5E Advanced Materials, Inc. 10-Q

Item 2. 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 the amended Form 10 filed on March 7, 2022. The Company was incorporated under the laws of the State of Delaware to become the holding company of our business pursuant to the reorganization under the Scheme (“Reorganization”). Prior to completion of the Reorganization, the Company had no business or operations and following completion of the Reorganization, the business and operations of the Company consists solely of the business and operations of the subsidiaries of ABR. Accordingly, financial information for the Company and a discussion and analysis of its results of operations and financial condition for the period of its operation prior to the Reorganization would not be meaningful and therefore are not presented. Following the Reorganization, the historical financial statements of ABR will be our financial statements as a continuation of the predecessor, and our future financial statements will consolidate ABR as an operating subsidiary. This discussion and analysis contain 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 amended Form 10 filed, and in our other filings 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 under “Item 1A. Risk Factors” and elsewhere in this Form 10-Q and “Item 1A. Risk Factors” and elsewhere in our amended Form 10. 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. Overview 5E Advanced Materials, Inc. is an exploration stage company focused on becoming a vertically integrated global leader and supplier of boron specialty and advanced materials whose mission is to enable decarbonization. We anticipate boron and lithium products will target applications for electric transportation, clean energy, food and domestic security. Our business strategy will focus on our boron and lithium resource in Southern California, which is designated as Critical Infrastructure by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency, which we believe is one of the largest known and environmentally permitted new conventional boron deposits globally. The Company holds 100% of the rights — either through ownership or leasehold interest — in the Fort Cady Borate Project (the “Project”) through the Company’s wholly owned subsidiary, Fort Cady (California) Corporation (“FCCC”). The Project is underpinned by a conventional colemanite deposit, which is a hydrated calcium borate mineral found in evaporite deposits. The deposit hosts a mineral resource from which we intend to extract and process into boric acid, boron advanced materials, lithium carbonate, and other materials. These materials are scarce in resource and subject to supply risk since a large portion of third-party production is imported. Redomiciliation 5E Advanced Materials, Inc. 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 State of Delaware in the United States, effective on March 8, 2022. 19 Table of Contents 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. Recent Developments Securing Domestic Supply Chains and Decarbonization In June 2021, President Biden’s administration announced a supply chain disruptions task force and Executive Order 14017 to address supply chain discontinuities with a focus to secure domestic supply for advanced batteries and invest in sustainable domestic and international production and processing of critical materials. President Biden provided an update in February 2022 announcing major government initiatives to expand domestic, sustainable critical materials supply in an effort to break dependence on foreign sources. Major initiatives included updating outdated mining laws and regulations, updating and prioritizing the Federal list of critical minerals, and strengthening critical mineral stockpiling. Executive Order 14051 delegates authority to the Under Secretary of Defense for Acquisition and Sustainment of strategic and critical materials. On March 31, 2022, the President signed a determination permitting the use of Defense Production Act (“DPA”) Title III authorities to strengthen the U.S. industrial base for large-capacity batteries. The U.S. depends on unreliable foreign sources for many of the strategic and critical materials necessary for a clean energy transition, and the DPA Title III authorities enables the Department of Defense to undertake actions, including but not limited to feasibility studies and modernization projects for mature mining, beneficiation, and value-added processing projects to increase productivity, environmental sustainability, and workforce safety. The Defense Logistics Agency (“DLA”) is a combat support agency within the United States Department of Defense, and boron is classified as a mineral of interest by the DLA. In addition to boron, we plan to focus on lithium, which is a critical mineral, as part of our mineral resource and continue to progress workstreams to establish lithium as a co-product of future production within our Project. We believe that we have an opportunity to benefit from government initiatives to secure domestic supply chains and can be a key contributor in progressing applications within clean energy, food security, and national defense. In February, the Company’s Project was designated as Critical Infrastructure by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency, thereby supporting the Company’s goal of having an important role in providing critical and strategic materials to the challenged global supply chain. Market Update As a result of the COVID-19 pandemic and the Ukraine and Russia conflict, there has been increased stress on an already challenged global supply chain for boron and lithium. We believe that this supply tightness could persist as only a limited number of boron projects are currently known globally and demand continues to increase, primarily as a result of increased demand from the electric transportation, clean energy, food and domestic security industries. This current imbalance is manifesting itself with increased pricing across a variety of boron derivatives, including boric acid prices at approximately $730 to $1,360 per ton, depending on volume, according to third-party market research as of April 2022. We believe that the boron market has historically and largely followed a similar pricing structure as lithium, whereby customers have executed long-standing volume-based supply contracts. If these supply-demand trends continue, we believe future boron contracts could reflect favorable pricing terms based on factors such as supply constraints, value in use, and inflation. SSBF Update During the quarter, we have made progress on planning and procurement of long lead item equipment for our proposed Small-Scale Boron Facility (“SSBF”), with major equipment either already on-site or scheduled for delivery. Detailed engineering, including our hazard analysis, instrument designs, piping isometrics, and structural and foundation design, was substantially completed during the quarter and the progress of detailed engineering provided us the opportunity to engage in a competitive bidding process for the SSBF construction contract. In April 2022, we awarded the construction contract to a contractor and broke ground on the SSBF. Assuming no unexpected delays in construction or supply chain issues, we target completing construction of the SSBF in the calendar fourth quarter of 2022 at an engineered estimated production capacity of approximately 2,000 tons per year of boric acid. This facility is engineered to process a pregnant leach solution (“PLS”) containing boron and lithium extracted from colemanite. The extraction of the PLS is expected to occur through our injection-recovery wells, and we have completed one of our four wells during the quarter that will supply the SSBF. Three additional injection-recovery wells were completed post quarter-end. During the quarter, we had no lost time injuries for any of our Company sites, and we will continue to prioritize the safety and well-being of personnel. Management expects that the successful construction and operation of the SSBF will provide PLS and process intelligence that will help us to more effectively detail engineer our proposed large-scale complex. Project Update Over the past nine months, the Company has worked with our external engineering partners on process design for our proposed large-scale complex. Our SK-1300 initial assessment report effective October 15, 2021 added further definition to our large boron resource and established the existence of a lithium mineral resource that we believe could provide us with potential lithium carbonate production. Due to the current favorable market backdrop and growing importance of critical materials, the Company intends to focus primarily on further defining its boron and lithium resources, and to work towards developing a large-scale boron and lithium complex for the extraction of boric acid and lithium carbonate. A focus on boron and lithium extraction and related end markets is aligned with our mission to become a global leader in enabling industries addressing decarbonization, and the Company’s focus on high value in use materials. The SSBF is expected to serve as a foundation for future design, engineering, and cost optimization for our large-scale complex. We believe that the successful completion of the SSBF is an important path to obtaining critical information that will help enable us to optimize the efficiency, output and economic profile of our large-scale complex. As such, the Company expects to incorporate value engineering and cost structure optimization into the continued technical and economic analysis of the proposed large-scale complex, and to provide project updates, rather than completing a bankable feasibility study in 2022. The Company has begun to progress plans for its proposed processing plant, including defining infrastructure, material balance and process flow diagrams, co-generation, integration of a sulfuric acid plant, and development of a priced equipment list for process equipment needed for full-scale operations. Notwithstanding the proposed scope changes to the Project and large-scale complex focused on boron and lithium, management continues to believe that assuming successful construction and operation of the SSBF, and obtaining the requisite funding for construction, we will be able to achieve initial commercial production in 2025. The Company is currently targeting a boric acid production capacity of approximately 250,000 tons per year once the large-scale complex commences initial operations. In addition, based on currently expected engineering and process design, once in full production the Project could potentially produce up to 500,000 tons per year of boric acid. The Company also intends to sell boron advanced materials from the above estimated capacity figures. However, further analysis is required with respect to the potential for boron advanced materials, with the successful completion and operation of the SSBF expected to provide key operational input for this analysis. Additionally, early estimates by management currently target a lithium carbonate production capacity of up to several thousand tons per year upon completion of our proposed large-scale complex, and we expect the successful completion and operation of the SSBF to provide further information on this point, which if successful, could allow us to become an important participant in the U.S lithium carbonate market. Given currently high lithium prices and electric vehicle growth forecasted by third-party analysts, management believes that an ability to produce a co-product of lithium carbonate could have a positive impact on our business. The proposed large-scale complex has been value engineered to regenerate a significant portion of hydrochloric acid, which management expects to increase efficiencies and reduce our emphasis on sulphate of potash to produce feedstock hydrochloric acid. While production of sulphate of potash remains in our long-term plans, the Company believes we can implement the Mannheim process to produce sulphate of potash during later phases of the Project when capacity for boric acid production exceeds 250,000 tons per year. Our short to medium term plan focuses on the production of boric acid, boron advanced materials, and lithium carbonate where management currently sees favorable market pricing and high value in use. Management believes that a focus on boron and lithium could be an important step towards creating a more durable, less seasonal business compared to a more traditional commodity-driven fertilizer focused business. The continued technical and economic analysis described above with respect to our proposed large-scale complex and overall business strategy, has been determined by management to be a currently more cost and time efficient way to proceed. This continued technical and economic analysis of the proposed large-scale complex may lead to a separate technical study, an update to our initial assessment from October 2021 or a more comprehensive study. However, we cannot assure you of the form and scope of this continued technical and economic analysis, and it is possible that we will conclude that the completion of any such further studies (including a bankable feasibility study) may not be commercially reasonable, necessary or possible at all. Please also see Item 1A. Risk Factors in this Form 10-Q. Corporate Update In early March 2022 we completed our redomicile to the U.S. and listed on the Nasdaq Stock Market LLC (“Nasdaq”) on March 15, 2022. We have established a Nasdaq compliant board and expect to align our board composition with the ongoing needs of the Company. Customer contract discussions advanced during the quarter, and we signed a non-binding letter of intent with Rose Mill Co. in May 2022 for boron advanced materials that focus on industrial and military applications. We continue to advance discussions with other customers for boron advanced materials. Our team in California and Texas continues to grow with several new hires across operations, administration, and finance, including a former executive with over 19 years of experience at Albemarle Corporation that spans across multiple disciplines including process design, purchasing, M&A, and general management. As of May 2022, the majority of our administrative and operational personnel have transitioned to the U.S. We anticipate a step-up in hiring as we work towards mechanical completion and operation of the SSBF. We currently estimate that our proposed large-scale complex could create up to approximately 400 new jobs in an economically distressed California Opportunity Zone. More recently and in light of the recent Presidential Executive Orders and U.S. government initiatives, we increased our government affairs effort by engaging a specialized management consulting firm to pursue federal, state, and local funding opportunities. Finally, we executed a research agreement with Georgetown University that aims to enhance the performance of permanent magnets through increased usage of boron. We believe the potential benefits of this agreement include creating intellectual property and commercialization pathways for the Company as it pertains to the manufacturing of boron enhanced permanent magnets. COVID-19 Impact Since March 2020, the COVID-19 pandemic has caused severe disruptions in the world economy. Several measures have been implemented in the United States, Australia, and the rest of the world in response to the increased impact from COVID-19. In accordance with these restrictions, travel was limited, our supply chain experienced disruptions, and employees had required periods of quarantine. While some of these measures have since been lifted and supply chains improve, we can offer no assurance that they will not be reimposed or that new restrictive measures will not be implemented. The full extent to which the COVID-19 pandemic and our precautionary measures may continue to impact our business will depend on future developments, which continue to be highly uncertain and cannot be predicted at this time, including, but not limited to, the duration and geographic spread of the pandemic, its severity, the actions to contain the virus or treat its impact, future spikes of COVID-19 infections resulting in additional preventative measures to contain or mitigate the spread of the virus, the effectiveness, distribution and acceptance of COVID-19 vaccines, including the vaccines’ efficacy against emerging COVID-19 variants, measures imposed by federal and state governments, including social distancing requirements, quarantine, vaccine mandates, travel restrictions and any further economic stimulus that may be provided, and how quickly and to what extent normal economic and operating conditions can resume. We believe this could have an adverse impact on our ability to obtain financing, development plans, results of operations, financial position, and cash flows during the current fiscal year. While the Company has to date not experienced any material adverse impact with respect to its employees or third-party vendors as a result of the pandemic, the effects of COVID-19 on supply chains have directly and adversely impacted the Company’s equipment procurement activities and could continue to do so. Material extended lead times for numerous items have caused delays on anticipated start-up timeframes and the related price increases due to scarcity of supply have also affected Company. These considerations are factored into our forecast but may be subject to revision depending on a change or extension of event. The Company continues to implement mitigation and risk management measures to reduce potential delays such as engaging multiple suppliers, vendor site visits, and procuring rental equipment to bridge potential gaps. Changes in existing regulations of implementation of future regulations in response to the spread of COVID-19 may further restrict our existing operations and require changes that may be difficult or costly for us to implement. To the extent the COVID-19 pandemic continues to adversely affect our business prospects, financial condition, and results of operation, it may also have the effect of exacerbating many of the other risks described in the “Risk Factors” section. The ultimate impact of the COVID-19 pandemic remains uncertain at this time. For additional information regarding these risks, see our amended Form 10 filing and “Risk Factors” for a further discussion of the potential adverse impact of COVID-19 on our business, results of operations, and financial condition. 20 Table of Contents Results of Operations Comparison of the Three and Nine Months Ended March 31, 2022 and 2021 The following table summarizes our results of operations: FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED MARCH 31 Change ENDED MARCH 31 Change 2022 2021 $ % 2022 2021 $ % COST AND EXPENSES Project expenses $ 1,972,536 $ 2,045,719 $ (73,183 ) (3.6 %) $ 9,782,791 $ 3,424,419 $ 6,358,372 185.7 % General and administrative 30,983,504 1,828,279 29,155,225 * 44,616,803 8,121,310 36,495,493 * Depreciation and amortization expense 36,063 6,081 29,982 * 76,249 15,344 60,905 * Total cost and expenses 32,992,103 3,880,079 29,112,024 * 54,475,843 11,561,073 42,914,770 * LOSS FROM OPERATIONS (32,992,103 ) (3,880,079 ) (29,112,024 ) * (54,475,843 ) (11,561,073 ) (42,914,770 ) * NON-OPERATING INCOME (EXPENSE) Other income 27,477 1,459 26,018 * 37,843 3,530 34,313 * Interest income 1,748 333 1,415 * 3,552 1,447 2,105 145.5 % Interest expense (3,275 ) (468 ) (2,807 ) * (7,958 ) (2,117 ) (5,841 ) (275.9 %) Net foreign exchange gain (loss) (3,469 ) (47,245 ) 43,776 (92.7 %) 965,180 (2,060,234 ) 3,025,414 * Total non-operating income (expense) 22,481 (45,921 ) 68,402 204.3 % 998,617 (2,057,374 ) 1,617,765 * NET LOSS (32,969,622 ) (3,926,000 ) (29,043,622 ) * (53,477,226 ) (13,618,447 ) (39,858,779 ) 292.7 % OTHER COMPREHENSIVE LOSS (INCOME) Reporting currency translation 338,592 (84,626 ) 423,218 * 1,168,480 (2,466,052 ) 3,634,532 * NET LOSS AND OTHER COMPREHENSIVE LOSS $ (33,308,214 ) $ (3,841,374 ) $ (29,466,840 ) * $ (54,645,706 ) $ (11,152,395 ) $ (43,493,311 ) * * Represents a percent change of greater than +/- 300%. Continuing Operations Project expenses Project expenses include drilling, site-prep, engineering, consumables, testing and sampling, hydrology, permits, surveys, and other expenses associated with further progressing our Fort Cady advanced boron complex. The Company incurred project expenses of $1,972,536 for the three months ended March 31, 2022, compared to $2,045,719 for the three months ended March 31, 2021. The $73,183 (3.6%) decrease was due to a reduction in drilling activity and environmental permit expenses as the Company transitions to construction to the SSBF. The Company incurred project expenses of $9,782,791 for the nine months ended March 31, 2022, compared to $3,424,419 for the nine months ended March 31, 2021. The $6,358,372 (185.7%) increase was primarily due to environmental drilling expenses and consumables specific to our water monitoring wells driven by our Underground Injection Control permit. General and administrative expenses General and administrative expenses include professional fees, costs associated with marketing, press releases, on-going SEC and public company costs, public relations, rent, salaries, sponsorships, share based compensation and other expenses. The Company incurred general and administrative expenses of $30,983,504 for the three months ended March 31, 2022, compared to $1,828,279 for the three months ended March 31, 2021. The $29,155,225 increase was primarily driven by $25,104,453 of stock-based compensation and increased salaries as our employee head count increased to 22 at the end of the current period from 8 at the end of the comparable period. The stock-based compensation was driven by $23,763,846 of shares issued as payment for consulting fees under the Company’s Advisory Agreement with Blue Horizon Advisors, LLC (“BHA”). Under the BHA Advisory Agreement, BHA provided advisory services related to assessing the Project, recruiting a U.S. based management team, and advising in connection with the U.S. listing. The Company incurred general and administrative expenses of $44,616,803 for the nine months ended March 31, 2022, compared to $8,121,310 for the nine months ended March 31, 2021. The $36,495,493 increase was primarily driven by $27,171,876 in share based compensation expense for the BHA Advisory Agreement as well as the previously mentioned increase in headcount and professional fees specific to listing on Nasdaq. 21 Table of Contents Depreciation and amortization expense The Company had $36,063 in depreciation and amortization expense for the three months ended March 31, 2022, compared to depreciation and amortization expense of $6,081 for the three months ended March 31, 2021. The $29,982 increase was primarily due to additional assets placed in service as the Company added three hybrid trucks to its fleet. The Company had $76,249 in depreciation and amortization expense for the nine months ended March 31, 2022, compared to depreciation and amortization expense of $15,344 for the nine months ended March 31, 2021. The $60,905 increase primarily included the previously mentioned hybrid trucks and one piece of heavy machinery placed in service. Non-operating (income) expense Non-operating income (expense) consists of Other income, Interest income, Interest expense, and Net foreign exchange gain (loss). The Company had a total non-operating income of $22,481 for the three months ended March 31, 2022, compared to total non-operating expense of $45,921 in the three months ended March 31, 2021. The change from net non-operating expense in the period ended March 31, 2021 to non-operating income in the period ended March 31, 2022 was primarily driven by Other income related to hydrology income derived from our water wells. Other income for the three months ended March 31, 2022 increased from $1,459 for the three months ended March 31, 2021 to $27,477 for the three months ended March 31, 2022. The $26,018 increase was driven by increased sales from our water wells. Interest income for the three months ended March 31, 2022, increased from $333 for the three months ended March 31, 2021 to $1,748 for the three months ended March 31, 2022, due to increased assets in reclamation bonds earning interest in the three months ended March 31, 2022. Interest expense for the three months ended March 31, 2022, increased from $468 for the three months ended March 31, 2021 to $3,275 for the three months ended March 31, 2022, due to increased interest expense related to asset retirement obligations. The Company generated a loss on foreign exchange of $3,469 in the three months ended March 31, 2022, compared to a loss of $47,245 for the three months ended March 31, 2021. The $43,776 (92.7%) decrease was due to fluctuations in currency. The Company had a total non-operating income of $998,617 for the nine months ended March 31, 2022, compared to total non-operating expense of $2,057,374 in the nine months ended March 31, 2021. The change from non-operating expense in the nine months ended March 31, 2021, to non-operating income for the nine months ended March 31, 2022 was primarily driven by Other income related to hydrology income derived from our water wells and Net foreign exchange gain due to currency fluctuations primarily driven between the USD and the Australian dollar in the period. Other income for the nine months ended March 31, 2022, increased from $3,530 for the three months ended March 31, 2021, to $37,843 for the nine months ended March 31, 2022. The $34,313 increase was driven by increased sales from our water wells. Interest income for the nine months ended March 31, 2022, increased from $1,447 for the nine months ended March 31, 2021 to $3,552 for the nine months ended March 31, 2022, the $2,105 (145.5%) increase was due to increased assets in reclamation bonds earning interest in the nine months ended March 31, 2022. Interest expense for the nine months ended March 31, 2022, increased from $2,117 for the nine months ended March 31, 2021, to $7,958 for the nine months ended March 31, 2022, due to increased interest expense related to asset retirement obligations. The Company generated a gain on foreign exchange of $965,180 in the nine months ended March 31, 2022, compared to a loss of $2,060,234 for the nine months ended March 31, 2021. The $3,025,414 difference was primarily due to fluctuations in currency primarily between the USD and the declining Australian dollar in the prior period. Income Tax The Company did not have any income tax expense or benefit for the three and nine months ended March 31, 2022, nor for the three and nine months ended March 31, 2021, as the Company did not generate any net income for either period. Net Losses The Company incurred net losses of $32,969,622 and $53,477,226 for the three and nine months ended March 31, 2022, compared to net losses of $3,926,000 and $13,618,447 for the three and nine months ended March 31, 2021. The $29,043,622 and $39,858,779 increase in net losses during these three and nine month periods 22 Table of Contents was primarily due to increased general and administrative expenses driven by increased employee costs as headcount increased, share based compensation for the BHA Advisory Agreement, going-public costs related to our direct listing on Nasdaq, net foreign exchange loss and increased project expenses driven by environmental water monitoring wells partially offset by increase in other income from water sales as compared to the prior corresponding period. Liquidity and Capital Resources Overview As of March 31, 2022, we had cash and cash equivalents of $41,140,290 and working capital of $38,149,487 compared to $40,811,269 and $39,284,165 as of June 30, 2021, respectively. As of March 31, 2022, our cash balance held in the U.S. totaled $41,118,395, or 99.9%, and the remaining of our cash balances were held in Australia. Our cash balances in Australia can be repatriated to the U.S. with inconsequential tax consequences. Our predominant source of cash has been generated through equity financing from issuances of our common stock. Since inception, we have not generated revenues, and as such, have relied on equity financing to fund our operating and investing activities. Outlook We expect our current cash balances to fund our planned cash expenditures in 2022 primarily related to: (i) working capital requirements; (ii) construction in progress, capital expenditures, and operation of the SSBF; and (iii) further progression of our downstream strategy. Our 2022 plan does not include additional cash from equity or debt financing and cash from generating revenue. We believe our current cash balances are sufficient to fund our cash requirements for at least the next 12 months. In the event costs were to exceed our 2022 plan, we will reduce or eliminate current and/or planned discretionary spending. If further reductions are required, we will reduce certain non-discretionary expenditures. Historically, we have been successful raising cash through equity financing; 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 would 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. Item 1A. Risk Factors” and elsewhere in our amended Form 10. Liquidity and Capital Resources for the Nine Months Ended March 31, 2022, compared to the Nine Months Ended March 31, 2021 Nine Months Ended March 31, 2022 2021 Summary of Cash Flows: Net cash used by operating activities $ (23,389,986 ) $ (6,107,237 ) Net cash used by investing activities $ (4,609,538 ) $ (9,985,955 ) Net cash provided by financing activities $ 28,531,845 $ 34,197,918 Net increase (decrease) in cash and cash equivalents $ 329,021 $ 18,510,544 Beginning cash and cash equivalents $ 40,811,269 $ 26,639,953 Ending cash and cash equivalents $ 41,140,290 $ 45,150,497 Operating Activities Operating activities used $23,389,986 and $6,107,237 during the nine months ended March 31, 2022 and 2021, respectively, resulting in an increase in cash used in operating activities of $17,282,749. The increase in cash used in operating activities was primarily due to changes in working capital totaling $542,656, partially offset by a decrease in net loss adjusted for noncash items of $16,568,061, in the nine months ended March 31, 2022 compared to the nine months ended March 31, 2021. Investing Activities Investing activities used $4,609,538 and $9,985,955 during the nine months ended March 31, 2022 and 2021, respectively, resulting in a decrease in cash used in investing activities of $5,376,417. The decrease in cash used in investing activities was mainly due to a decrease in construction in progress for the SSBF totaling $5,440,959, reclamation bonds totaling $776,650, and mineral rights and properties for the Elementis lease totaling $26,306, partially offset by increases in properties, plant and equipment of $867,498 as we purchased additional equipment including trucks and heavy equipment, in the nine months ended March 31, 2022 compared to the nine months ended March 31, 2021. Financing Activities Financing activities provided $28,531,845 and $34,197,918 during the nine months ended March 31, 2022 and 2021, respectively, resulting in a decrease in financing activities of $5,666,073. The decrease in cash from financing activities was mainly due to a decrease in proceeds from issuance of common stock totaling $3,800,697, cash exercises of stock options totaling $2,539,065, and share offering costs totaling $776,022, partially offset by an increase in payments on note payable of $102,333, in the nine months ended March 31, 2022 compared to the nine months ended March 31, 2021. 23 Table of Contents Contractual Commitments and Contingencies Purchase Obligations The Company had purchase order commitments of $18,888,000 for the construction works in progress, drilling, 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. The initial expiration date of the lease agreement was 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 $112,914, respectively. Salt Wells Earn-in Agreement The Company has funding commitments 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Our market risks have not changed significantly from those disclosed in our amended Form 10. 24 Table of Contents