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 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. 22 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 Year ended December 31, 2024, Compared to Year ended December 31, 2023 Revenue For the years ended December 31, 2024, and 2023, our company had no revenue. Operating Expenses General and administrative expenses for the year ended December 31, 2024, were $1,568,707, a decrease of $884,993 or 36%, compared to $2,453,700 for the year ended December 31, 2023. The decrease in operating expenses was mainly due to a decrease in professional fees. In the year ended December 31, 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 Extinguishment During the year ended December 31, 2024, our company recorded a loss on extinguishment of debt of $1,842,273. During the year ended December 31, 2023, the Company recorded a gain on extinguishment of debt 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. Fair Value of Stock Issued for Note Modification During the year ended December 31, 2024, our company recorded a fair value of stock issued for note modification of $449,660. During the year ended December 31, 2023, the Company recorded a fair value of stock issued for note modification of $168,856. Interest Expense Interest expense for the year ended December 31, 2024, was $446,278, as compared to $203,287 during the year ended December 31, 2023. Net Loss As a result of the foregoing, the net loss for the year ended December 31, 2024, was $4,306,918 as compared to the net loss of $2,384,802 during the year ended December 31, 2023. 23 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 $4,306,918 during the year ended December 31, 2024, had accumulated losses totaling $24,546,557, and a working capital deficit of $7,012,565 as of December 31, 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. 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, 2024, our company used $750,311 of cash in operating activities as a result of our net loss of $4,306,918, offset by loss on debt settlement of $1,842,273 and amortization of debt discount of $28,497, fair value of stock issued for note modification of $449,660, share-based compensation of $67,586, and net changes in operating assets and liabilities of $1,168,591. 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. Cash Flows from Investing Activities During the year ended December 31, 2024, our company had no 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. Cash Flows from Financing Activities During the year ended December 31, 2024, financing activities provided $755,831 resulting from $210,000 in proceeds from convertible notes and $770,831 in proceeds from promissory notes and offset by repayment of promissory notes of $225,000. 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. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not required by smaller companies. 24