: (a) extend the maturity date of its note to the earlier of (i) March 31, 2025 or (ii) the closing of an uplisting transaction in which our common stock is traded on a national securities exchange and (b) impose a limitation on conversions so that the investor will not effect a conversion under its note until the earlier of (i) the uplisting transaction closing or (ii) the maturity date. In consideration for the extensions of the maturity date and agreement not to convert their notes, the principal amount due under each note was increased by 30% and the interest rate of each note was increased to 10% beginning on the effective date of March 29, 2024. We negotiated the note amendments with the investors, all of whom are unaffiliated with our company, on an arm’s-length basis. As additional consideration for each note amendment, we also issued to the investors a total of 237,250 shares of our common stock on a pro rata basis. 16 Fair Value of Financial Instruments For certain of our 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 our short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by us. 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. We consider 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 we value 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). Derivative Financial Instruments We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Certain warrants issued by us 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. We do 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.