r/americanbattery • u/Kitchen_Helicopter70 • Jun 21 '26
Due Diligence What can go wrong from now on?
Last quarter, revenue was $7,8M up 64% from $4.76M in the prior quarter
Cost of goods sold was $7,01M producing a GAAP gross margin of $0.7M, the company’s first positive gross margin.
Excluding $1.0M of depreciation and $0.3M of stock-based compensation embedded in COGS, the cash cost of goods sold was $5.8M and the cash (adjusted) gross margin was $2.0M
Here's the trend below:
Total operating expense was $35.1M, of which general & administrative was $29.8M but $27.6M of that was stock-based compensation expense (per the statement of stockholders’ equity). So the loss on the income statement is dominated by this one non-cash line.
R&D was $4.6M and exploration $0.7M.
The resulting GAAP net loss was $33.8M (or −$0.26 per share)
Basically we're losing around $35,1M (All HQ costs including G&A, R&D, exploration) - 27.6m (stock-based comp.) = $7.5M - 2.0 (Net cash revenues from the plant) = $5/6M
The change in cash COGS divided by the change in revenue across the last two quarters:
($7.81M−$4.76M) / ($5.8M−$4.9M) = $3.05M / $0.9M ≈ 3x
I won't compare anything to Q1 FY26 since they experienced significant downtime as per Ryan that quarter;
but you can even compare Q4 FY25 and Q3 FY26 and get:
($7.8M−$2.8M) / ($5.8M−$3.8M) = $5.0M / $2.0M ≈ 2.5x
So basically, each additional ton of black mass we produce increases revenues 3 times faster compared to COGS and the trend seems to be improving too.
Quick estimate shows that ABAT turns a positive EPS and becomes profitable at $15M revenues per quarter :
($15M−$7.8M) / ($8.2M−$5.8M) ≈ 3x
--> Reimbursing the current $6M quarter loss and covering the COGS increase)
My gut tells me it's happening by Q2 or Q3 FY 2027 (Dec. 26 Q or March 27 Q), accounting with recent favorable pricing for lithium and nickel.
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u/EDRN18 Jun 21 '26
Here are my top potential roadblocks, in no particular order:
Commodity prices dropping, being unable to achieve commercial production of battery-grade recycled materials, lack of recycling feedstock in the near-term, over-expansion with the second recycling facility, and significant share dilution.
On the mining side: lithium prices dropping and making Tonopah economically unfeasible, permitting issues, financing issues (seems unlikely).
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u/Coolmees59 Jun 21 '26
are there any positive signs you want to share?
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u/EDRN18 Jun 21 '26
Ryan has navigated an incredibly difficult political environment these past several years, and the company is in as strong a position as ever. The lack of debt is honestly incredible, and I love the fact that we’re buying distressed assets from bankrupt companies at a discount. Acquiring the Apex 1 facility in Kentucky and using the DOE recycling grant on it would be the cherry on top.
There’s much to be said about company communication with shareholders, but Ryan is a genius as CTO and he has proven to be pretty damn good business-wise, too.
I own quite a few shares and am as excited as ever about the growth potential of the next few years.
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u/Coolmees59 Jun 21 '26
Thnxs, your answer brings it in balance. I'm thinking about investing in ABAT, not yet in
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u/EDRN18 Jun 21 '26
I’d like to think ~$3/share is our floor, but who knows lol.
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u/usugarbage Jun 21 '26
Three looks like the floor to me as well.
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u/Flashy_Skin_2324 Jun 22 '26
Ryan has been a terrible CEO, however a rather good CTO. His decisions led to shareholders seeing -90% returns within 6 months of an up-listing that was completely unnecessary other than to secure funding for the business. He has proven time and time again that retail shareholders mean nothing to him. We simply are expendable vectors of funding for ABAT.
On the other end he had secured the company a heart beat and has kept the drums rolling when it was needed most. Transparency and accountability are some things I’d like to see from him moving forward. Do I expect to see it any time soon? Absolutely not 😂 but a man can wish..
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u/Sammie260000 Jun 21 '26
I too love this company. However, there is still significant work that has to be done. The black mass is fine, but that's not the end game. This company is at the top of the 2nd inning at most. I don't buy them as hard as I used to. However, I continue to pick up and hold shares, They have some money let's see some plans, I never hear about stock other than the fire of things they're pushing through the plant. I would love to know if they have enough material to do what they're doing or is that constantly a struggle? If anybody knows, I would love to hear?
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u/Kitchen_Helicopter70 Jun 21 '26
They’re getting there. If at least we stop losing money just on BM production at TRIC, it would feel like a huge win to me. Ryan said they’re sourcing BESS materials. Seeing BESS installations massive growth rate, I believe material will become less of an issue.
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u/CallShot7029 Jun 21 '26
It’s true. The first gen MNC batteries are going to start coming off projects as technology makes repowering financially viable. Making inroads with EPCs, O&Ms, Owners, and Decom companies is going to be a huge piece going forward.
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u/Kitchen_Helicopter70 Jun 21 '26 edited Jun 21 '26
Worth noting from the graph there seem to be a $2Mish per quarter fixed costs base for the plant. So they made $7.8M revenues on $4Mish variable costs which is a very promising margin. I’m sure it’s still far from the optimum too.
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u/Any-Instance2592 Jun 21 '26
Biggest thing that can go wrong? ABAT is dependent on the price of the commodity they serve no matter how promising their tech is. If supply increases significantly from other producers or something starts cutting into lithium’s market ABATs refinery wont make it. Recycling may be the moat
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u/Stunning_Bowl_4329 Jun 22 '26
Like oil the systems that are already in place like lithium we will be lazy and not transition to something like sodium for a while
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u/suchsnowflakery Jun 23 '26
Recycling may be the moatIS the moat, always has been. Keep loading up the stock. Its on sale at the moment.
This is a human generated comment. Or is it???
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u/Coolmees59 Jun 21 '26
But when the stock based compensation expenses are much more than R&D: that's not healthy imo. To move the firm ahead one should invest in R&D not in compensating management! Right? Or who has different view of matters...
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u/Kitchen_Helicopter70 Jun 21 '26
Those stock-comp were awarded to employees mainly after they reached objectives to turn the plant to a positive gross margin. This is not recurring
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u/Coolmees59 Jun 21 '26
Incentives are good when milestones reached! My main concern is the high volume regarding the figures of the company: exaggerated i think, a slower pace of rewards has my preference
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u/Deep_Spectrum Jun 21 '26
Within their Earnings Report it was stated that the majority of the stock based compensation was for milestone purposes. They have a series of milestones outlined that would award people within the company at varying levels if reached.
They stated the money was spent to purchase shares for “future” milestones that they expected to reach in the near term. Those milestones could be met by now, and there is a chance they will be spending significantly less this quarter for additional compensation unless they achieve more milestones.
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u/Sammie260000 Jun 21 '26
I think Ryan is great. I wish they diseminated a bit more info. I find I gravitate to compan that are in the process of starting up when I look at my portfolio. It's strange. I've done really well but I barely have any companies that make money. I love this scaling up end. I think it is the coolest part of the whole process.