5E Advanced Materials Inc

8. Convertible Notes Derivatives

The Original Convertible Note Derivative and June 2024 Convertible Note Derivative, each which related to the Convertible Notes described above in Note 7—Debt, were valued upon initial recognition and at each reporting period at fair value using a with-and-without methodology utilizing a binomial lattice model (a model which utilizes Level 3 fair value inputs). Refer to Convertible Notes – Fair Value in Note 7—Debt for a table of certain inputs utilized in the valuation of the Convertible Notes and related convertible notes derivatives on certain dates. Changes in the fair value were recognized in Derivative gain (loss) in the statement of operations, but had no related impact on the Company’s cash position or cash flows. The provision that resulted in separate accounting for the Original Convertible Note Derivative began on August 26, 2022 in connection with the issuance of the Original Convertible Notes and expired November 26, 2022, and accordingly, the fair value of the Original Convertible Note Derivative at expiration of the provision was transferred to additional paid-in capital. The provision that results in separate accounting for the June 2024 Convertible Note Derivative began June 11, 2024 in connection with the issuance of the June 2024 Notes and will expire on December 31, 2024, and accordingly, the fair value of the June 2024 Convertible Note Derivative, if any, will be transferred to additional paid-in capital at that time.

The components of changes to the fair value of each of the convertible note derivatives for the periods presented are summarized below.