NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.DESCRIPTION OF COMPANY
Nature of Business
Piedmont Lithium Inc. (“Piedmont Lithium,” “we,” “our,” “us,” or “Company”) is a development stage company centered on developing a multi-asset, integrated lithium business that enables the transition to a net zero carbon world and the creation of a clean energy economy in North America. Through this endeavor, we are focused on developing and manufacturing lithium products for the fast-growing electric vehicle industry. Our wholly-owned Carolina Lithium Project is in the development stage and located in the renowned Carolina Tin-Spodumene Belt in North Carolina. We are geographically diversified with equity investments in strategic partnerships that own lithium resource assets in Canada and Ghana. Collectively, these resource assets and the location of these assets strategically position us to be a large, low-cost, sustainable producer of lithium products and by-products, including quartz, feldspar and mica, serving the North American electric vehicle and battery supply chains. The geology, geography and proximity of our resources, planned production operations, which includes a second lithium hydroxide conversion plant to be located in the United States (“U.S.”), and customer base, should allow us to deliver a valuable continuous supply of high-quality, sustainably produced lithium hydroxide from spodumene concentrate. Our diversified operations should enable us to play a pivotal role in supporting the move toward decarbonization and the electrification of transportation and energy storage.
Change in Fiscal Year End
Effective January 1, 2022, we changed our fiscal year end from June 30 to December 31. The six-month period from July 1, 2021 to December 31, 2021 served as a transition period. Our fiscal year for 2022 commenced on January 1, 2022 and will end on December 31, 2022. See our Transition Report on Form 10-KT (“Transition Report”) filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2022.
Basis of Presentation
The accompanying unaudited consolidated financial statements and related notes have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”) and in conformity with the rules and regulations of the SEC applicable to interim financial information. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Unless otherwise indicated, all references to “$” are to U.S. dollars, and all references to “AUD” are to Australian dollars. Our reporting currency is U.S. dollars. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. Therefore, these unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-KT for the six-month transition period ended December 31, 2021. These unaudited consolidated financial statements reflect all adjustments and reclassifications that, in the opinion of management, are considered necessary for a fair statement of the results of operations, financial position and cash flows for the periods presented. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the year ending December 31, 2022, for any other interim period or for any other future fiscal year.
Certain prior period amounts have been reclassified to conform with the current period presentation.
Piedmont Lithium Inc. acquired all of the issued and outstanding ordinary shares of Piedmont Lithium Limited (“Piedmont Australia”), our Australian predecessor and currently a wholly-owned subsidiary, pursuant to a Scheme of Arrangement under Australian law, which was approved by Piedmont Australia’s shareholders on February 26, 2021 and by the Supreme Court of Western Australia on May 5, 2021 (collectively referred to as “Redomiciliation”). As part of the Redomiciliation, we changed our place of domicile from Australia to the state of Delaware in the United States, effective May 17, 2021.
Piedmont Australia’s ordinary shares were listed on the Australian Securities Exchange (“ASX”), and Piedmont Australia’s American Depositary Shares (“ADSs”), each representing 100 of Piedmont Australia’s ordinary shares, were traded on the Nasdaq Capital Market (“Nasdaq”). Following the approval of the Redomiciliation, we moved our primary listing from the ASX to Nasdaq and retained an ASX listing via Chess Depositary Interests (“CDIs”), each representing 1/100th of a share of common stock of Piedmont Lithium Inc.
All issued and outstanding shares of our common stock and per share amounts have been retroactively adjusted in these consolidated financial statements to reflect the 100:1 ratio and share consolidation. Shares of our common stock issued in connection with the Redomiciliation trade on Nasdaq under the symbol “PLL.”
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 and development activities, need for additional capital or financing to fund operating losses, competition from substitute products and services from larger companies, protection of proprietary technology, litigation, and dependence on key individuals.
We have accumulated deficits of $101.8 million, and $92.7 million as of March 31, 2022 and December 31, 2021, respectively. We have incurred net losses and utilized cash in operations since inception, and we expect to incur future additional losses. We have cash available on hand and believe this cash will be sufficient to fund our 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 has the ability and commitment to make corresponding changes to our 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, funding capital projects, development-stage technical studies, permitting activities associated with our projects, funding our commitments in Quebec and Ghana, maintaining and acquiring exploration properties and undertaking ongoing exploration activities. 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 obtain certain permits and approvals, develop our planned portfolio of projects, 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, long-lived assets, fair value of stock-based compensation awards, income tax uncertainties, valuation of deferred tax assets, contingent assets and liabilities, legal claims, asset impairments and environmental remediation. Actual results could differ due to the uncertainty inherent in the nature of these estimates.
We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Significant Accounting Policies
Exploration and Mine Development Costs
We incur costs in resource exploration, evaluation and development during the different phases of our resource development projects. Exploration costs incurred before the declaration of proven and probable reserves, which primarily include exploration, drilling, engineering, metallurgical test-work, and compensation for employees associated with exploration activities, are expensed as incurred. We have also expensed as incurred engineering costs attributable to the evaluation of land for our future lithium hydroxide conversion plants and spodumene concentrator, development project management costs, feasibility studies and other project expenses that do not qualify for capitalization. After proven and probable reserves are declared, exploration and mine development costs necessary to bring the property to commercial capacity or increase the capacity or useful life are capitalized.
Mine Development
Mine development assets include engineering and metallurgical test-work, drilling and other related costs to delineate an ore body, and the removal of overburden to initially expose an ore body at open pit surface mines. Costs incurred before mineral resources are classified as proven and probable reserves are expensed and classified as “Exploration and mine development costs” in our statements of operations. Capitalization of mine development project costs that meet the definition of an asset begins once mineral resources are
classified as proven and probable reserves. Drilling and related costs are capitalized for an ore body where proven and probable reserves exist and the activities are directed at obtaining additional information on the ore body or converting mineralized material to proven and probable reserves. All other drilling and related costs are expensed as incurred. The cost of removing overburden and waste materials to access the ore body at an open pit mine prior to the production phase are referred to as pre-stripping costs. Pre-stripping costs are capitalized during the development of an open pit mine. The removal, production, and sale of de minimis salable materials may occur during the development phase of an open pit mine and are assigned incremental mining costs related to the removal of that material. Mine development assets are depleted using the units-of-production method based on estimated recoverable metric tons in proven and probable reserves. To the extent that these costs benefit an entire ore body, they are depleted over the estimated life of the ore body. As of March 31, 2022, we had no projects in the production phase and we did not record depletion expense for any of our mine development assets.
For a further discussion of our significant accounting policies, see “Note 2—Summary of Significant Accounting Policies” within Part II, Item 8 of our Transition Report for the six-month period ended December 31, 2021.
Recently Issued and Adopted Accounting Pronouncements
We have considered the applicability and impact of all recently issued accounting pronouncements and have determined that they were either not applicable or were not expected to have a material impact on our consolidated financial statements.
2.PROPERTY, PLANT AND MINE DEVELOPMENT
Property, plant and mine development, net, is presented in the following table:
| | | | | | | | | | | |
| March 31,
2022 | | December 31,
2021 |
| Mining interests | $ | 44,482,570 | | | $ | 39,303,043 | |
| Mine development | 1,301,099 | | | — | |
| Land | 688,829 | | | 688,829 | |
| Facilities and equipment | 113,252 | | | 107,248 | |
| Construction in process | 1,595,695 | | | — | |
| Property, plant, and mine development | 48,181,445 | | | 40,099,120 | |
| Accumulated depreciation | (48,828) | | | (43,766) | |
| Property, plant, and mine development, net | $ | 48,132,617 | | | $ | 40,055,354 | |
Depletion of mine development and mining interests does not commence until the assets are placed in service. As of March 31, 2022, we have not recorded depletion expense for any of our mine development or mining interests assets.
Depreciation expense was $5,062 and $1,376 for the three months ended March 31, 2022 and 2021, respectively, and was recorded to depreciation expense in “General and administrative expenses” in our consolidated statements of operations.
3.EQUITY INVESTMENTS IN UNCONSOLIDATED AFFILIATES
We apply the equity method to investments when we have the ability to exercise significant influence over the operational decision-making authority and financial policies of the investee. We account for our existing investments in Atlantic Lithium Limited (“Atlantic Lithium”), Sayona Mining Limited (“Sayona”), and Sayona Quebec Inc. (“Sayona Quebec”), a subsidiary of Sayona, as equity method investments. Our share of the income or loss from Atlantic Lithium, Sayona and Sayona Quebec is recorded on a one-quarter lag.
Sayona
We own an equity interest of approximately 16.4% in Sayona, an Australian company publicly listed on the ASX, forming a strategic partnership to explore, evaluate, mine, develop, and ultimately produce spodumene concentrate in Quebec, Canada.
Sayona Quebec
We own an equity interest of 25% in Sayona Quebec for the purpose of furthering our investment and strategic partnership in Quebec, Canada with Sayona. The remaining 75% equity interest is held by Sayona. Sayona Quebec holds a 100% interest in the existing
lithium mining operations of North American Lithium.
We have a long-term supply agreement with Sayona Quebec, under which Sayona Quebec will supply Piedmont Lithium the greater of 113,000 metric tons per year or 50% of spodumene concentrate production on a life-of-mine basis.
Atlantic Lithium Limited
We own an equity interest of 9.9% in Atlantic Lithium, an Australian company publicly listed on the Alternative Investment Market of the London Stock Exchange, forming a strategic partnership to explore, evaluate, mine, develop, and ultimately produce spodumene concentrate in Ghana. We have the right to acquire a 50% equity interest in Atlantic Lithium’s Ghanaian-based lithium portfolio companies (collectively, “Atlantic Lithium Ghana”), which are wholly-owned subsidiaries of Atlantic Lithium, through future staged investments.
We have a long-term supply agreement whereby Atlantic Lithium will sell 50% of spodumene concentrate produced in Ghana to Piedmont Lithium, subject to us exercising our ability to acquire an equity interest of 50% in Atlantic Lithium’s lithium-based portfolio in Ghana through expected future staged investments. See Note 5—Other Assets.
The following table summarizes the carrying amounts, including changes therein, of our equity method investments:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 | | |
| Sayona | | Sayona Quebec | | Atlantic Lithium | | Total | | |
| Balance at December 31, 2021 | $ | 18,256,488 | | | $ | 25,215,851 | | | $ | 15,400,371 | | | $ | 58,872,710 | | | |
| Additional investments | 46,304 | | | 1,999,903 | | | — | | | 2,046,207 | | | |
| Loss from equity method investments | (1,421,471) | | | (1,066,637) | | | (901,395) | | | (3,389,503) | | | |
| Share of income from equity method investments included in other comprehensive income (loss) | 64,515 | | | 44,760 | | | 84,369 | | | 193,644 | | | |
| Balance at March 31, 2022 | $ | 16,945,836 | | | $ | 26,193,877 | | | $ | 14,583,345 | | | $ | 57,723,058 | | | |
| Fair value of equity investments where market values from publicly traded entities are readily available | $ | 221,488,733 | | | Not publicly traded | | $ | 38,678,400 | | | | | |
During the three months ended March 31, 2021, we made an investment in Sayona of $9.3 million, including transaction costs. We had no income or loss from Sayona recorded for the three months ended March 31, 2021.
The following tables present summarized financial information for our significant equity investments compiled from information provided to us by the investee and presented in accordance with U.S. GAAP.
Summarized financial information for the three months ended and as of March 31, 2022:
| | | | | | | | | | | | | | | | | |
| Sayona | | Sayona Quebec | | Atlantic Lithium |
| Summarized statement of operations information: | | | | | |
| Revenue | $ | — | | | $ | — | | | $ | — | |
| Net loss from operations | (8,588,384) | | | (4,266,667) | | | (9,095,808) | |
| Other comprehensive income (loss), net of tax | 390,967 | | | 179,041 | | | 851,351 | |
| Comprehensive loss | (8,197,417) | | | (4,087,626) | | | (8,244,457) | |
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4.FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
We follow FASB ASC Topic 820, “Fair Value Measurement and Disclosure,” which establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of
three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:
Level 1:Quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2:Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived from observable market data by correlation or other means.
Level 3:Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement.
Measurement of Fair Value
Our financial instruments consist primarily of cash and cash equivalents, investments in equity securities, trade and other payables, and long-term debt as follows:
•Long-term debt—As of March 31, 2022 and December 31, 2021, we had $1.4 million and $1.7 million, respectively, of principal debt outstanding associated with seller financed loans. The carrying value of our long-term debt approximates its estimated fair value based on recently negotiated comparable loans having stated interest rates of 10.0%, consistent with the stated interest rates for all of our seller financed loans.
•Investments in equity securities—As of March 31, 2022 and December 31, 2021, we had $0.5 million and $0.5 million, respectively, of investments in equity securities which are recorded at fair value based on Level 3 inputs. See Note 5—Other Assets.
•Other financial instruments—The carrying amounts of cash and cash equivalents and trade and other payables approximate fair value due to their short-term nature.
Level 3 activity was not material for all periods presented.
5.OTHER ASSETS
Other current assets consisted of the following: | | | | | | | | | | | |
| March 31,
2022 | | December 31,
2021 |
| Investments in equity securities | $ | 534,281 | | | $ | 513,511 | |
| Prepaid assets and other receivables | 1,083,276 | | | 2,001,091 | |
| Total other current assets | $ | 1,617,557 | | | $ | 2,514,602 | |
As of March 31, 2022, our investments in equity securities consisted of common shares in Ricca Resources Limited (“Ricca”), a private company, which we acquired as part of a spin-out of Ricca from Atlantic Lithium, focused on gold exploration in Africa. The increase in fair value of our investment in equity securities during the three months ended March 31, 2022 was due to currency revaluation of our common stock held in Ricca and is recorded in “Gain from foreign currency exchange” in our consolidated statements of operations.
Other non-current assets consisted of the following: | | | | | | | | | | | |
| March 31,
2022 | | December 31,
2021 |
| Advances on the Ewoyaa Project | $ | 7,942,656 | | | $ | 4,310,173 | |
| Non-current prepaid assets | 188,482 | | | 190,030 | |
| | | |
| Total other assets | $ | 8,131,138 | | | $ | 4,500,203 | |
The Ewoyaa Project is part of the strategic partnership between Piedmont Lithium and Atlantic Lithium that includes Atlantic Lithium Ghana. Under our partnership, we entered into a project agreement to acquire a 50% equity interest in Atlantic Lithium Ghana as part
of two phases of future staged investments by Piedmont Lithium in the Ewoyaa Project over an approximate period of three to four years.
We are currently in phase one, which allows us to acquire a 22.5% equity interest in Atlantic Lithium Ghana by funding approximately $17.0 million for exploration and definitive feasibility study expenses. Our future equity interest ownership related to phase one is contingent upon completing a definitive feasibility study and making an election to proceed with phase two. Phase two allows us to acquire a 27.5% equity interest in Atlantic Lithium Ghana upon completion of funding approximately $70.0 million for capital costs associated with the construction of the Ewoyaa Project. Any cost underruns or overruns beyond the initial commitment for each phase will be shared equally between Piedmont Lithium and Atlantic Lithium. Upon completion of phase one and phase two, we will have a total equity interest of 50.0% in Atlantic Lithium Ghana. Phase one funding costs are included in other non-current assets as an advance on our expected future investments into the Ewoyaa Project.
Our maximum exposure to a loss as a result of our involvement in the Ewoyaa Project is limited to the total funding paid by Piedmont Lithium to Atlantic Lithium. As of March 31, 2022, we did not own an equity interest in Atlantic Lithium Ghana. We have made advanced payments totaling $3.6 million during the three months ended March 31, 2022 and additional advance payments totaling $1.7 million beginning April 1, 2022 through the date of this filing.
6.EQUITY
We are authorized to issue up to 100,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share. We have no outstanding shares of preferred stock.
In March 2022, we issued 2,012,500 shares under our $500 million automatic shelf registration with an issue price of $65.00 per share to raise gross proceeds of $130.8 million. Share issuance costs associated with the U.S. public offering totaled $8.8 million and were accounted for as a reduction in the proceeds from share issuances in the consolidated balance sheets.
In March 2021, we issued 1,750,000 shares with an issue price of $70.00 per share to raise gross proceeds of $122.5 million. Share issuance costs associated with the U.S. public offering totaled $12.8 million and were accounted for as a reduction in the proceeds from share issuances in the consolidated balance sheets.
7.STOCK-BASED COMPENSATION
Stock Incentive Plans
In March 2021, our Board adopted, in connection with the Redomiciliation, the Piedmont Lithium Inc. Stock Incentive Plan (“Incentive Plan”). The Incentive Plan authorized the grant of stock options, stock appreciation rights, restricted stock units and restricted stock, any of which may be performance-based. Our Compensation Committee determines the exercise price for stock options and the base price of stock appreciation rights, which may not be less than the fair market value of our common stock on the date of grant. Generally, stock options or stock appreciation rights vest after three years of service and expire at the end of ten years. Performance rights awards (“PRAs”) vest upon achievement of certain pre-established performance targets that are based on specified performance criteria over a performance period. As of March 31, 2022, 2,362,161 shares of common stock were available for issuance under our Incentive Plan.
We include the expense related to stock-based compensation in the same financial statement line item as cash compensation paid to the same employee. Additionally, and if applicable, we capitalize personnel expenses attributable to the development of our mine and construction of our plants, including stock-based compensation expenses. We recognize share-based award forfeitures as they occur.
Stock-based compensation related to all stock-based incentive plans is presented in the following table:
| | | | | | | | | | | |
| Three Months Ended
March 31, |
| 2022 | | 2021 |
| Components of stock-based compensation: | | | |
| Stock-based compensation | $ | 764,855 | | | $ | 406,488 | |
| Stock-based compensation forfeitures | (850,763) | | | — | |
Stock-based compensation, net of forfeitures | $ | (85,908) | | | $ | 406,488 | |
| | | |
| Presentation of stock-based compensation in the consolidated financial statements: | | | |
| Exploration and mine development costs | $ | (217,939) | | | $ | 131,147 | |
| General and administrative expenses | 90,173 | | | 275,341 | |
Stock-based compensation expense, net of forfeitures(1) | (127,766) | | | 406,488 | |
Capitalized stock-based compensation(2) | 41,858 | | | — | |
Stock-based compensation, net of forfeitures | $ | (85,908) | | | $ | 406,488 | |
__________________________
(1)For the three months ended March 31, 2022 and 2021, we did not reflect a tax benefit associated with stock-based compensation expense in the consolidated statements of operations because we had a full tax valuation allowance during these periods. As such, the table above does not reflect the tax impacts of stock-based compensation expense.
(2)These costs relate to direct labor costs related to our Carolina Lithium Project and are included in “Property, plant and mine development, net” in our consolidated balance sheets.
Stock Option Awards
Stock options may be granted to employees, officers, non-employee directors and other service providers. Stock options granted are equal to the market value of the underlying common stock on the date of grant. We use the Black-Scholes valuation model to measure stock-based compensation expense associated with stock options as of each respective grant date. As of March 31, 2022, we had remaining unvested stock-based compensation expense of $6.8 million to be recognized through December 2024.
Stock option award activity is presented in the following table:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| Shares | | Weighted-
Average
Exercise Price
(per share) | | Shares | | Weighted-
Average
Exercise Price
(per share) |
| Outstanding at beginning of period | 272,504 | | | $ | 24.34 | | | 443,694 | | | $ | 14.14 | |
| Options granted | 135,957 | | | 55.00 | | | 50,000 | | | 30.94 | |
| Options exercised or surrendered | (15,000) | | | 30.94 | | | (18,906) | | | 12.38 | |
| Options forfeited | (19,458) | | | 38.74 | | | — | | | — | |
| | | | | | | |
| Outstanding at end of period | 374,003 | | | 34.47 | | | 474,788 | | | 15.98 | |
Assumptions used to estimate the fair value of stock options granted are presented in the following table:
| | | | | | | | | | | |
| Three Months Ended
March 31, |
| 2022 | | 2021 |
| Expected life of options (in years) | 5.4 - 6.4 | | 3.0 |
| Risk-free interest rate | 1.1% - 1.8% | | 0.1% |
| Assumed volatility | 50.0% | | 90.0% |
| Expected dividend rate | — | | — |
Restricted Stock Unit Awards
Restricted stock units (“RSUs”) are granted to employees and non-employee directors based on the market price of our common stock on the grant date and recognized as stock-based compensation expense over the vesting period, subject to the passage of time and continued service during the vesting period. In some instances, awards may vest concurrently with or following an employee’s termination.
RSUs were first granted to employees and non-employee directors in May 2021. RSU activity is presented in the following table:
| | | | | | | | | | | | | | |
| Three Months Ended
March 31, 2022 | | | |
| Shares | | Weighted-Average
Grant-Date Fair Value
(per share) | | | |
| Unvested at beginning of period | 51,277 | | | $ | 62.69 | | | | |
| RSUs granted | 17,437 | | | 56.34 | | | | |
| RSUs exercised | (14,285) | | | 58.14 | | | | |
| RSUs forfeited | (17,209) | | | 67.23 | | | | |
| Unvested at end of period | 37,220 | | | 59.36 | | | | |
Performance Rights Awards
The fair value of PRAs is based on the market price of our common stock on the grant date. PRAs are subject to performance conditions, which must be satisfied in order for PRAs to vest. Each performance right automatically converts into one share of common stock upon vesting of the performance right. Upon vesting of PRAs, common stock is immediately issued for no consideration. The performance right will expire if a performance condition of a performance right is not achieved by the expiry date.
PRA activity is presented in the following table:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| Shares | | Weighted-Average
Grant-Date Fair Value
(per share) | | Shares | | Weighted-Average
Grant-Date Fair Value
(per share) |
| Unvested at beginning of period | 30,000 | | | $ | 5.42 | | | 65,000 | | | $ | 5.50 | |
| PRAs granted | 29,120 | | | 52.60 | | | — | | | — | |
| | | | | | | |
| | | | | | | |
| Unvested at end of period | 59,120 | | | 28.66 | | | 65,000 | | | 5.50 | |
As of March 31, 2022, there were 59,120 unvested PRAs, which expire over the next three years. The unvested PRAs are subject to certain milestones related to construction, feasibility studies and supply agreements.
8.LOSS PER SHARE
Basic and diluted net loss per share are reflected in the following table: | | | | | | | | | | | |
| Three Months Ended
March 31, |
| 2022 | | 2021 |
| Net loss | $ | (9,154,632) | | | $ | (6,576,038) | |
| | | |
| | | |
| | | |
Weighted-average number of common shares used in calculating basic and dilutive earnings per share(1) | 16,088,013 | | | 14,090,959 | |
| | | |
| Basic and diluted net loss per weighted-average share | $ | (0.57) | | | $ | (0.47) | |
__________________________
(1)For the three months ended March 31, 2021, the weighted-average number of common shares used in calculating basic and dilutive earnings per share was adjusted to reflect the impact of the exchange ratio caused by the Redomiciliation.
Potentially dilutive shares were not included in the calculation of diluted net loss per share because their effect would have been anti-dilutive are presented in the following table:
| | | | | | | | | | | |
| Three Months Ended
March 31, |
| 2022 | | 2021 |
| Stock options | $ | 374,003 | | | $ | 474,788 | |
| RSUs | 37,220 | | | — | |
| PRAs | 59,120 | | | 65,000 | |
| Total potentially dilutive shares | $ | 470,343 | | | $ | 539,788 | |
9.INCOME TAXES
For the three months ended March 31, 2022, we recorded an income tax provision of $0 on a loss before taxes of $9.2 million, resulting in an effective tax rate of 0%. For the three months ended March 31, 2021, we recorded an income tax provision of $0 on a loss before taxes of $6.6 million, resulting in an effective tax rate of 0%. The effective tax rate and the federal statutory rate were 0% for the three months ended March 31, 2022 and the three months ended March 31, 2021 and was primarily related to the full valuation allowance on net deferred tax assets.
As of March 31, 2022, we maintained a full valuation allowance against our net deferred tax assets. We continually review the adequacy of the valuation allowance and intend to continue maintaining a full valuation allowance on our net deferred tax assets until there is sufficient evidence to support reversal of all or a portion of the allowance. Should our assessment change in a future period, we may release all or a portion of the valuation allowance at such time, which would result in a deferred tax benefit in the period of adjustment.
10.SEGMENT REPORTING
We report our segment information in the same way management internally organizes the business in assessing performance and making decisions regarding allocation of resources in accordance with ASC Topic 280, “Segment Reporting.” We have a single reportable operating segment which operates as a single business platform. In reaching this conclusion, management considered the definition of the Chief Operating Decision Maker (“CODM”), how the business is defined by the CODM, the nature of the information provided to the CODM, how the CODM uses such information to make operating decisions, and how resources and performance are accessed. The results of operations provided to and analyzed by the CODM are at the consolidated level, and accordingly, key resource decisions and assessment of performance are performed at the consolidated level. We have a single, common management team and our cash flows are reported and reviewed at the consolidated level only with no distinct cash flows at an individual business level.
11.COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are involved from time to time in various claims, proceedings, and litigation. We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated.
In July 2021, a lawsuit was filed against us in the U.S. District Court for the Eastern District of New York on behalf of a class of putative plaintiffs claiming violations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The complaint alleged, among other things, that we made false and/or misleading statements and/or failed to make disclosure relating to proper and necessary permits. In February 2022, the Court appointed a lead plaintiff in this action, and the lead plaintiff filed an amended complaint in April 2022. We intend to move to dismiss the amended complaint on various grounds, with our moving papers due in or around June 2022, and we intend to vigorously defend against these claims should the amended complaint survive. Although there can be no assurance as to the outcome, we do not believe these claims have merit. The potential monetary relief, if any, is not probable and cannot be estimated at this time, accordingly, we have not recorded a liability for this matter.
On October 14, 2021, Vincent Varbaro, a purported holder of the Company’s American Depositary Shares and equity securities, filed a shareholder derivative suit in the U.S. District Court for the Eastern District of New York, purporting to bring claims on behalf of the Company against certain of the Company’s officers and directors. The complaint alleges that the defendants breached their fiduciary duties in connection with the Company’s statements regarding the timing and status of government permits for the Company’s Carolina Lithium Project in North Carolina, at various times between March 16, 2018 and July 19, 2021. No litigation demand was made to the Company in connection with this action. In December 2021, the parties agreed to a stipulation to stay the proceeding pending resolution of the motion to dismiss in the securities law matters described above, and the Court ordered the case stayed. We intend to vigorously defend against these claims. Although there can be no assurance as to the outcome, we do not believe these claims have merit. The potential monetary relief, if any, is not probable and cannot be estimated at this time, accordingly, we have not recorded a liability for this matter.
12.RELATED PARTIES
Ledger Holdings Pty Ltd, a company associated with a former non-executive director of the Company was paid $25,000 during the three months ended March 31, 2021 for services related to business development activities. These fees and associated payments were included in the former director’s remuneration. Effective June 1, 2021, the director's term ended.