What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-05-12 · 441 added, 291 removed, 101 unchanged (88% of the section changed)

1 unchanged sentence

5E ADVANCED MATERIALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands, except share data)

September 30,

Current assets:

6 unchanged sentences

Reclamation bond deposit

RIGHT OF USE ASSETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

Right of use asset

LIABILITIES AND STOCKHOLDERS’

Current liabilities:

2 unchanged sentences

Total current liabilities

LONG-TERM DEBT

Long-term debt, net

Convertible note derivative liability

Lease liabilities

2 unchanged sentences

Commitments and contingencies (Note 12)

STOCKHOLDERS’ EQUITY

Preferred stock, $ 0.01 par value;

20,000,000 shares authorized;

no shares outstandin g

Stockholders’

Common stock, $ 0.01 par value;

180,000,000 shares authorized;

42,519,315 and 38,391,412 shares outstanding, respectively

Additional paid-in

Accumulated other comprehensive income (loss):

Reporting currency translation

Accumulated deficit

Total stockholders’ equity

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

The accompanying notes are an integral part of these unaudited financial statements.

43,355,315 and

43,305,315 shares outstanding September 30 and June 30, respectively

Additional paid-in capital

Retained earnings (accumulated deficit)

Total stockholders’

Total liabilities and stockholders’

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5E ADVANCED MATERIALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED

FOR THE NINE MONTHS ENDED

COST AND EXPENSES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

Three Months Ended September 30,

Operating expenses:

Project expenses

General and administrative

Research and development

Depreciation and amortization expense

Total cost and expenses

LOSS FROM OPERATIONS

NON-OPERATING

INCOME (EXPENSE)

Total operating expenses

Income (loss) from operations

Non-operating income (expense)

Interest income

Derivative gain (loss)

Interest expense

Net foreign exchange gain (loss)

Total non-operating

income (expense)

OTHER COMPREHENSIVE LOSS (INCOME)

Reporting currency translation

NET LOSS AND OTHER COMPREHENSIVE LOSS

Net loss per common share – basic and diluted

Weighted average common shares outstanding — basic and diluted

Total non-operating income (expense)

Income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

Net income (loss) per common share:

Weighted average common shares outstanding —

Comprehensive income (loss):

Net income (loss)

Reporting currency translation gain (loss)

Comprehensive income (loss)

The accompanying notes are an integral part of these unaudited financial statements.

5E ADVANCED MATERIALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

For the Three Months Ended September 30,

Cash Flows From Operating Activities:

Adjustments to reconcile net loss to net cash used by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used by operating activities:

Depreciation and amortization

Interest earned on reclamation bond

Share based compensation

Common stock issued for consulting fees

Unrealized (gain) loss on convertible note derivative instrument

Accretion of reclamation liability

Amortization of debt issuance costs

Amortization of right of use asset

Net foreign exchange (gain) loss

1 unchanged sentence

Accounts payable and accrued liabilities

Net cash used by operating activities

Net cash used in operating activities

Cash Flows From Investing Activities:

2 unchanged sentences

Properties, plant and equipment

Reclamation bonds

Net cash used by investing activities

Net cash used in investing activities

Cash Flows From Financing Activities:

Proceeds from issuance of convertible note

Payments on note payable

Proceeds from issuance of common stock

Proceeds from exercise of stock options

Share offering costs

Net cash provided by financing activities

3 unchanged sentences

Cash and cash equivalents at end of period

Supplemental Disclosure Of Cash Flow Information:

Interest paid in cash

Noncash Investing And Financing Activities:

Accounts payable change related to construction in progress additions

Recognition of operating lease liabilities and right of use assets

Construction in progress transferred to properties, plant and equipment

Equipment acquired with notes payable

Accounts payable change related to construction in progress

Recognition of operating lease liability and right of use asset

The accompanying notes are an integral part of these unaudited financial statements.

5E ADVANCED MATERIALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Three and Nine Months Ended March 31, 2022

Comprehensive

Income (Loss)

Stockholders’

Balance at July 1, 2021

Shares issued for:

Exercise of stock options

Consulting fees

Share based compensation

Other comprehensive (loss)

Balance at September 30, 2021

Shares issued for:

Exercise of stock options

Consulting fees

Shares issuance costs

Share based compensation

Other comprehensive income

Balance at December 31, 2021

Shares issued for:

Exercise of stock options

Consulting fees

Share based compensation

Other comprehensive income

Balance at March 31, 202 2

Three and Nine Months Ended March 31, 2021

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands)

Comprehensive

1 unchanged sentence

Income (loss)

Balance at July 1, 2020

( 21,398,319 )

Balance at June 30, 2021

Shares issued for:

1 unchanged sentence

Consulting fees

Shares issuance costs

Share based compensation

Other comprehensive income

Net income (loss)

Other comprehensive income (loss), net of tax

Balance at September 30, 2021

Shares issued for:

Exercise of stock options

Share based compensation

Other comprehensive income

Balance at December 31, 2020

Balance at June 30, 2022

Shares issued for:

Exercise of stock options

Shares issuance costs

Share based compensation

Other comprehensive income

Balance at March 31, 2021

( 35,016,766 )

Net income (loss)

Balance at September 30, 2022

The accompanying notes are an integral part of these unaudited financial statements.

1 unchanged sentence

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Description of Company and Summary of Significant Accounting Policies

Nature of Business

5E Advanced Materials, Inc.

(“5E,” “we,” “our,” “us,” or the “Company”) is an exploration stage company focused on becoming a vertically integrated global leader in boron specialty advanced materials and lithium with a focus on enabling decarbonization.

Redomiciliation

5E Advanced Materials, Inc.

(the “Company”) acquired all of the issued and outstanding shares of American Pacific Borates Limited (“ABR”), our Australian predecessor and wholly owned subsidiary, pursuant to a Scheme of Arrangement (“Scheme”) under Australian law, which was approved by ABR’s shareholders on December 2, 2021, and the Supreme Court of Western Australia on February 24, 2022.

As part of the Scheme, the Company changed its place of domicile from Australia to the S

tate of Delaware in the United States, effective on March 8, 2022.

In accordance with the Scheme, all ordinary shares of ABR have been transferred to the Company and pursuant to the Scheme, the Company issued to the shareholders of ABR, either one share of the Company’s common stock for every ten ordinary shares of ABR or one CHESS Depository Interest (“CDIs”) over the Company’s common stock for every one ordinary share of ABR, in each case, as held on the Scheme record date.

The Company maintains an Australian Stock Exchange (“ASX”) listing for its CDIs, with each CDI representing 1/10th of a share of common stock.

Holders of CDIs are able to trade their CDIs on the ASX under the symbol “5EA” and holders of shares of the Company’s common stock are able to trade their shares on Nasdaq under the symbol “FEAM.” All share and per share data presented in the Company’s condensed consolidated financial statements have been retroactively adjusted to reflect a one for ten (1:10) exchange ratio of all of its issued and outstanding common stock.

As a result of the reorganization, the Company became the parent company of ABR, and for financial reporting purposes the historical financial statements of ABR have become the historical financial statements of the Company as a continuation of the predecessor.

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q

and Article 8 of Regulation S-X.

Basis of Financial Statement Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and should be read in the context of the consolidated financial statements and footnotes thereto for the year ended June 30, 2022 included in our annual report filed with the Securities and Exchange Commission on Form 10-K.

Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of its financial position as of March 31, 2022 and its results of operations and cash flows for the three months and nine months ended March 31, 2022 and 2021 have been included.

Operating results for the nine-month period ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending June 30, 2022.

For further information, refer to the financial statements and footnotes thereto for the year ended June 30, 2021 included in our amended Form 10.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of our financial position as of September 30, 2022, and our results of operations and cash flows for the three months ended September 30, 2022 and 2021 have been included.

Operating results for the three months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, 2023.

Basis of Consolidation

The consolidated financial statements comprise the financial statements of 5E and its wholly owned subsidiaries, American Pacific Borates Limited and Fort Cady (California) Corporation.

Subsidiaries are those entities over which the Company has the power to govern the financial and operating policies so as to obtain benefits from their activities.

The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a Company controls another entity.

In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-company transactions have been eliminated in full.

Our fiscal year ends on June 30 of each calendar year.

Our reporting currency is in United States dollars (“USD”), and unless otherwise indicated, all references to “$” are to USD.

The unaudited condensed consolidated financial statements comprise the financial statements of 5E Advanced Materials, Inc.

and its wholly owned subsidiaries, American Pacific Borates Pty Ltd.

and 5E Boron Americas, LLC (formerly Fort Cady (California) Corporation), (collectively, “5E,”

“we,”

“our,”

“us”

or the “Company”).

Risk and Uncertainties

We are subject to a number of risks similar to those of other companies of similar size in our industry, including but not limited to, the success of our exploration activities, need for significant additional capital (or financing) to fund operating losses, competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, and dependence on key individuals.

We have accumulated deficits of $ 94.1

million and $ 40.7 million, as of March 31, 2022 and June 30, 2021, respectively.

We have incurred net losses and utilized cash in operations since inception, and expect to incur significant additional losses in the future.

We have cash available on hand and believe that this cash will be sufficient to fund operations and meet our obligations as they come due within one year from the date these consolidated financial statements are issued.

In the event our cash requirements change during the next twelve months, management believes it has the ability and commitment to reduce operating expenses, as necessary.

Until commercial production is achieved from our planned operations, we will continue to incur operating and investing net cash outflows associated with, among other things, maintaining properties, construction and operation of our Small-Scale Boron Facility (“SSBF”) and undertaking ongoing exploration activities and project expenses.

Our long-term success is dependent upon our ability to successfully raise additional capital or financing or enter into strategic partnership opportunities.

Our long-term success is also dependent upon our ability to operate the SSBF, develop our planned injection and recovery wells and processing facility, develop and commercialize the full-scale Fort Cady Borate Project, earn revenues, and achieve profitability.

Our consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions, and allocations that affect amounts reported in the consolidated financial statements and related notes.

Significant items that are subject to such estimates and assumptions include, but are not limited to, estimated useful lives and valuation of properties, plant and equipment, mineral rights and properties, deferred tax assets, reclamation liabilities, and fair value of stock-based compensation.

Actual results could differ due to the uncertainty inherent in the nature of these estimates.

We currently generate no revenues from operations and will need to rely on raising additional capital or financing to sustain operations in the long-term.

There is no guarantee that we will be able to raise such additional capital or financing.

We believe, based on our current forecasts, that we have sufficient cash on hand to fund our operations for at least the next twelve months from the date of the issuance of these condensed consolidated financial statements.

Significant Accounting Policies

There have been no material changes in the significant accounting policies followed by us during the nine months ended March 31, 2022 from those disclosed in the financial statements included in our amended Form 10.

Convertible Debt

Upon the issuance of convertible debt, we evaluate the embedded conversion features to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for separately as a derivative.

If the conversion feature does not require derivative treatment, the instrument is evaluated for consideration of any beneficial conversion features.

If a conversion feature is deemed to be beneficial, the intrinsic value of the conversion feature is recorded as additional paid in capital.

Derivative Financial Instruments

We record derivative instruments on the consolidated balance sheet at fair value as either an asset or a liability with changes in fair value recognized currently in earnings.

The related cash flow impact of our derivative activities is reflected as cash flows from operating activities unless the derivatives are determined to have a significant financing element at inception, in which case they are classified within financing activities.

Currently, our only derivative instrument is the conversion feature of our convertible note that was recorded as a stand-alone derivative at inception (see note 7 - Long-term Debt).

Debt Issue Costs

Costs incurred in connection with the issuance of debt are recorded as a reduction of the related debt and are amortized to interest expense over the life of the debt.

If a conversion of the underlying debt occurs, a proportionate share of the unamortized amount is expensed in the period of conversion.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

The authoritative guidance requires disclosure of the framework for measuring fair value and requires that fair value measurements be classified and disclosed in one of the following categories:

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 with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

This category includes those derivative instruments that can be valued using observable market data.

Substantially all of the inputs are observable in the marketplace throughout the full term of the derivative instrument, can be derived from observable data, or are 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).

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy.

We periodically review our inputs to ensure the fair value level classification is appropriate.

When transfers between levels occur, it is our policy to assume that the transfer occurred at the date of the event or change in circumstances that caused the transfer.

Recently Issued and Adopted Accounting Pronouncements

In December 2019, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12—Income Taxes

Simplifying the Accounting for Income Taxes (“ASU 2019-12”).

ASU 2019-12 is

part of the FASB’s overall simplification initiative and seeks to simplify the accounting for income taxes by updating certain guidance and removing certain exceptions.

The updated guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years.

Early adoption is permitted.

The Company adopted this ASU on July 1, 2021, and ASU 2019-12 does

not have a material effect on the Company’s consolidated financial statements other than modification of income tax disclosure.

In August 2020, FASB issued ASU No.

2020-06–Debt–Debt with

Conversion and Other Options (Subtopic 470-20) and

Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

for Convertible Instruments and Contracts in an Entity’s Own Equity.

2020-06–Debt–Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

The update is to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity.

The update is effective for fiscal years beginning after December 15, 2021, including condensed periods within those fiscal years and with early adoption permitted.

The Company does not expect ASU 2020-06 to have a material effect on the Company’s consolidated financial statements.

We adopted this standard during the quarter ended September 30, 2022 .

The adoption of this standard did not have an effect on our previously reported consolidated financial statements as we had no transactions that were the subject of the pronouncement.

During the current quarter we issued convertible debt and accounted for it in accordance with the updates provided for by ASU No.

In May 2021, FASB issued ASU No.

2021-04—Earnings Per

Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50),

Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s

Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

2021-04—Earnings Per Share (Topic 260), Debt—

Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—

Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

The update is to clarify and reduce diversity in accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.

The update is effective for fiscal years beginning after December 15, 2021, including condensed periods within those fiscal years and with early adoption permitted.

The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

The adoption of this standard during the quarter ended September 30, 2022 did not have an effect on our consolidated financial statements.

Mineral Rights and Properties, Net

The Company owns surface properties and the associated mineral rights for the Fort Cady Borate Project.

The Company has capitalized the cost of drilling hydrology wells, which provide water for the P

For the nine-month period ended March 31, 2022 and 2021, the Company recognized hydrology income of $ 36,020 and zero , respectively.

The hydrology income is recognized in the Consolidated Statements of Loss and Comprehensive Loss in Other income.

On October 1, 2011, Fort Cady (California) Corporation executed

net royalty lease agreement with Elementis Specialties, Inc.

(“Elementis”) to explore, develop and mine boron and lithium on claims held by Elementis.

On September 16, 2021, the Company extended its mineral lease agreement with Elementis until July 1, 2022 .

Amounts paid prior to production are considered advanced royalty payments and capitalized.

For the nine-month period ended March 31, 2022 and 2021, the Company paid Elementis advanced royalty payments of

$ 86,608 and $ 107,502 , respectively.

Asset retirement costs represent the carrying value of capitalized costs associated with asset retirement obligations discussed in Note 5.

Mineral Interests and Properties as of March 31, 2022 and June 30, 2021 consisted of the following:

Mineral properties – Fort Cady Borate Project

Mineral Rights and Properties, net consist of the following.

September 30,

(in thousands)

Mineral properties

Hydrology wells

Mineral interest – Elementis lease

Asset retirement cost, net of accumulated amortization of $ 3,887 and zero at March 31, 2022 and June 30, 2021, respectively

Mineral interest –

Elementis lease

Asset retirement cost, net of accumulated amortization

of $ 8 and $ 6 at September 30 and June 30, 2022, respectively (1)

Mineral rights and properties, net

(1) Asset retirement costs represent the carrying value of capitalized costs associated with asset retirement obligations discussed in Note 5.

Construction in Progress

Construction work in progress represents the equipment which has been acquired and is not in use and prepayments for design, engineering, and construction services in relation to the development of the Fort Cady Borate Project.

As of March 31, 2022 and June 30, 2021, Construction in Progress consisted of the following:

Construction in Progress consisted of the following.

September 30,

(in thousands)

Engineering services

Injection and recovery wells

Electric infrastructure

Filter system

Centrifuge system

Air compression

Conveyor system

Water treatment

Total construction in progress

Properties, Plant and Equipment, Net

Properties, plant, and equipment, net as of March 31, 2022 and June 30, 2021 consisted of the following:

Properties, plant, and equipment, net consisted of the following.

Asset category

Depreciation method

Estimated useful life (in years)

September 30, 2022

June 30, 2022

(in thousands)

Straight-line

Plant and equipment

Straight-line

Less accumulated depreciation

Properties, plant and equipment, net

For the nine-month periods ended March 31, 2022 and 2021, the Company recognized depreciation expense of $ 72,362 and $ 15,344 , respectively.

For the three months ended September 30, 2022 and 2021, we recognized depreciation expense of approximately $ 34.9 thousand and $ 20.3 thousand, respectively.

Reclamation Liabilities

The liabilities accrued for reclamation and closure costs as of March 31, 2022 and June 30, 2021 were as follows:

Accrued reclamation costs

Asset retirement obligation

Accrued reclamation costs of $ 297,997 relate to land disturbance for the Fort Cady Borate Project.

On June 30, 2021, the Company established an asset retirement obligation (“ARO”) relating to water monitoring wells and injection recovery wells as required by the Company’s Underground Injection Permit.

Total estimated reclamation and closure costs for wells completed was $ 597,420 as of March 31, 2022 and $ 298,710 as of June 30, 2021.

These estimated costs were discounted using credit adjusted, risk-free interest rates of 6.6 – 6.9 % from the time the Company incurred the obligation to the time the Company expects to pay the retirement obligation.

During the nine-month period ended March 31, 2022, the Company incurred additional

relating to water monitoring and injection recovery wells with the total estimated costs of $ 298,710 .

These estimated costs increased the balance of the asset retirement obligation by $ 84,358 .

The following is a reconciliation of the aggregate retirement obligation asset associated with our reclamation plan for the Company’s mining projects for the nine months ended March 31, 2022.

There was no comparable activity for the nine months ended March 31, 2021:

Retirement obligation asset — beginning of period

The change in our ARO during the periods presented, and the balance of our accrued reclamation liabilities at the end of each period is set forth below.

September 30, 2022

June 30, 2022

(in thousands)

Asset retirement obligation —

beginning of period

Obligation incurred during the period

Retirement obligation asset — end of period

Exploration and evaluation activities are subject to various federal and state laws and regulations governing the protection of the environment.

These laws and regulations are continually changing and generally have become more restrictive.

The Company believes that its operations are materially in compliance with all applicable laws and regulations.

The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.

The ultimate amount of reclamation and other future site-restoration costs to be incurred for existing mining interests is uncertain.

The Company leases offices in Hesperia, CA and Houston, TX under operating lease agreements, which expire in February 2024 and December 2024 , respectively.

Starting February 2021 and January 2022, right o f

use (“ROU”) assets were recognized with corresponding lease liabilities on the effective date of the lease.

To calculate right of use assets and lease liabilities, the Company utilized incremental borrowing rates ranging fro

0.04 % to 1.04 %

discount the future rent payments.

The remaining lease term for our office in Hesperia, CA is 1.90 years and 2.75 years for our office in Houston, TX.

During the nine-month period ended March 31, 2022, operating cash flows included cash payments o

88,285 related to lease liabilities.

Future minimum annual lease payments under these existing lease agreements are as follows as of March 31, 2022:

For the year ending June 30,

2022 (April 1 – June 30)

Less imputed interest

Net lease liability

Current portion

Long-term portion

Expense under operating leases, including short-term leases, for the nine-month periods ended March 31, 2022 and 2021 were $ 134,699 and $ 36,112 , respectively.

This expense is included in General and Administrative expense on the Consolidated Statement of Operations and Comprehensive Loss (Income).

tock for every one ordinary share of ABR, in each case, as held on the Scheme record date.

On the effective date of the Scheme, the number of ordinary outstanding shares was reduced from 418,693,150 to 41,869,315 shares of common stock.

All share and per share amounts in these condensed consolidated financial statements and related notes for the periods prior the Scheme have been retroactively adjusted to reflect the effect of the exchange ratio.

We are authorized to issue up to 180,000,000 shares of common stock, par value $ 0.01 per share, and 20,000,000 shares of preferred stock, par value, $ 0.01 per share.

We have no outstanding shares of preferred stock.

During the nine-month periods ended March 31, 2022 and 2021, the Company issued the following shares of common stock:

Issued 1,760,236 and 5,128,205 shares of its common stock for cash proceeds of $ 26,309,067 and $ 30,109,764 during the nine months ended March 31, 2022 and 2021, respectively.

Share issue costs of $ 797,474 and $ 1,573,496 were incurred.

Issued 1,267,667 and 2,097,685 shares of its common stock upon exercise of stock options for $ 3,124,112 and $ 5,663,177 during the nine months ended March 31, 2022 and 2021, respectively.

Issued 1,100,000 and 8,000 shares of its common stock with a fair value of $ 27,171,876 and $ 32,076 for consulting fees during the nine months ended March 31, 2022 and 2021, respectively.

Net Loss Per Common Share

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

Diluted loss per share reflects the potential dilution that could occur if stock options, warrants, and convertible securities were exercised or converted into common stock.

Diluted loss per share equals basic loss per share as the effect of including dilutive securities in the calculation would be antidilutive.

For the nine-month periods ended March 31, 2022 and 2021, respectively, stock options of 5,510,000 and 5,925,000 were excluded from the computation of diluted loss per share as our reported net losses for those periods would cause their exercise to have no effect on the calculation of loss per share.

Revisions to previous estimates

Asset retirement obligation —

end of period

Accrued reclamation costs

Total accrued reclamation liabilities

Accrued reclamation costs of $ 298 thousand relate to surface reclamation obligations at Fort Cady.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following at the end of each period presented.

September 30,

(in thousands)

Accounts payable - trade

Accrued expenses

Accrued payroll

Accrued interest

Current portion of debt

Accounts payable and accrued liabilities

Long-term Debt

Long-term debt consisted of the following at the end of each period presented.

September 30,

(in thousands)

Convertible note

Vehicle notes payable

Current portion of debt

Long-term debt

Unamortized convertible note discount - embedded conversion feature

Unamortized debt issuance costs - convertible note

Long-term debt, net

Interest expense consisted of the following.

Three Months Ended September 30,

(in thousands)

Convertible note interest

Notes payable interest

Vehicle notes payable interest

Amortization of debt issuance costs and discount - convertible note

Total interest expense

Convertible Note

On August 11, 2022, we executed a $ 60 million private placement of Senior Secured Convertible Note (“the Note”

or "Convertible Note"), with Bluescape Energy Partners (“Bluescape”).

The Note, which is convertible into our common stock and matures in August 2027 , closed on August 26, 2022.

At our election, the Note bears interest at an annual rate of 4.50 % if paid in cash, or at an annual rate of 6.00 % if paid through the issuance of additional notes and contains a financial covenant requiring us to maintain a cash balance of at least $10 million.

The purchaser may convert the Note at any time before August 2027 at a conversion price of $ 17.60 (“Conversion Price”).

We have the right, at any time on or before the twenty-four (24) month anniversary of the closing date of the Note (“Closing Date”), to convert the Note to our common stock in whole or in part if the closing price of our common stock is at least 200 % of the Conversion Price of the Note (“Threshold Price”) for each of the twenty ( 20 ) consecutive trading days prior to the time we deliver a conversion notice.

The Threshold Price for our right to convert the Note decreases to 150 % after the twenty-four (24) month anniversary of the Closing Date and on or before the thirty-six (36) month anniversary of the Closing, and to 130 % at any time after the thirty-six (36) month anniversary of the Closing Date.

The conversion feature of the Note was deemed an embedded derivative requiring separate accounting as a stand-alone derivative instrument (convertible note derivative).

The Note was recorded at its face amount of $ 60 million less debt issuance costs of $ 4.2 million and the fair value of the convertible note derivative of $ 24.9 million (Note 8).

Fair value information for the convertible instrument follows.

September 30,

August 26, 2022

(in thousands)

Fair value of convertible note (Level 2)

Fair value of embedded conversion feature (Level 3)

Total fair value of convertible note instrument

Convertible Note Derivative

Our convertible note derivative relates to the Convertible Note (Note 7) and valued upon initial recognition at fair value using a with-and-without methodology utilizing a binomial lattice model (Level 3).

The convertible note derivative is re-measured at fair value at each period end using a Black-Scholes option valuation model with the resulting gain or loss recognized in the Condensed Consolidated Statement of Operations.

The components of the convertible note derivative are summarized as follows.

September 30,

(in thousands)

Convertible note derivative —

beginning of period

Fair value adjustment

Convertible note derivative —

end of period

The valuation model requires the input of subjective assumptions including expected share price volatility, risk-free interest rate and debt rate.

Changes in the input assumptions as well as our underlying share price can materially affect the fair value estimate and reported net income (loss).

The assumptions used in the valuation model include the following, with a change in volatility and debt rate having the most significant impact on the valuation.

September 30,

August 26, 2022

Risk-free interest rate

Financial Instruments and Fair Value Measurements

At September 30, 2022, cash equivalents as well as trade and other payables approximate their fair value due to their short-term nature.

Our financial instruments also consist of environmental reclamation bonds which are invested in certificates of deposit and money market funds which are classified as Level 1, and the convertible note derivative is classified as Level 3.

There were no transfers into or out of level 3 during the three months ended September 30, 2022 .

The reconciliation of changes in the fair value of assets and liabilities classified as Level 3 can be found in Note 7 and 8.

Share Based Compensation

Stock Incentive Plans

In March 2022,

our Board of Directors adopted the 5E Advanced Materials, Inc.

2022 Equity Compensation Plan (the “Incentive Plan”).

A total of 2,500,000 shares of common stock are reserved for issuance under the Incentive Plan.

The Incentive Plan authorized the grant of stock options, restricted share units, performance share units, director share units, performance cash units and other equity-based awards.

Our Compensation Committee determines the exercise price for stock options and other equity-based awards, which may not be less than the fair market value of our common stock on the date of grant.

As of March 31, 2022, 2,500,000 shares of common stock were available for issuance under the Incentive Plan.

The Company established an employee share option plan (“ESOP”) under its predecessor parent company ABR.

The objective of the ESOP was to assist in the recruitment, reward, retention and motivation of employees and contractors.

Individual may receive the options or nominate a relative or associate to receive the options.

The plan was open to executive officers, employees, and eligible contractors of the Company.

Additionally, the board authorized

the awards of

options outside of the plan to suppliers and vendors.

Vesting periods of options granted varied as determined by the

board of directors.

Total number of shares authorized for award of share options under the ESOP was limited to 5 % of common stock over a 3 -year

The Company canceled each of the outstanding options to acquire ordinary shares of ABR and issued replacement options representing the right to acquire shares of the Company’s common stock on the basis of the exchange ratio of one replacement option for every ten ABR options held.

It is the Company’s policy to issue new shares of common stock to satisfy stock options.

The fair value of stock option awards granted to directors, officers, employees and/or consultants of the Company are estimated on the grant date using the Black-Scholes option valuation model and the closing price of our common shares on the grant date.

The significant assumptions used to estimate the fair value of 1,700,000 and 1,350,000 stock option awards granted during the nine-month periods ended March 31, 2022 and 2021, respectively, using the Black-Scholes option valuation model are as follows:

Average for nine-month periods ended March 31,

Share based compensation expense is included in general and administrative expense and consisted of the following for the periods presented.

Three Months Ended September 30,

(in thousands)

Share based compensation expense - service based

Employee share option plan

2022 Equity Compensation Plan - Options

2022 Equity Compensation Plan - RSU and DSU's

Total service based compensation

Options issued to suppliers

Consulting stock awards

Total share based compensation

Stock Options

All options outstanding prior to the three-month period ended September 30, 2022 were granted under our predecessor parent company's employee share option plan.

New option grants are made under the 2022 Equity Compensation Plan and vest ratably over three years .

The tables below reflect all options granted under both plans.

The significant assumptions used to estimate the fair value of stock option awards granted under the plans during the three months ended September 30, 2022 and 2021, using the Black-Scholes option valuation model are as follows.

Three Months Ended September 30,

Exercise price

$ 14.62 - $ 18.27

$ 6.58 - $ 11.69

Expected term in years

1 unchanged sentence

Dividend rate

The share-based compensation cost recognized in the Consolidated Statements of Loss and Comprehensive Loss in General and administrative expense was $ 4,428,071 and 5,318,298 for the nine-month periods ended March 31, 2022 and 2021, respectively.

The following table summarizes stock option activity for each of the periods ended March 31, 2022 and 2021.

The number of options have been adjusted for the exchange ratio and exercise prices reflect the AUD prices in USD based on the exchange rate that existed on the date prior to implementation of the Scheme:

The following table summarizes stock option activity for each of the periods presented.

Three Months Ended September 30,

Number of Options

Weighted Average Exercise Price

Number of Options

Weighted Average Exercise Price

(In thousands, except per share data)

Outstanding at beginning of the period

Expired/forfeited

Outstanding at end of period

Outstanding at end of the period

Vested at the end of the period

Options outstanding and vested as of March 31, 2022, have a weighted average remaining life of 2.03 years and 1.52 years, respectively.

As of March 31, 2022, there was $ 6.1 million of unrecognized compensation cost related to 1,640,000 unvested stock options.

The weighted average remaining life of vested options at September 30, 2022 and 2021 was 1.4 years and 2.4 years, respectively.

As of September 30, 2022 , there was $ 7.8 million of unrecognized compensation cost related to 1.6 million unvested stock options.

This cost is expected to be recognized over a weighted-average remaining period of approximately 2.3 years.

As of March 31, 2022, the intrinsic value of both the outstanding stock options and vested options was $ 54.3 million and $ 48.0 million, respectively.

The intrinsic value of stock options exercised during the nine-month periods ended March 31, 2022 and 2021 was $ 14.4 million and $ 9.9 million, respectively.

Consulting Stock Awards

Pursuant to an agreement ABR had in place with its U.S.-based advisory board Blue Horizon Advisors LLC (“BHA”), the Company issue

shares of common stock upon the listing of the Company’s shares on Nasdaq during the three-month period ended March 31, 2022.

The fair value of

these shares of $ 13.2

million was recognized as stock based compensation and included in general and administrative expenses in the consolidated statements of operations for the three and nine month period ended March 31, 2022.

The agreement also includes a provision enabling BHA to potentially

earn an additional 250,000 shares of common stock upon meeting

four different market-based milestones (total of 1,000,000 shares).

The market-based milestones include the Company’s common stock achieving a ten -day

volume weighted average price of $ 21.94 , $ 29.25 , $ 36.57 , and $ 43.88 before December 31, 2022.

All services required for the awards have been fulfilled as of March 31, 2022, and due

to the market-based milestones of the awards, the fair value of these awards is determined using the Monte Carlo Simulation valuation model.

Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, the expected life of awards, a risk-free interest rate and dividend yield.

The assumptions used to estimate the fair value of the market-based stock grants under the Monte Carlo Simulation model for the period ended March 31, 2022 are as follows:

Hurdle stock price

Expected term in years

Risk-free interest rate

Expected dividend yield

Estimated fair value per share

The Company recorded stock based compensation of $ 7.8 million in general and administrative expense in the consolidated statements of operations for three and nine month periods ended March 31, 2022.

The following table summarizes the activity for unvested options for each of the periods presented.

Three Months Ended September 30,

Number of Options

Weighted Average Grant Date Fair Value per share

Number of Options

Weighted Average Grant Date Fair Value per share

(In thousands, except per share data)

Unvested at beginning of the period

Expired/forfeited

Unvested at end of the period

As of September 30, 2022 , the intrinsic value of both the outstanding stock options and vested options was $ 13.2 million and $ 13.2 million, respectively.

The intrinsic value of stock options exercised during the three months ended September 30, 2022 and 2021 was $ 0.8 million and $ 2.9 million, respectively.

Restricted Share Units, Director Share Units and Performance Share Units

The following table summarizes restricted share ("RSU"), director restricted share ("DSU") and performance share ("PSU") activity under the 2022 Equity Compensation Plan for each of the periods presented.

Serviced-Based Shares

Weighted Average Grant Date Fair Value per Share

Performance- Based Shares

Weighted Average Grant Date Fair Value per Unit

(In thousands, except per share data)

Non-vested shares/units outstanding

at July 1, 2022

Non-vested shares/units outstanding

at September 30, 2022

(1) Includes approximately 35.6 thousand director share units

(2) On September 1, 2022, we granted approximately 63.5 thousand performance share units, which based on the achievement of certain operational targets, could vest within a range of 0 % to 100 %.

The operational targets are;

1) commissioning and operation of the SSBF;

2) obtaining formation flow, head grade and impurity profile data from the SSBF;

and 3) generate product data to ensure process design for detailed engineering.

The determination of the percentage of shares that ultimately vest will be made at the three-year anniversary of the grant date based upon achievement of the performance targets over the period.

Net Income (Loss) Per Common Share

The following is the calculation of basic and diluted weighted-average shares outstanding and earnings (loss) per share (EPS) for the indicated periods.

Three Months ended September 30,

(in thousands, except per share data)

Basic earnings (loss) per share:

Net income (loss) - numerator

Weighted-average shares —

Basic earnings (loss) per share

Diluted earnings (loss) per share:

Net income (loss)

Interest expense on convertible note

Net income (loss) - numerator

Weighted-average shares (denominator):

Dilution effect of stock options and unvested restricted stock units and performance share units

outstanding at end of period

Additional shares assuming conversion of convertible note

Weighted-average shares —

Diluted earnings (loss) per share

Stock options and unvested restricted stock units and performance share units excluded due to

anti-dilutive effect

Commitments and Contingencies

We had purchase order commitments of $21.7 million for the construction works in progress, software, drilling, and technical reports.

References herein to the “Company,”

“we,”

“our,”

and “us,”

refer to 5E Advanced Materials, Inc.

and its subsidiaries.

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this Quarterly Report on Form 10-Q for the three months ended September 30, 2022 (this “Form 10-Q”) contain various forward-looking statements relating to the Company’s future financial performance and results, financial condition, business strategy, plans, goals and objectives, including certain projections, business trends and other statements that are not historical facts.

These statements constitute forward-looking statements within the meaning of the Safe Harbor provisions of the U.S.

Private Securities Litigation Reform Act of 1995.

These forward-looking statements generally are identified by the words “believe,”

“project,”

“expect,”

“anticipate,”

“estimate,”

“intend,”

“budget,”

“target,”

“aim,”

“strategy,”

“estimate,”

“plan,”

“guidance,”

“outlook,”

“intend,”

“may,”

“should,”

“could,”

“will,”

“would,”

“will be,”

“will continue,”

“will likely result”

and similar expressions, although not all forward-looking statements contain these identifying words.

Forward-looking statements reflect the Company’s beliefs and expectations based on current estimates and projections.

While the Company believes these expectations, and the estimates and projections on which they are based, are reasonable and were made in good faith, these statements are subject to numerous risks and uncertainties.

Forward-looking statements involve known and unknown risks, uncertainties and other important factors, which include, but are not limited to, the risks described under the heading “Risk Factor Summary”

and “Item 1A.

Risk Factors”

in our annual report on Form 10-K, any of which could cause the Company’s actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

Therefore you should not rely on any of these forward-looking statements.

These forward-looking statements speak only as of the date of this Form 10-Q and, except as required by law, the Company undertakes no obligation to correct, update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required under federal securities laws.

You are advised, however, to consult any additional disclosures we make in our reports to the U.S.

Securities and Exchange Commission (the “SEC”).

All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in our latest annual report on Form 10-K and this Form 10-Q.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in conjunction with, and is qualified in its entirety by, the unaudited Condensed Consolidated Financial Statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report on Form 10K filed on September 28, 2022.

This discussion and analysis contains forward looking statements that involve risks, uncertainties and assumptions and other important factors, which include, but are not limited to, the risks described in our annual report on Form 10-K filed with the SEC, any of which could cause the Company’s actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth elsewhere in this Form 10-Q and under “Item 1A.

Risk Factors”

and elsewhere in our Form 10-K.

In addition, see “Cautionary Note Regarding Forward-Looking Statements.”

References to the “Company,”

“we,”

“our,”

and “us,”

refer to 5E Advanced Materials, Inc.

and its subsidiaries.

Highlights for the Three Months Ended September 30, 2022

In August 2022, we completed a $60 million private placement of Senior Secured Convertible Note with Bluescape Energy Partners.

In September 2022, we were included in the S&P/ASX 300 Index.

In September 2022, we entered into a research agreement with Boston College for the advancement of boron-based materials research in solar energy systems.

We had zero lost time incidents with over 23,000 man hours recorded in the quarter.

Mechanical completion of SSBF is on track for completion around calendar year end.

Significant progress during the quarter included pouring of foundations, installation of electrical houses, receipt of fiberglass reinforced tanks, and installation of piping racks and structural steel.

Recruitment of U.S.

based directors, culminating in appointment of three additional board members in October 2022.

Results of Operations

Comparison of the Three Months Ended September 30, 2022 and 2021

The following table summarizes our results of operations for the periods presented:

Three Months Ended September 30,

($ in thousands)

COSTS AND EXPENSES

Project expenses

General and administrative

Research and development

Depreciation and amortization expense

Total costs and expenses

LOSS FROM OPERATIONS

NON-OPERATING INCOME (EXPENSE)

Interest income

Derivative gain (loss)

Interest expense

Net foreign exchange gain (loss)

Total non-operating income (expense)

NET INCOME (LOSS)

* Represents a percentage change greater than +/- 300%

Project expenses

Project expenses include drilling, plug and abandonment, site-preparation, engineering, consumables, testing and sampling, hydrology, permits, surveys, and other expenses associated with further progressing our project.

Project expenses decreased 25% during the current period versus the comparable period in 2021.

The decrease was primarily due to a reduction in drilling activity specific to water monitoring wells ($4.2 million) partially offset by costs related to our plug and abandonment program incurred during the period ($2.6 million) and increases in site related costs ($0.4 million).

General and administrative expenses

The $955 thousand decrease in general and administrative expenses during the three months ended September 30, 2022 was primarily driven by one-time costs incurred during the three months ended September 30, 2021 related to the preparation of our Form-10, our reorganization, and consulting fees paid to Blue Horizon Advisors LLC for services provided ($2 million).

The absence of these costs during the current period were partially offset by an increase in salaries and benefits ($621 thousand) and liability insurance ($333 thousand).

Salaries and benefits increased primarily due to an increase in headcount from 11 at September 30, 2021 to 27 at September 30, 2022.

Non-operating (income) expense

During the current period we recognized an unrealized gain of $13.9 million resulting from the change in fair value of the embedded conversion feature of our convertible notes that was required to be bifurcated and accounted for separately as a stand-alone derivative instrument.

The increase in interest income during the three months ended September 30, 2022 was attributable to one-month certificates of deposit purchased in September 2022.

Interest expense increased due to the issuance of the convertible note on August 26, 2022 and includes $550 thousand of debt issuance cost amortization.

During the three months ended September 30, 2022, we had no foreign exchange gains or losses.

All foreign denominated cash balances that existed in the comparative period were transferred during the quarter ended June 30, 2022 to our bank account in the U.S.

and are held in U.S.

We did not have any income tax expense or benefit for the three months ended September 30, 2022, nor for the three months ended September 30, 2021, as we have recorded a full valuation allowance against our net deferred tax asset.

Liquidity and Capital Resources

As of September 30, 2022, we had cash and cash equivalents of $74.2 million and working capital of $66.2 million compared to $31.1 million and $25.2 million as of June 30, 2022, respectively.

Our predominant source of cash has been generated through equity financing from issuances of our common stock and hybrid equity and debt securities.

Since inception, we have not generated revenues, and as such, have relied on equity financing and hybrid equity and debt instruments to fund our operating and investing activities.

We believe our current cash balances are sufficient to fund our cash requirements for at least the next 12 months based on our 2023 plan.

In the event costs were to significantly exceed our 2023 plan, we have the ability to reduce or eliminate current and/or planned discretionary spending as well as raise additional capital.

Historically, we have been able to raise cash through equity financing and hybrid equity and debt instruments;

however, no assurance can be given that additional financing will be available in amounts sufficient to meet our needs or on terms that are acceptable to us.

If we issue additional shares of our common stock, it could result in dilution to our existing shareholders.

There are many factors that could significantly impact our ability to raise funds through equity and debt financing as well as influence the timing of future cash flows.

These factors include, but are not limited to, our ability to access capital markets, stock price volatility, uncertain economic conditions, unforeseen delays in our project, and access to labor.

See “Part I.

Risk Factors”

and elsewhere in our annual report on Form 10-K.

For the three months ended September 30,

($ in thousands)

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Operating Activities

Net cash used in operating activities for each of the above periods was primarily the result of expenses incurred in preparing us for operation of the SSBF.

During the three months ended September 30, 2022, we used approximately $3 million more from operations than in the comparative period.

The increase in cash used in operations during the current period was due to an increase in cash compensation resulting from an increase in headcount combined with an increase in cash professional fees.

During the three months ended September 30, 2021, approximately $1.8 million of professional fees were settled by issuing shares of our common stock.

The remaining increase was due to timing of settlement of accounts payable and accrued expenses.

Investing Activities

The increase in cash used in investing activities during the three months ended September 30, 2022, compared to the three months ended September 30, 2021, was primarily due to the construction of our SSBF which commenced during the fourth quarter of fiscal year 2022.

Cash used in investing activities during the three months ended September 30, 2021, was primarily for construction and equipment purchases for the SSBF.

Financing Activities

The increase in cash provided by financing activities during the three months ended September 30, 2022, compared to the three months ended September 30, 2021, was primarily due to net proceeds of $55.8 million received from the issuance of a convertible note in August 2022 (see Note 7 - Long-term Debt in the unaudited condensed consolidated financial statements in this 10-Q).

Net cash provided by financing activities for the three months ended September 30, 2021 was from proceeds received upon the exercise of stock options.

Critical Accounting Policies

Derivative Financial Instruments

Our derivative instruments are accounted for on a mark-to-market basis.

We have in the current quarter and are likely in the future to experience non-cash volatility in our reported earnings during periods of high interest rate and stock market volatility.

As of September 30, 2022, we had a derivative liability of approximately $11 million related to the bifurcated embedded conversion feature of our convertible notes.

The derivative fair value was determined using a with-and-without methodology utilizing a binomial lattice model.

The model considers various inputs including time value, volatility, credit risk and the current share price of our common stock.

As a result, the value of the embedded conversion feature and respective settlement dates could be significantly different than its fair value as of September 30, 2022, See Note 8 to our unaudited consolidated financial statements in item 1 of this report for additional information.

Contractual Commitments and Contingencies

Purchase Obligations

As of March 31, 2022, the Company has purchase order commitments of $ 18,888,000 in respect of construction works in progress, drilling, and technical reports.

The Company had purchase order commitments of $21.7 million for the construction works in progress, drilling, software and technical reports.

Mineral Lease Payments

The Company has a mineral lease agreement for the purposes of obtaining exclusive rights to exploration at the Fort Cady Project.

The mineral lease agreement requires the Company to make an annual minimum royalty payment of $ 75,000 , escalated annually based on inflation, until the expiration date of the lease, October 1, 2021 .

On September 16, 2021, the Company extended its mineral lease agreement with Elementis until July 1, 2022.

Payments made during the nine-month period ended March 31, 2022 and 2021 were $ 86,608 and $ 107,502 , respectively.

Salt Wells Earn-in

The Company has funding commitments under its Earn-in Agreement of

300,000 in fiscal year 2022, $ 600,000 in fiscal year 2023, $ 800,000 in fiscal year 2024, and $ 1,200,000 in fiscal year 2025.

The Company did no t record a U.S.

federal or state income tax benefit for losses incurred during the three and nine months ended March 31, 2022 and 2021.

The Company concluded that it is more likely than not that its deferred tax assets will not be realized which resulted in recording a full valuation allowance during those periods.

Subsequent Events

On April 12, 2022, the Company issued 150,000 shares to Blue Horizon Advisors LLC, pursuant to the terms of the Advisory Agreement dated April 16, 2021 and as consideration for advisory board services provided, including services related to assessment of the Project, recruiting a U.S.

based management team, and advising in connection with the U.S.

The Company did

no t receive any proceeds in connection with the issuance.

We have a mineral lease agreement with Elementis for the purposes of obtaining exploration and mining privilege.

The mineral lease agreement requires us to make an annual minimum royalty payment of $75 thousand, escalated annually based on inflation, until the expiration date of the lease (March 31, 2023).

Payments made during the three months ended September 30, 2022 and 2021, were $0 and $86 thousand, respectively.

Salt Wells Earn-in Agreement

On August 2, 2022, Great Basin Resources, Inc.

agreed to amend our Salt Wells Earn-in Agreement.

To fully realize the mineral interest rights under the agreement, we must incur exploration expenses of $900 thousand by December 31, 2023, $800 thousand by December 31, 2024, and approximately $756 thousand by December 31, 2025.

Quantitative and Qualitative Disclosures About Market Risk.

Not required.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements