5E Advanced Materials Inc

Previous wording

The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in conjunction with, and is qualified in its entirety by, the unaudited Condensed Consolidated Financial Statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report on Form 10-K filed on August 30, 2023, as amended (the “Annual Report”). This discussion and analysis contains forward looking statements that involve risks, uncertainties and assumptions and other important factors, which include, but are not limited to, the risks described in our Annual Report filed with the SEC, any of which could cause the Company’s actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth elsewhere in this Form 10-Q and under “Item 1A. Risk Factors” and elsewhere in our Annual Report, as amended, and our Quarterly Report on Form 10-Q for the period ended September 30, 2023. 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.

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) summarizes the significant factors affecting the operating results, financial condition, liquidity and capital resources, and cash flows of our Company for the three months ended September 30, 2024 and 2023. This MD&A should be read in conjunction with, and is qualified in its entirety by, the unaudited condensed consolidated financial statements, the accompanying notes thereto and other financial information included in this Quarterly Report on Form 10-Q, and the consolidated financial statements and accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K, filed with the SEC on September 9, 2024 (the “Annual Report”). Except for historical information, this discussion and analysis contains forward looking statements that involve risks, uncertainties and assumptions and other important factors, which include, but are not limited to, the risks described elsewhere in this Form 10-Q under “Item 1A. Risk Factors” and elsewhere in our Annual Report filed with the SEC, any of which could cause the Company’s actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made. Additionally, you should refer to the “Cautionary Note Regarding Forward-Looking Statements.” References within this MD&A to the “Company,” “we,” “our,” and “us,” refer to 5E Advanced Materials, Inc. and its subsidiaries.

Previous wording

5E Advanced Materials, Inc. is focused on becoming a vertically integrated global leader and supplier of specialty boron and advanced boron derivative materials whose mission is to enable decarbonization, increase food security, and ensure domestic supply of critical materials. We hold 100% of the rights through ownership in the 5E Boron Americas (Fort Cady) Complex (the “Project”) located in southern California, through our wholly owned subsidiary 5E Boron Americas, LLC. Our Project is underpinned by a mineral resource that includes boron and lithium, with the boron being contained in a conventional boron mineral known as colemanite. In 2022, our facility was designated as Critical Infrastructure by the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency. Our vision is to safely process boric acid and lithium carbonate through sustainable best practices to enable decarbonization, food security and domestic supply surety.

Current wording

5E Advanced Materials, Inc. is focused on becoming a vertically integrated global leader and supplier of specialty boron and advanced boron derivative materials whose mission is to enable decarbonization, increase food security, and ensure domestic supply of critical materials. We hold 100% of the rights through ownership in the 5E Boron Americas (Fort Cady) Complex (the “Project”) through our wholly owned subsidiary 5E Boron Americas LLC. Our Project is underpinned by a mineral resource that includes boron and lithium, with the boron being contained in a conventional boron mineral known as colemanite. In 2022, our facility was designated as Critical Infrastructure by the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency. Our vision is to safely process boric acid and lithium carbonate through sustainable best practices to enable decarbonization, food security and domestic supply surety.

Previous wording

Although the equity offerings associated with our Out-of-Court Restructuring improved our cash position by providing $15.8 million of net proceeds after issuance costs and fees to the Company, and we continue to operate under a business plan that includes reductions in certain spending, we will need additional financing in order to continue as a going concern and maintain a cash balance in excess of the $7.5 million minimum cash covenant of the Amended and Restated Note Purchase Agreement (as discussed in Note 7 and Note 13 to the unaudited condensed consolidated financial statements). An event of default under the Amended and Restated Note Purchase Agreement would cause the Convertible Notes balance outstanding to become immediately due and payable, for which we would not have the resources to repay without additional financing. The receipt of potential funding, beyond those that are part of the Out-of-Court Restructuring, cannot be considered probable at this time because these plans are not entirely within management's control as of the date of the condensed consolidated financial statements. Therefore, there exists substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that these financial statements are issued. Even if additional financing is successfully consummated, available liquidity may still not be sufficient to eliminate the aforementioned substantial doubt regarding our ability to continue as a going concern. Refer to the "Going Concern" discussion within Note 1 of the unaudited condensed consolidated financial statements and“Liquidity and Capital Resources”below for more information.

Current wording

Although the August 2024 Equity Offering and issuance of September 2024 Notes improved our cash position by providing an aggregate of approximately $8.6 million of net proceeds after issuance costs and fees to the Company (inclusive of amounts payable and accrued as of September 30, 2024), and we continue to operate under a business plan that includes reductions in certain spending, we will need additional financing in order to continue as a going concern and maintain a cash balance in excess of the $7.5 million minimum cash covenant contained in the September 2024 Amended and Restated Note Purchase Agreement (as discussed in Note 7–Debt to the unaudited condensed consolidated financial statements). An event of default under the September 2024 Amended and Restated Note Purchase Agreement would cause all of our Convertible Notes to become immediately due and payable, for which we would not have the resources to repay without additional financing. The receipt of potential funding cannot be considered probable at this time because these plans are not entirely within management's control as of the date of the unaudited condensed consolidated financial statements. Therefore, there exists substantial doubt regarding our ability to continue as a going concern. Even if additional financing is successfully consummated, available liquidity may still not be sufficient to eliminate the aforementioned substantial doubt regarding our ability to continue as a going concern. Refer to the "Going Concern" discussion within Note 1–Basis of Financial Statement Presentation of the unaudited condensed consolidated financial statements and “Liquidity and Capital Resources” below for more information.

Previous wording

Comparison of the three and nine months ended March 31, 2024 and 2023

Current wording

Comparison of the three months ended September 30, 2024 and 2023

Previous wording

Project expenses include drilling, plug and abandonment, site-preparation, engineering, consumables, testing and sampling, hydrology, permits, surveys, and other expenses associated with further progressing our Project. For the three months ended March 31, 2024, project expenses decreased $113 thousand, or 9%, versus the comparable period in fiscal year 2023. Specifically, the decrease was primarily due to the combined impact of reductions in expenses incurred relating to our water monitoring wells, obtaining technical reports, insurance, and testing and analysis ($0.3 million). These decreases were partially offset by increased site-related costs ($0.2 million) which resulted from final activities preparing our operators and the Small-Scale-Facility for final commissioning.

Current wording

Project expenses include drilling, plug and abandonment, site-preparation, engineering, consumables, testing and sampling, hydrology, permits, surveys, and other expenses associated with further progressing our Project. Prior to April 1, 2024, Project expenses also included non-labor related costs incurred to prepare for the operation of the SSF, as these costs were incurred prior to the SSF being placed into operation. For the three months ended September 30, 2024, project expenses decreased $29 thousand, or 2%, versus the comparable period in the prior year. The decrease was primarily the result of (i) a decrease in Environmental Protection Agency compliance costs ($0.4 million), (ii) a decrease in testing and analysis costs ($0.2 million ), (iii) a decrease in insurance costs ($0.1 million), and (iv) a reduction in expenses incurred relating to our plug and abandonment program to prepare the wellfield for injection operations ($0.1 million). These decreases were offset by increases in (i) materials and drilling services for the installation of additional observation wells ($0.5 million), and (ii) an increase in site related costs ($0.2 million).

Previous wording

General and administrative expenses include professional fees, costs associated with marketing, on-going SEC and public company costs, public relations, rent, salaries, sponsorships, share-based compensation and other expenses. Currently, all salaries and benefits for the entire organization are reported in general and administrative expenses. For the three months ended March 31, 2024, general and administrative expenses decreased $3.0 million, or 50%, versus the comparable period in fiscal year 2023. The decrease was primarily due to (i) a reduction in professional and legal fees of $1.9 million which includes a $1.8 million reclassification of legal and accounting fees incurred during the second fiscal quarter of 2024 to either debt or equity issuance costs in the third fiscal quarter due to the successful implementation of the Out-of-Court restructuring in the current quarter, (ii) a decrease in costs related to marketing activities ($0.5 million), and (iii) a decrease in employee severance and relocation costs ($0.9 million). These decreases were partially offset by increased employee compensation and benefits costs ($0.3 million).

Current wording

General and administrative expenses include professional fees, costs associated with marketing, on-going SEC and public company costs, public relations, rent, salaries, share-based compensation and other expenses. Prior to April 1, 2024, all salaries and benefits for the entire organization were reported in general and administrative expenses. After April 1, 2024, the date which we began commercial operation of the SSF, salaries and benefits for employees that are directly responsible for the operation of the SSF are reported in Small-scale facility operating costs. For the three months ended September 30, 2024, general and administrative expenses decreased $1.2 million, or 21%, versus the comparable period in the prior fiscal year. The decrease was primarily due to (i) $1.2 million of salaries and benefits for personnel responsible for the operation of the SSF, which are now reported as Small-scale facility operating costs, (ii) a reduction in professional and legal fees ($0.4 million), (iii) a reduction on incentive compensation related costs ($0.4 million), and (iv) a reduction in marketing related costs ($0.1 million). These decreases were partially offset by an increase in share-based compensation costs, which was primarily the result of the acceleration of certain awards in accordance with an employee’s severance agreement ($0.8 million).

Previous wording

Research and development expense includes costs incurred under research agreements with Georgetown University and Boston College that aim to enhance the performance of permanent magnets through increased use of boron. Both engagements were completed during the second fiscal quarter of 2024. For the three months ended March 31, 2024, research and development expenses decreased $45 thousand, or 100%, versus the comparable period in fiscal year 2023. The decrease was attributable to the completion of the engagements during the second fiscal quarter of 2024.

Current wording

Research and development expense includes costs incurred under research agreements with Georgetown University and Boston College that aim to enhance the performance of permanent magnets through increased use of boron. Both engagements were completed during the second fiscal quarter of 2024. Therefore, we incurred no research and development costs in the three months ended September 30, 2024.

Previous wording

Depreciation and amortization relates to use of our owned or leased vehicles, buildings and equipment and the amortization of our asset retirement obligations. For the three months ended March 31, 2024, depreciation and amortization expense remained consistent with the comparable period in fiscal year 2023. For the nine months ended March 31, 2024, depreciation and amortization expense increased $27 thousand or 20% versus the comparable period in fiscal year 2023. This increase was primarily due to additional assets placed in service during the second and third fiscal quarters of 2023.

Current wording

Depreciation and amortization relates to use of our SSF, injection and recovery wells, owned or leased vehicles, buildings and equipment and the accretion of our asset retirement obligations. For the three months ended September 30, 2024, depreciation and amortization expense increased $4.9 million versus the comparable period in the prior year. This increase was primarily due to placing the SSF and its related injection and recovery wells, facilities and equipment into service as of April 1, 2024 corresponding with the commencement of commercial operations.

Previous wording

Interest income is derived from the investment of our excess cash and cash equivalents in short-term (original maturities of three months or less) investments of highly liquid treasury bills and certificates of deposit beginning in the first fiscal quarter of 2022 and corresponding with the issuance of the Convertible Notes. For the three months ended March 31, 2024, interest income decreased $315 thousand or 81% versus the comparable period in fiscal year 2023. Similarly, for the nine months ended March 31, 2024, interest income decreased $699 thousand or 76% versus the comparable period in fiscal year 2023. Such decreases correspond to decreases in our average cash and cash equivalent balances between the periods, respectively.

Current wording

Interest income is derived from the investment of our excess cash and cash equivalents in short-term (original maturities of three months or less) investments of highly liquid treasury bills and certificates of deposit. For the three months ended September 30, 2024, interest income decreased $109 thousand, or 83%, versus the comparable period in the prior fiscal year. Such decrease correspond to decreases in our average cash and cash equivalent balances between the periods.

Previous wording

Interest expense primarily relates to interest expense incurred on the Convertible Notes issued on August 26, 2022, and as amended by the Amended and Restated Note Purchase Agreement dated January 18, 2024, and is net of amounts capitalized to construction-in-progress. Prior to the execution of the Amended and Restated Note Purchase Agreement, the Convertible Notes accrued interest at a rate of 6% when interest was paid-in-kind through the issuance of additional notes. Subsequent to the Amended and Restated Note Purchase Agreement, the Convertible Notes accrue interest at a rate of 10% when interest is paid-in-kind through the issuance of additional notes. We also recognize interest expense for the amortization of debt issuance costs and the amortization of the discount on the Convertible Notes. As part of the modification of the terms of our debt associated with the Amended and Restated Note Purchase Agreement, the modified debt was recognized at fair value on our balance sheet which eliminated the prior debt discount that was amortized to interest expense. For the three months ended March 31, 2024, interest expense decreased $1.4 million or 63% versus the comparable period in fiscal year 2023. This decrease was primarily due to (i) the elimination of the amortization of the debt discount associated with the accounting for our debt modification that was consummated January 18, 2024 which results in a shorter period of amortization expense in the current period compared to the prior period ($1.0 million reduction in interest expense), (ii) additional interest being capitalized between periods due to the combined effect of a higher interest rate associated with our modified debt and an increase in our average construction in progress balance between periods ($0.6 million reduction in interest expense), and (iii) a reduction in the amortization expense associated with lower debt issuance costs associated with our modified debt ($55 thousand reduction in interest expense). These decreases were offset to a lesser extent by the effects of (i) interest accruing at 10% under the terms of our Amended and Restated Note Purchase Agreement compared to 6% under our prior agreement, and (ii) accruing additional interest on $1.9 million and $2.1 million of interest that was paid-in-kind during August of 2023 and February of 2024, respectively (for a combined impact of a $273 thousand increase in interest expense).

Current wording

Interest expense primarily relates to interest expense incurred on the Convertible Notes and is net of amounts capitalized to construction-in-progress. Prior to the execution of an amended and restated note purchase agreement on January 18, 2024 (the “January 2024 Amended and Restated Note Purchase Agreement”), the August 2022 Notes accrued interest at a rate of 6% when interest was paid-in-kind through the issuance of additional notes. Subsequent to the January 2024 Amended and Restated Note Purchase Agreement and continuing under the September 2024 Amended and Restated Note Purchase Agreement, the August 2022 Notes accrue interest at a rate of 10% when interest is paid-in-kind through the issuance of additional notes, with such rate also applying to the June 2024 Notes and September 2024 Notes. We also recognize interest expense for the amortization of debt issuance costs and the amortization of debt discounts on the Convertible Notes. As part of the modification of the terms of our debt associated with the January 2024 Amended and Restated Note Purchase Agreement, the modified debt was recognized at fair value on our balance sheet which eliminated the prior debt discount that was amortized to interest expense.

Previous wording

For the nine months ended March 31, 2024, interest expense decreased $695 thousand or 14% versus the comparable period in fiscal year 2023. This decrease was due to (i) additional interest being capitalized between periods due to the combined effect of a higher interest rate associated with our modified debt, an increase in our average construction-in-progress balance between periods and a full year of capitalized interest in the current period versus a partial year in the comparative period ($1.8 million reduction in interest expense), and (ii) the elimination of the amortization of the debt discount associated with the accounting for our debt modification that was consummated January 18, 2024 which results in a shorter period of amortization expense in the current period compared to the prior period ($221 thousand reduction in interest expense). These decreases in interest expense were offset to a lesser extent by the effects of (i) interest accruing at 10% under the terms of our Amended and Restated Note Purchase Agreement compared to 6% under our prior agreement, and accruing additional interest on $1.9 million and $2.1 million of interest that was paid-in-kind during August of 2023 and February of 2024, respectively (for a combined impact of $1.2 million increase in interest expense), and (ii) higher amortization expense associated with debt issuance costs due to a longer period of amortization expense in the current period compared to the prior period ($74 thousand increase in interest expense).

Current wording

For the three months ended September 30, 2024, interest expense increased $0.4 million, or 21%, versus the comparable period in the prior fiscal year. This increase was primarily due to the combined effect of interest accruing (i) at 10% under the terms of our January 2024 Amended and Restated Note Purchase Agreement compared to 6% under our prior agreement in the prior period, (ii) on a $12 million aggregate increase in the principal balance of Convertible Notes resulting from the issuance of the June 2024 Notes and September 2024 Notes, and (iii) on $2.1 million and $3.4 million of interest that was paid-in-kind during February of 2024 and August of 2024, respectively (for a combined impact of $0.9 million increase in interest expense). Interest expense also increased as a result of capitalizing less interest expense to construction-in-progress between periods as a result of the SSF being placed into service on April 1, 2024 and therefore no longer eligible for interest capitalization (an impact of $0.6 million increase in interest expense). These increases were partially offset by the effects of a reduction in the amount of debt discount and debt issuance costs amortization primarily resulting from the write-off of the remaining unamortized debt discount and debt issuance costs (established August 26, 2022) and corresponding elimination of the amortization of such amounts in connection with the accounting for the January 2024 Amended and Restated Note Purchase Agreement ($1.1 million reduction in interest expense).

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $8.0 million and working capital of $2.7 million compared to $20.3 million and $13.3 million as of June 30, 2023, respectively. Our predominant source of cash has been generated through equity financing from issuances of our common stock and equity-linked debt securities. Since inception, we have not generated revenues, and as such, have relied on equity financing and equity-linked debt instruments to fund our operating and investing activities. We maintain the majority of our cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at certain of these institutions may exceed insured limits. Market conditions can impact the viability of these institutions.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $6.9 million and working capital of $0.6 million compared to $4.9 million of cash and cash equivalents and a working capital deficit of $2.9 million as of June 30, 2024. Our predominant source of cash has been generated through equity financing from issuances of our common stock and equity-linked securities, including our Convertible Notes. Since inception, we have not generated revenues, and as such, have relied on equity financing and equity-linked instruments to fund our operating and investing activities. We maintain the majority of our cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at certain of these institutions may exceed insured limits. Market conditions can impact the viability of these institutions.

Previous wording

On March 28, 2024, we entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Canaccord Genuity LLC and D.A. Davidson & Co. (each, an “Agent” and together, the “Agents”) providing for the offer and sale of up to $15,000,000 of shares of our Common Stock from time to time by us through the Agents, acting as our sales agents, or directly to one or more of the Agents, acting as principal (the “ATM Offering”).

Current wording

On March 28, 2024, we entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Canaccord Genuity LLC and D.A. Davidson & Co. (the “Agents”) pursuant to which we may offer and sell up to $15.0 million of shares of our Common Stock from time to time through the Agents, acting as our sales agents, or directly to one or more of the Agents, acting as principal (the “ATM Program”).

Previous wording

None of the Agents are required to sell any specific number or dollar amount of shares of our Common Stock, but each has agreed, subject to the terms and conditions of the Equity Distribution Agreement, to use its commercially reasonable efforts, consistent with its normal trading and sales practices, to sell the shares of the Company’s Common Stock on the terms agreed upon by such Agent and the Company, provided that the number of common stock sold pursuant to the Equity Distribution Agreement will not (at any time) exceed the Company's available placement capacity under ASX Listing Rule 7.1. Any common stock to be sold in excess of the Company's available placement capacity under ASX Listing Rule 7.1 will be subject to, and conditional on, shareholder approval.

Current wording

Neither of the Agents is required to sell any specific number or dollar amount of shares of our Common Stock, but each has agreed, subject to the terms and conditions of the Equity Distribution Agreement, to use its commercially reasonable efforts, consistent with its normal trading and sales practices, to sell the shares of Common Stock on the terms agreed upon by such Agent and the Company.

Previous wording

We did not sell any common stock nor receive any proceeds under the Equity Distribution Agreement during the three months ended March 31, 2024.

Current wording

We did not sell any shares of common stock nor receive any proceeds under the Equity Distribution Agreement during the three months ended September 30, 2024. As a result of the August 2024 Equity Offering, we are precluded from utilizing the ATM program until after August 27, 2025.

Previous wording

Our material short-term cash requirements include general and administrative expenses including recurring payroll and benefit obligations for our employees, construction related costs necessary to complete the Small-Scale Facility, operating costs for the Small-Scale Facility, project related costs, payments under certain lease agreements and working capital needs. Our long-term material cash requirements from currently known obligations include repayment of outstanding borrowings and interest payment obligations under our Convertible Notes (which may be avoided to the extent the Notes are converted to shares of our common stock and/or interest is paid-in-kind) and future obligations to reclaim, remediate, or otherwise restore properties to a condition that existed prior to our operations. Refer to the “Construction in Progress,” “Asset Retirement Obligations,” “Accounts Payable and Accrued Liabilities,” “Long-term Debt” and “Commitments and Contingencies” footnotes in the unaudited condensed consolidated financial statements for more information on certain of these expenditures and obligations.

Current wording

Our material short-term cash requirements include general and administrative expenses including recurring payroll and benefit obligations for our employees, costs necessary to further engineering of our proposed commercial-scale complex, operating costs for the SSF, project related costs, payments under certain lease agreements and working capital needs. Our long-term material cash requirements from currently known obligations include repayment of outstanding borrowings and interest payment obligations under our Convertible Notes (which may be avoided to the extent the Convertible Notes are converted to shares of our Common Stock and/or interest is paid-in-kind) and future obligations to reclaim, remediate, or otherwise restore properties to a condition that existed prior to our operations. Refer to the “Construction in Progress,” “Asset Retirement Obligations,” “Accounts Payable and Accrued Liabilities,” “Long-term Debt” and “Commitments and Contingencies” footnotes in the unaudited condensed consolidated financial statements for more information on certain of these expenditures and obligations.

Previous wording

Over the next 12 months, we have plans to achieve the following milestones that will require additional capital:

Current wording

Over the next 12 months we have the following plans that will require additional capital:

Previous wording

Progress FEL-2, FEL-3, and detailed engineering as well as procure long lead item equipment, specifically our crystallization units;

Current wording

Progress FEL-2, FEL-3, and detail engineering;

Previous wording

Optimize well-field design in an effort to reduce future mining capital and operational expenditures through various drilling techniques such as directional, horizontal and radial drilling;

Current wording

Optimize well-field design in an effort to reduce future mining capital and operational expenditure through various drilling techniques such as directional, horizontal and radial drilling;

Previous wording

Although the Out-of-Court Restructuring transaction discussed above improved our cash position, and we continue to operate under a business plan that includes reductions in certain spending, we will need additional financing in order to continue as a going concern and maintain a cash balance in excess of the $7.5 million minimum cash covenant in the Amended and Restated Note Purchase Agreement. Absent additional financing as outlined above, we may no longer be able to meet our ongoing obligations, continue operations or achieve the milestones outlined above. If we are not able to secure additional financing cash flows and our cash balance falls below $7.5 million after December 31, 2024, an event of default under the Amended and Restated Note Purchase Agreement could occur. An event of default would cause our Convertible Notes balance outstanding to become immediately due and payable, for which we would not have the resources to repay without additional financing.

Current wording

Although the August 2024 Equity Offering and issuance of the September 2024 Notes, each discussed above, improved our cash position, and we continue to operate under a business plan that includes reductions in certain spending, we will need additional financing in order to continue as a going concern and maintain a cash balance in excess of the $7.5 million minimum cash covenant contained in the Amended and Restated Note Purchase Agreement. Absent additional financing as outlined above, we may no longer be able to meet our ongoing obligations, continue operations or achieve the milestones outlined above. If we are not able to secure additional financing cash flows and our cash balance falls below $7.5 million after December 31, 2024, an event of default under the Amended and Restated Note Purchase Agreement would occur if not cured after 30 days. An event of default would cause our Convertible Notes balance outstanding to become immediately due and payable, for which we would not have the resources to repay without additional financing.

Previous wording

The receipt of potential funding, including those that may be executed pursuant to the Equity Distribution Agreement discussed below, cannot be considered probable at this time because these plans are not entirely within management's control as of the date of the condensed consolidated financial statements. Therefore, there exists substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that these financial statements are issued. Even if additional financing is successfully consummated, available liquidity may still not be sufficient to eliminate the aforementioned substantial doubt regarding our ability to continue as a going concern. Refer to the “Going Concern” discussion within Note 1 of the unaudited condensed consolidated financial statements for more information.

Current wording

The receipt of potential funding cannot be considered probable at this time because these plans are not entirely within management’s control as of the date of the unaudited condensed consolidated financial statements. Therefore, there exists substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that these financial statements are issued. Even if additional financing is successfully consummated, available liquidity may still not be sufficient to eliminate the aforementioned substantial doubt regarding our ability to continue as a going concern. Refer to the “Going Concern” discussion within Note 1 of the unaudited condensed consolidated financial statements for more information.

Previous wording

A complete discussion of our critical accounting policies is included in our Annual Report on Form 10-K, as amended, for the fiscal year ended June 30, 2023. There have been no significant changes in our critical accounting policies during the nine months ended March 31, 2024.

Current wording

A complete discussion of our critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. There have been no significant changes in our critical accounting policies during the three months ended September 30, 2024.

Previous wording

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to improve income tax disclosures primarily through enhanced disclosure of income tax rate reconciliation items, and disaggregation of income (loss) from continuing operations, income tax expense (benefit) and income taxes paid, net disclosures by federal, state and foreign jurisdictions, among others. ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, and early adoption is permitted. We are evaluating the impact that ASC 2023-09 will have on the consolidated financial statements and our plan for adoption, including the adoption date and transition method.

Current wording

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to improve income tax disclosures primarily through enhanced disclosure of income tax rate reconciliation items, and disaggregation of income (loss) from continuing operations, income tax expense (benefit) and income taxes paid, net disclosures by federal, state and foreign jurisdictions, among others. ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, and early adoption is permitted. We are evaluating the impact that ASU 2023-09 will have on our consolidated financial statements and our plan for adoption, including the adoption date and transition method.