5E Advanced Materials, Inc.
For the period ended Dec 31, 2024. Filed Feb 13, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 13, 2025
FEAM$1.91+1.1%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-13.
0000950170-24-126394
Item 1A. Risk FactorsUnregistered Sales of Equity Securities and Use of ProceedsDefaults Upon Senior SecuritiesMine Safety DisclosuresCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-13.
0000950170-25-019943
Item 1A. Risk FactorsUnregistered Sales of Equity Securities and Use of ProceedsDefaults Upon Senior SecuritiesMine Safety DisclosuresThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 23 previous paragraphs and 54 current paragraphs.
18 unchanged; 5 reworded; 31 added; 0 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (31)
Current report
We are party to a restructuring support agreement that contemplates certain restructuring and recapitalization transactions involving our outstanding convertible notes. The consummation of these transactions is subject to various closing conditions, including approval by our stockholders, and would result in substantial dilution to our existing stockholders and in a significant amount of our Common Stock being held by Ascend and Bluescape. If these transactions are not consummated, we expect to undertake a restructuring by voluntarily filing cases under chapter 11 of title of the United States Code, which, among other things, would result in the extinguishment of all of our equity interests.
Current report
As previously disclosed, on January 14, 2025, we entered into a restructuring support agreement (the “Restructuring Support Agreement”) with BEP Special Situations IV LLC (“Bluescape”), Meridian Investments Corporation (“Meridian”) and Ascend Global Investment Fund SPC, for and on behalf of Strategic SP (together with Meridian, “Ascend”) relating to certain restructuring and recapitalization transactions with respect to our capital structure (collectively the “Transaction”), including our outstanding Convertible Notes.
Current report
Out-of-Court Restructuring: Subject to the satisfaction of customary conditions, including approval by our stockholders, a recapitalization through, among other things:
Current report
pursuant to an Exchange Agreement dated January 14, 2025 among the Company, Ascend and Bluescape (the “Exchange Agreement”), the issuance of an aggregate of 312,490,076 shares of our Common Stock to Ascend and Bluescape upon exchange of all of the outstanding Convertible Notes (the “Exchange”);
Current report
pursuant to a Securities Subscription Agreement dated January 14, 2025 among the Company, Ascend and Bluescape (the “Subscription Agreement”), the issuance and sale by the Company of an aggregate of $5.0 million of Common Stock to Ascend and Bluescape at a price per share equal to the lesser of (a) $0.2920 per share (appropriately adjusted to reflect any stock split, stock dividend, stock combination, recapitalization, or the like occurring after the date of the Restructuring Support Agreement) and (b) the volume weighted average price for the Common Stock on the five consecutive trading days immediately following the date of the Exchange (the “Subscription Price”);
Current report
pursuant to the Subscription Agreement, the issuance by the Company to Ascend and Bluescape of warrants with a one-year term (the “Warrants”) to purchase an aggregate number of shares of Common Stock represented by up to $20.0 million divided by the Subscription Price, at a price per share equal to the Subscription Price; and
Current report
pursuant to a Fourth Amended and Restated Investor and Registration Rights Agreement dated January 14, 2025 among the Company, Ascend and Bluescape (the “IRRA”), the right of each of Ascend and Bluescape to designate two directors to serve on the Company’s Board following the consummation of the Transaction for so long as such party beneficially owns 25% of the Company’s Common Stock and one director to serve on the Company's Board for so long as such party beneficially owns 10% of the Company's Common Stock (clauses (i) through (iv), together, the “Out-of-Court Restructuring”); or
Current report
In-Court Restructuring: To the extent that the terms of or the conditions precedent to the Out-of-Court Restructuring cannot be timely satisfied or waived, the Company shall file voluntary pre-packaged cases (the
Current report
“Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in a United States Bankruptcy Court (the “Bankruptcy Court”) pursuant to a pre-packaged plan of reorganization (the “Pre-Packaged Chapter 11 Plan”) pursuant to which, among other things, all existing equity interests of the Company shall be extinguished, with Ascend and Bluescape each owning their respective pro rata share of 100% of the new equity interests in the Company upon the effective date of the Pre-Packaged Chapter 11 Plan (the “In-Court Restructuring”).
Current report
If the out-of-court restructuring is consummated, our stockholders will experience substantial dilution. Based on share information as of February 12, 2025, 2025 and assuming the Subscription Price is $0.2920 per share, Ascend and Bluescape would hold more than 80% of our outstanding Common Stock immediately after the Transaction, in addition to approximately 68.5 million shares they may acquire upon exercise of the Warrants. Our current stockholders would hold less than 20% of our Common Stock immediately after the Transaction. If Ascend and Bluescape were to choose to act together, they would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these parties, if they choose to act together, could control the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership control may delay, defer or prevent a change in control, entrench our management or the board of directors, or impede a merger, consolidation, takeover or other business combination involving us that other stockholders may desire.
Current report
These parties may have interests that are different than those of other stockholders. Additionally, Ascend and Bluescape will each have the right to designate two directors to serve on our Board immediately following the Transaction.
Current report
The consummation of the of-court restructuring is subject to various closing conditions, including approval by our stockholders. If the out-of-court restructuring is not consummated, then we will commence Chapter 11 Cases as contemplated by the Restructuring Support Agreement and seek approval to implement the Pre-Packaged Chapter 11 Plan. Under such plan, the equity interests of our stockholders would be extinguished in their entirety.
Current report
As long as the Convertible Notes remain outstanding, there are risks associated with the Convertible Notes that could adversely affect our business and financial condition.
Current report
We initially issued $60.0 million aggregate principal amount of our Convertible Notes in August 2022 pursuant to a note purchase agreement, which was subsequently amended and restated in January 2024 and then further amended and restated on May 28, 2024 (the “Amendment No. 2” and, as further, the “Amended and Restated Note Purchase Agreement”) in connection with the issuance and sale of the June 2024 Notes in an aggregate principal amount of $6.0 million pursuant to the Amended and Restated Note Purchase Agreement.
Current report
On September 16, 2024, we entered into Amendment No. 3 to the January 2024 Amended and Restated Note Purchase Agreement and agreed, among other things, to issue and sell new senior secured convertible notes in substantially the same form and under the same terms as the June 2024 Notes, the September 2024 Notes in an aggregate principal amount of $6.0 million to Ascend and Bluescape.
Current report
On January 14, 2025, the Company entered into Amendment No. 4 to the January 2024 Amended and Restated Note Purchase Agreement and agreed, among other things, to (i) issue and sell the new January 2025 Notes in substantially the same form and under the same terms as the September 2024 Notes, in an aggregate principal amount of $5.0 million to Ascend and Bluescape, and (ii) amend and restate the January 2024 Amended and Restated Note Purchase Agreement, which included an extension from December 31, 2024 to March 31, 2025 for date by which the Company must comply with a financial covenant for the Company to maintain a cash balance of at least $7.5 million.
Current report
The Convertible Notes bear interest at a rate of 4.50% per annum, payable semi-annually, or 10.00% per annum if we elect to pay such interest in kind through the delivery of additional Convertible Notes. The Convertible Notes are secured by substantially all of the Company’s assets and mature on August 15, 2028. The Convertible Notes are convertible into our Common Stock at a conversion rate of 650.4065 shares of Common Stock per $1,000 principal amount of Convertible Notes (the “Conversion Rate”), representing a conversion price of approximately $1.5375 per share. The June 2024 Notes are convertible into the Company’s Common Stock based upon a Conversion Rate of 692.7990 shares of Common Stock per $1,000 principal amount of June 2024 Notes, representing a conversion price of approximately $1.4434 per share. The September 2024 Notes are convertible into the Company’s Common Stock based upon a Conversion Rate of 1,066.6667 shares of Common Stock per $1,000 principal amount of September 2024 Notes, representing a conversion price of approximately $0.9375 per share. The January 2025 Notes are convertible into the Company’s Common Stock based upon a Conversion Rate of 3,424.9375 shares of Common Stock per $1,000 principal amount of January 2025 Notes, representing a conversion price of approximately $0.2920 per share. The Convertible Notes are convertible into up to an aggregate of 106,211,700 shares of our Common Stock, including accrued interest paid-in-kind through maturity, provided, however, that no shares of Common Stock will be issuable upon conversion of the January 2025 Notes that would require approval of the Company’s stockholders under the applicable listing rules of The Nasdaq Stock Market LLC (“Nasdaq”), prior to such approval being obtained.
Current report
The Amended and Restated Note Purchase Agreement provides for certain adjustments to the Conversion Rate to increase the number of shares of Common Stock issuable upon conversion (the “Additional Shares”) following certain corporate events that may occur prior to the maturity date of the Convertible Notes, including a change of control transaction, liquidation of our company or any failure of our Common Stock to be listed on Nasdaq or any other eligible exchange (a “Make-Whole Fundamental Change”). Upon the occurrence of a Make-Whole Fundamental Change, the Conversion Rate will be increased by up to 325.2033, 346.3996, 444.4445 and 1,424.5016 Additional Shares per $1,000 principal amount of August 2022 Notes, June 2024 Notes, September 2024 Notes and January 2025 Notes, respectively, based on the timing of the Make-Whole Fundamental Change and the trading price of the Common Stock at such time or the cash received by holders of the Common Stock in connection with such Make-Whole Fundamental Change, as applicable, as further described in the Amended and Restated Note Purchase Agreement (the “Make-Whole Adjustment”).
Current report
The Amended and Restated Note Purchase Agreement provides for customary events of default, such as our insolvency or failure to make timely payments of principal or interest or to comply with financial or other covenants. The Convertible Notes also contain customary affirmative and negative covenants, including limitations on incurring additional indebtedness or the creation of additional liens on our assets. The Amended and Restated Note Purchase Agreement also contains a minimum cash covenant of $7.5 million, which goes into effect March 31, 2025.
Current report
Our ability to remain in compliance with the covenants under the Convertible Notes depends on, among other things, our operating performance, competitive developments, financial market conditions, and stock exchange listing of our Common Stock, all of which are significantly affected by financial, business, economic, and other factors, many of which we are not able to control. Accordingly, our cash flow may not be sufficient to allow us to pay principal and interest on the convertible notes or meet our other obligations under the Amended and Restated Note Purchase Agreement. Our level of indebtedness under the Amended and Restated Note Purchase Agreement could have other important consequences, including the following:
Current report
we may need to use a substantial portion of our cash flow from operations to pay interest and principal on the Convertible Notes, which would reduce funds available to us for other purposes such as working capital, capital expenditures, potential acquisitions, and other general corporate purposes;
Current report
we may be unable to refinance our indebtedness under the Amended and Restated Note Purchase Agreement or to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes;
Current report
we may be unable to comply with covenants in the Convertible Notes, which could result in an event of default that, if not cured or waived after 30 days, may result in acceleration of the Convertible Notes. An event of default would have an adverse effect on our business and prospects and could force us into bankruptcy or liquidation;
Current report
our ability to pay interest and repay principal in additional notes, if so elected by us, and conversion of the Convertible Notes (at the current Conversion Rate, or any adjusted conversion rate including the Additional Shares) could result in significant dilution to our existing stockholders and cause the market price of our Common Stock to decline; and
Current report
we may be more vulnerable to an economic downturn or recession and adverse developments in our business.
Current report
Further, on November 20, 2024, we received written notice (the “Stockholders’ Equity Notice”) from Nasdaq notifying the Company that we were not in compliance with the minimum stockholders’ equity requirement set forth in Nasdaq Listing Rule 5450(b)(1)(A), which requires companies listed on the Nasdaq Global Select Market to maintain a minimum of $10,000,000 in stockholders’ equity for continued listing (the “Stockholders’ Equity Rule”). The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2024 reported stockholders’ equity of $2,094,000 as of September 30, 2024. The Stockholders’ Equity Notice had no immediate effect on the listing of our common stock. In accordance with Nasdaq Listing Rule 5810(c)(2)(A), we were provided with 45 calendar days, or until January 6, 2025, to submit a plan to regain compliance (the “Compliance Plan”), which we timely submitted to Nasdaq. On January 10, 2025, Nasdaq accepted our Compliance Plan and granted an extension until May 19, 2025 to evidence compliance with the Stockholders’ Equity Rule. We believe the successful completion of the out-of-court restructuring is critical to regaining compliance with the Stockholders’ Equity Rule. However, there can be no assurance that we will be able to regain compliance with the Stockholders’ Equity Rule though the successful completion of the out-of-court restructuring or through other means by May 19, 2025 or that we will otherwise maintain compliance with any of the other applicable listing requirements. Moreover, there is no assurance that any actions that we take will be successful in restoring our compliance with the Stockholders Equity Rule or the Bid Price Rule will prevent future non-compliance therewith. If we fail to regain compliance with the Stockholders’ Equity Rule, Nasdaq will notify us of its determination to delist our common stock.
Reworded paragraphs (5)
Previous wording
The exercise of some or all of the warrants will dilute the ownership interests of existing stockholders and increase the number of shares of common stock eligible for resale in the public market. Any sales in the public market of the shares of common stock issuable upon such exercise of the warrants, or the anticipation of such exercises and sales, could adversely affect prevailing market prices of our common stock. Additionally, the existence of the warrants may encourage short selling by market participants because the exercise of the warrants could be used to satisfy short positions, or the anticipated exercise of the warrants for shares of common stock could depress the price of our common stock.
Current wording
The exercise of some or all of the warrants will dilute the ownership interests of existing stockholders and increase the number of shares of common stock eligible for resale in the public market. Any sales in the public market of the shares of common stock issuable upon such exercise of the warrants, or the anticipation of such exercises and sales, could adversely affect the prevailing market prices of our common stock. Additionally, the existence of the warrants may encourage short selling by market participants because the exercise of the warrants could be used to satisfy short positions, or the anticipated exercise of the warrants for shares of common stock could depress the price of our common stock.
Previous wording
We are required to meet the continued listing requirements of the Nasdaq Global Select Market and if we fail to satisfy such continued listing requirements, Nasdaq may take steps to delist our securities. For example, on September 12, 2024, we received written notice from Nasdaq (the “Notice”) notifying us that, for the prior 30 consecutive business days, the bid price for our common stock had closed below the $1.00 minimum bid price requirement for continued listing on the Nasdaq Global Select Market (the “Minimum Bid Price Requirement”). The Notice had no immediate effect on the listing of our common stock. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until March 11, 2025, to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days as required under Nasdaq Listing Rule 5810(c)(3)(A) (unless the Nasdaq staff exercises its discretion to extend this ten-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H)) during the 180-day period prior to March 11, 2025).
Current wording
We are required to meet the continued listing requirements of the Nasdaq Global Select Market and if we fail to satisfy such continued listing requirements, Nasdaq may take steps to delist our securities. For example, on September 12, 2024, we received written notice from Nasdaq (the “Bid Price Notice”) notifying us that, for the prior 30 consecutive business days, the bid price for our common stock had closed below the $1.00 minimum bid price requirement for continued listing on the Nasdaq Global Select Market (the “Minimum Bid Price Requirement”). The Bid Price Notice had no immediate effect on the listing of our common stock. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until March 11, 2025, to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days as required under Nasdaq Listing Rule 5810(c)(3)(A) (unless the Nasdaq staff exercises its discretion to extend this ten-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H)) during the 180-day period prior to March 11, 2025).
Previous wording
We intend to actively monitor the closing bid price of our common stock and will consider all available options to regain compliance with the minimum bid price requirement, which may include transferring the listing to the Nasdaq Capital Market and/or seeking stockholder approval to effect a reverse stock split. However, there can be no assurance that any such reverse stock split, if approved by the stockholders and implemented, would increase the market price of our common stock in proportion to the reverse split ratio or result in a sustained increase in the market price of our common stock. In addition, it is possible that the reduced number of issued shares of common stock resulting from such a reverse stock split could adversely affect the liquidity of our common stock. There can also be no assurance that we will regain compliance with the Minimum Bid Price Requirement during the 180-day compliance period, secure a second 180-day period to regain compliance, maintain compliance with the other Nasdaq listing requirements, or be successful in appealing any delisting determination.
Current wording
We intend to actively monitor the closing bid price of our common stock and will consider all available options to regain compliance with the minimum bid price requirement, which may include transferring the listing to the Nasdaq Capital Market and/or seeking stockholder approval to effect a reverse stock split. On January 21, 2025, our stockholders approved amendments to the Company’s Amended and Restated Certificate of Incorporation to effect a Reverse Stock Split at a ratio ranging from any whole number between 1-for-10 and 1-for-25, with the exact ratio within such range to be determined by the Company’s Board in its discretion. On February 3, 2025, the Board approved a 1-for-23 Reverse Stock Split, which will become effective upon filing of the amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. As of the date of this Quarterly Report on Form 10-Q, the Reverse Stock Split had not yet become effective and the Company’s Common Stock had not yet begun to trade on a reverse split-adjusted basis. However, there can be no assurance that the Reverse Stock Split, once implemented, will increase the market price of our common stock in proportion to the reverse split ratio or result in a sustained increase in the market price of our common stock. In addition, it is possible that the reduced number of issued shares of common stock resulting from such a reverse stock split could adversely affect the liquidity of our common stock. There can also be no assurance that we will regain compliance with the Minimum Bid Price Requirement during the 180-day compliance period, secure a second 180-day period to regain compliance, maintain compliance with the other Nasdaq listing requirements, or be successful in appealing any subsequent delisting determination.
Previous wording
If our common stock is delisted from Nasdaq in the future, it is unlikely that we will be able to re-list our common stock on another national securities exchange and, as a result, we expect our securities would be quoted on an over-the-counter market. If this occurs, we could face significant material adverse consequences, including:
Current wording
If our common stock is delisted from Nasdaq in the future, we expect our securities would be quoted on an over-the-counter market. If this occurs, we could face significant material adverse consequences, including:
Previous wording
Except as previously disclosed in Current Reports on Form 8-K, there were no unregistered sales of equity securities for the three months ended September 30, 2024.
Current wording
Except as previously disclosed in Current Reports on Form 8-K, there were no unregistered sales of equity securities during the three months ended December 31, 2024.