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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2022
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number
001-41279
5E ADVANCED MATERIALS, INC.
(Exact name of Registrant as specified in its Charter)
|
|
|
Delaware
|
87-3426517
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
|
|
19500 State Highway 249,
Suite 125
Houston,
TX
|
77070
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s telephone number, including area code:
(346)
439-9656
Securities registered pursuant to Section 12(b) of the
Act:
|
|
|
|
Title of each class
|
Trading
Symbol(s)
|
Name of each exchange
on which registered
|
|
Common Stock, $0.01 par value
|
FEAM
|
The Nasdaq Global Select Market
|
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
|
|
|
|
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
|
|
|
|
|
|
Non-accelerated filer
|
☒
|
Smaller reporting company
|
☒
|
|
|
|
|
|
|
Emerging growth company
|
☒
|
|
|
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
☒
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
☒
As of November 10, 2022,
there were
43,889,172
shares of the Registrant’s common stock outstanding.
Table of Contents
2
Part I - Financial Information
Item 1. Financial Statements.
5E ADVANCED MATERIALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
|
2022
|
|
|
2022
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
74,205
|
|
|
$
|
31,057
|
|
|
Prepaid expenses and other current assets
|
|
|
1,533
|
|
|
|
1,506
|
|
|
Total current assets
|
|
|
75,738
|
|
|
|
32,563
|
|
|
Mineral rights and properties, net
|
|
|
8,362
|
|
|
|
8,364
|
|
|
Construction in progress
|
|
|
33,294
|
|
|
|
25,625
|
|
|
Properties, plant and equipment, net
|
|
|
2,847
|
|
|
|
2,871
|
|
|
Reclamation bond deposit
|
|
|
1,086
|
|
|
|
1,086
|
|
|
Right of use asset
|
|
|
327
|
|
|
|
371
|
|
|
Other assets
|
|
|
6
|
|
|
|
6
|
|
|
Total assets
|
|
$
|
121,660
|
|
|
$
|
70,886
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
9,394
|
|
|
$
|
7,212
|
|
|
Lease liabilities, current
|
|
|
161
|
|
|
|
164
|
|
|
Total current liabilities
|
|
|
9,555
|
|
|
|
7,376
|
|
|
Long-term debt, net
|
|
|
31,632
|
|
|
|
148
|
|
|
Convertible note derivative liability
|
|
|
10,987
|
|
|
|
—
|
|
|
Lease liabilities
|
|
|
170
|
|
|
|
211
|
|
|
Accrued reclamation liabilities
|
|
|
492
|
|
|
|
489
|
|
|
Total liabilities
|
|
|
52,836
|
|
|
|
8,224
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note
12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
Common stock, $0.01 par
value;
180,000,000 shares
authorized;
43,355,315 and
43,305,315 shares
outstanding September 30 and June 30, respectively
|
|
|
434
|
|
|
|
433
|
|
|
Additional paid-in capital
|
|
|
171,148
|
|
|
|
169,593
|
|
|
Retained earnings (accumulated deficit)
|
|
|
(102,758
|
)
|
|
|
(107,364
|
)
|
|
Total stockholders’ equity
|
|
|
68,824
|
|
|
|
62,662
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
121,660
|
|
|
$
|
70,886
|
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
3
5E ADVANCED MATERIALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS)
(Unaudited)
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Project expenses
|
|
$
|
3,595
|
|
|
$
|
4,786
|
|
|
General and administrative
|
|
|
4,886
|
|
|
|
5,841
|
|
|
Research and development
|
|
|
39
|
|
|
|
—
|
|
|
Depreciation and amortization expense
|
|
|
37
|
|
|
|
20
|
|
|
Total operating expenses
|
|
|
8,557
|
|
|
|
10,647
|
|
|
Income (loss) from operations
|
|
|
(8,557
|
)
|
|
|
(10,647
|
)
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense)
|
|
|
|
|
|
|
|
Other income
|
|
|
14
|
|
|
|
10
|
|
|
Interest income
|
|
|
61
|
|
|
|
1
|
|
|
Derivative gain (loss)
|
|
|
13,909
|
|
|
|
—
|
|
|
Interest expense
|
|
|
(821
|
)
|
|
|
(2
|
)
|
|
Net foreign exchange gain (loss)
|
|
|
—
|
|
|
|
1,169
|
|
|
Total non-operating income (expense)
|
|
|
13,163
|
|
|
|
1,178
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
4,606
|
|
|
|
(9,469
|
)
|
|
|
|
|
|
|
|
|
|
Income tax provision (benefit)
|
|
|
—
|
|
|
|
—
|
|
|
Net income (loss)
|
|
$
|
4,606
|
|
|
$
|
(9,469
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.11
|
|
|
$
|
(0.24
|
)
|
|
Diluted
|
|
$
|
0.11
|
|
|
$
|
(0.24
|
)
|
|
Weighted average common shares outstanding — basic
|
|
|
43,350
|
|
|
|
38,712
|
|
|
Weighted average common shares outstanding — diluted
|
|
|
48,519
|
|
|
|
38,712
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,606
|
|
|
$
|
(9,469
|
)
|
|
Reporting currency translation gain (loss)
|
|
|
—
|
|
|
|
(1,606
|
)
|
|
Comprehensive income (loss)
|
|
$
|
4,606
|
|
|
$
|
(11,075
|
)
|
The accompanying notes are an integral part of these unaudited
financial statements.
4
5E ADVANCED MATERIALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,606
|
|
|
$
|
(9,469
|
)
|
|
Adjustments to reconcile net income (loss) to net cash used by
operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
37
|
|
|
|
20
|
|
|
Share based compensation
|
|
|
1,300
|
|
|
|
1,777
|
|
|
Common stock issued for consulting fees
|
|
|
—
|
|
|
|
1,539
|
|
|
Unrealized (gain) loss on convertible note derivative
instrument
|
|
|
(13,909
|
)
|
|
|
—
|
|
|
Accretion of reclamation liability
|
|
|
3
|
|
|
|
1
|
|
|
Amortization of debt issuance costs
|
|
|
550
|
|
|
|
—
|
|
|
Amortization of right of use asset
|
|
|
44
|
|
|
|
—
|
|
|
Net foreign exchange (gain) loss
|
|
|
—
|
|
|
|
(1,169
|
)
|
|
Change in:
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(27
|
)
|
|
|
(42
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
(416
|
)
|
|
|
2,527
|
|
|
Net cash used in operating activities
|
|
|
(7,812
|
)
|
|
|
(4,816
|
)
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
Construction in progress
|
|
|
(5,115
|
)
|
|
|
(953
|
)
|
|
Mineral rights and properties
|
|
|
—
|
|
|
|
(86
|
)
|
|
Properties, plant and equipment
|
|
|
(11
|
)
|
|
|
(898
|
)
|
|
Net cash used in investing activities
|
|
|
(5,126
|
)
|
|
|
(1,937
|
)
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible note
|
|
|
55,840
|
|
|
|
—
|
|
|
Payments on note payable
|
|
|
(10
|
)
|
|
|
(1
|
)
|
|
Proceeds from exercise of stock options
|
|
|
256
|
|
|
|
1,086
|
|
|
Net cash provided by financing activities
|
|
|
56,086
|
|
|
|
1,085
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
43,148
|
|
|
|
(5,668
|
)
|
|
Effect of exchange rate fluctuation on cash
|
|
|
—
|
|
|
|
(438
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
31,057
|
|
|
|
40,811
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
74,205
|
|
|
$
|
34,705
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure Of Cash Flow Information:
|
|
|
|
|
|
|
|
Interest paid in cash
|
|
$
|
2
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Noncash Investing And Financing Activities:
|
|
|
|
|
|
|
|
Accounts payable change related to construction in
progress
|
|
$
|
2,554
|
|
|
$
|
252
|
|
|
Recognition of operating lease liability and right of use
asset
|
|
|
—
|
|
|
|
17
|
|
The accompanying notes are an integral part of these unaudited
financial statements.
5
5E ADVANCED MATERIALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Accumulated
|
|
|
|
|
|
Total
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income (loss)
|
|
|
Deficit
|
|
|
Equity
|
|
|
Balance at June 30, 2021
|
|
|
38,391
|
|
|
$
|
384
|
|
|
$
|
101,179
|
|
|
|
1417
|
|
|
$
|
(40,651
|
)
|
|
$
|
62,329
|
|
|
Shares issued for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
303
|
|
|
|
3
|
|
|
|
1,083
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,086
|
|
|
Consulting fees
|
|
|
150
|
|
|
|
1
|
|
|
|
1,538
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,539
|
|
|
Share based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,777
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,777
|
|
|
Net income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,469
|
)
|
|
|
(9,469
|
)
|
|
Other comprehensive income (loss), net of tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,606
|
)
|
|
|
|
|
|
(1,606
|
)
|
|
Balance at September 30, 2021
|
|
|
38,843
|
|
|
|
388
|
|
|
|
105,577
|
|
|
|
(189
|
)
|
|
|
(50,120
|
)
|
|
|
55,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2022
|
|
|
43,305
|
|
|
$
|
433
|
|
|
$
|
169,593
|
|
|
$
|
—
|
|
|
$
|
(107,364
|
)
|
|
$
|
62,662
|
|
|
Shares issued for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
50
|
|
|
|
1
|
|
|
|
255
|
|
|
|
—
|
|
|
|
—
|
|
|
|
256
|
|
|
Share based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,300
|
|
|
Net income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,606
|
|
|
|
4,606
|
|
|
Balance at September 30, 2022
|
|
|
43,355
|
|
|
|
434
|
|
|
|
171,148
|
|
|
$
|
—
|
|
|
|
(102,758
|
)
|
|
|
68,824
|
|
The accompanying notes are an integral part of these unaudited
financial statements.
6
5E ADVANCED MATERIALS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
1. 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 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 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 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
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.
7
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 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):
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. 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. 2020-06.
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. 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
adoption
of this standard during the quarter ended
September 30, 2022
did not
have an effect on our consolidated financial statements.
2. Mineral Rights and Properties, Net
Mineral Rights and Properties, net consist of the
following.
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
|
2022
|
|
|
2022
|
|
|
|
|
(in thousands)
|
|
|
Mineral properties
|
|
$
|
6,733
|
|
|
$
|
6,733
|
|
|
Hydrology wells
|
|
|
547
|
|
|
|
547
|
|
|
Mineral interest – Elementis lease
|
|
|
908
|
|
|
|
908
|
|
|
Asset retirement cost, net of accumulated amortization
of $8 and
$6 at
September 30 and June 30, 2022, respectively(1)
|
|
|
174
|
|
|
|
176
|
|
|
Mineral rights and properties, net
|
|
$
|
8,362
|
|
|
$
|
8,364
|
|
(1)
Asset retirement costs represent the carrying value of capitalized
costs associated with asset retirement obligations discussed in
Note 5.
8
3. Construction in Progress
Construction in Progress consisted of the following.
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
|
2022
|
|
|
2022
|
|
|
|
|
(in thousands)
|
|
|
Engineering services
|
|
$
|
8,919
|
|
|
$
|
8,656
|
|
|
Equipment
|
|
|
19,010
|
|
|
|
13,548
|
|
|
Construction
|
|
|
1,849
|
|
|
|
—
|
|
|
Injection and recovery wells
|
|
|
3,516
|
|
|
|
3,421
|
|
|
Total construction in progress
|
|
$
|
33,294
|
|
|
$
|
25,625
|
|
4. Properties, Plant and Equipment, Net
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)
|
|
|
Land
|
|
N/A
|
|
-
|
|
$
|
1,533
|
|
|
$
|
1,533
|
|
|
Buildings
|
|
Straight-line
|
|
7-15
|
|
|
873
|
|
|
|
873
|
|
|
Vehicles
|
|
Straight-line
|
|
5
|
|
|
276
|
|
|
|
276
|
|
|
Plant and equipment
|
|
Straight-line
|
|
5-10
|
|
|
351
|
|
|
|
340
|
|
|
|
|
|
|
|
|
|
3,033
|
|
|
|
3,022
|
|
|
Less accumulated depreciation
|
|
|
|
|
|
|
(186
|
)
|
|
|
(151
|
)
|
|
Properties, plant and equipment, net
|
|
|
|
|
|
$
|
2,847
|
|
|
$
|
2,871
|
|
For the three months ended September 30, 2022 and 2021, we
recognized depreciation expense of approximately
$34.9
thousand
and $20.3
thousand, respectively.
.
5. Reclamation Liabilities
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
|
|
$
|
191
|
|
|
$
|
79
|
|
|
Obligation incurred during the period
|
|
|
—
|
|
|
|
106
|
|
|
Revisions to previous estimates
|
|
|
—
|
|
|
|
(3
|
)
|
|
Accretion
|
|
|
3
|
|
|
|
9
|
|
|
Asset retirement obligation — end of period
|
|
|
194
|
|
|
|
191
|
|
|
Accrued reclamation costs
|
|
|
298
|
|
|
|
298
|
|
|
Total accrued reclamation liabilities
|
|
$
|
492
|
|
|
$
|
489
|
|
Accrued reclamation costs of $298
thousand
relate to surface reclamation obligations at Fort Cady.
9
6.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following
at the end of each period presented.
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
|
2022
|
|
|
2022
|
|
|
|
|
(in thousands)
|
|
|
Accounts payable - trade
|
|
$
|
4,713
|
|
|
$
|
3,459
|
|
|
Accrued expenses
|
|
|
3,927
|
|
|
|
2,935
|
|
|
Accrued payroll
|
|
|
446
|
|
|
|
780
|
|
|
Accrued interest
|
|
|
269
|
|
|
|
—
|
|
|
Current portion of debt
|
|
|
39
|
|
|
|
38
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
9,394
|
|
|
$
|
7,212
|
|
7.
Long-term Debt
Long-term debt consisted of the following at the end of each period
presented.
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
|
2022
|
|
|
2022
|
|
|
|
|
(in thousands)
|
|
|
Convertible note
|
|
$
|
60,000
|
|
|
$
|
—
|
|
|
Vehicle notes payable
|
|
|
177
|
|
|
|
186
|
|
|
Total debt
|
|
|
60,177
|
|
|
|
186
|
|
|
Current portion of debt
|
|
|
39
|
|
|
|
38
|
|
|
Long-term debt
|
|
|
60,138
|
|
|
|
148
|
|
|
Unamortized convertible note discount - embedded conversion
feature
|
|
|
(24,426
|
)
|
|
|
|
|
Unamortized debt issuance costs - convertible note
|
|
|
(4,080
|
)
|
|
|
—
|
|
|
Long-term debt, net
|
|
$
|
31,632
|
|
|
$
|
148
|
|
Interest expense consisted of the following.
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
(in thousands)
|
|
|
Convertible note interest
|
|
$
|
269
|
|
|
$
|
—
|
|
|
Notes payable interest
|
|
|
—
|
|
|
|
2
|
|
|
Vehicle notes payable interest
|
|
|
2
|
|
|
|
—
|
|
|
Amortization of debt issuance costs and discount - convertible
note
|
|
|
550
|
|
|
|
—
|
|
|
Total interest expense
|
|
$
|
821
|
|
|
$
|
2
|
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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.
10
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
$24.9
million (Note 8).
Fair value information for the convertible instrument
follows.
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September 30,
2022
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August 26, 2022
(Inception)
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(in thousands)
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Fair value of convertible note (Level 2)
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$
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33,611
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$
|
35,104
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Fair value of embedded conversion feature (Level 3)
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10,987
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|
|
|
24,896
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Total fair value of convertible note instrument
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$
|
44,598
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|
|
$
|
60,000
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8.
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.
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September 30,
2022
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(in thousands)
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Convertible note derivative — beginning of period
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$
|
—
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|
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Additions
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|
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24,896
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Fair value adjustment
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(13,909
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)
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Convertible note derivative — end of period
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$
|
10,987
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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.
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September 30,
2022
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August 26, 2022
(Inception)
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Risk-free interest rate
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4.1%
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3.2%
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Volatility
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40.0%
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40.0%
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Debt rate
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18.6%
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17.3%
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9.
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.
11
10. Share Based Compensation
Share based compensation expense is included in general and
administrative expense and consisted of the following for the
periods presented.
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Three Months Ended September 30,
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2022
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|
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2021
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(in thousands)
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Share based compensation expense - service based
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Employee share option plan
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$
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961
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$
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1,528
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2022 Equity Compensation Plan - Options
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175
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—
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2022 Equity Compensation Plan - RSU and DSU's
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164
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—
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Total service based compensation
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1,300
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|
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|
1,528
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Options issued to suppliers
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—
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249
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Consulting stock awards
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—
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1,539
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Total share based compensation
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$
|
1,300
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|
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$
|
3,316
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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.
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Three Months Ended September 30,
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2022
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2021
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Exercise price
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$25.62
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$14.62 -
$18.27
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Share price
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$18.03
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$10.38
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Volatility
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79%
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85%
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Expected term in years
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5
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0.9 -
3.9
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Risk-free interest rate
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2.91%
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0.01%
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Dividend rate
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Nil
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Nil
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The following table summarizes stock option activity for each of
the periods presented.
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Three Months Ended September 30,
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2022
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|
2021
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Number of Options
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Weighted Average Exercise Price
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Number of Options
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Weighted Average Exercise Price
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|
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(In thousands, except per share data)
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Outstanding at beginning of the period
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4,874
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$
|
9.67
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5,554
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$
|
5.19
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|
Granted
|
|
|
400
|
|
|
|
25.62
|
|
|
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1,400
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15.20
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Exercised
|
|
|
(50
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)
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|
|
5.12
|
|
|
|
(303
|
)
|
|
|
3.29
|
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Expired/forfeited
|
|
|
—
|
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—
|
|
|
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(477
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)
|
|
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5.48
|
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Outstanding at end of the period
|
|
|
5,224
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|
|
|
10.94
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6,174
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7.53
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Vested at the end of the period
|
|
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3,664
|
|
|
$
|
8.02
|
|
|
|
4,835
|
|
|
$
|
7.60
|
|
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