5E Advanced Materials, Inc.
For the period ended Jun 30, 2025. Filed Sep 29, 2025.
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FY2025 · Filed Sep 29, 2025
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8. Convertible Notes Derivatives
The June 2024 Convertible Note Derivative and September 2024 Convertible Note Derivative, each which relate to the June 2024 Notes and September 2024 Notes, respectively, described 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).
The valuation model for the Convertible Note Derivatives requires the input of subjective assumptions including expected share price volatility, risk-free interest rate and debt rate. 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 input assumptions as well as the Company's underlying share price can materially affect the fair value estimates.
Changes in the fair value between periods 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 June 2024 Convertible Note Derivative began June 11, 2024 in connection with the issuance of the June 2024 Notes, and on September 16, 2024 for the September 2024 Convertible Note Derivative in connection with the issuance of the September 2024 Notes. Each of these provisions expired on December 31, 2024, and accordingly, the Convertible Note Derivatives were derecognized and the remaining fair values were transferred to additional paid-in capital.
The components of changes to the fair value of the Convertible Note Derivatives for the periods presented is summarized below.
| Derivative | |
|---|---|
| (Asset)/Liability | |
| (in thousands) | |
| Convertible note derivative (asset) liability — June 30, 2023 | $— |
| Additions, at fair value, June 11, 2024 | 4,064 |
| Fair value adjustment (gain) loss | (749) |
| Convertible note derivatives (asset) liability — June 30, 2024 | 3,315 |
| Additions, at fair value, September 16, 2024 | 1,643 |
| Fair value adjustments (gain) loss, net | (1,357) |
| Reclassified to additional paid-in capital, at fair value | (3,601) |
| Convertible note derivatives (asset) liability — June 30, 2025 | $— |
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