5E Advanced Materials, Inc.
For the period ended Jun 30, 2026. Filed Sep 17, 2026.
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FY2026 · Filed Sep 17, 2026
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15. Income Taxes
The Company did not record a U.S. federal or state income tax benefit for losses incurred during the fiscal year ended June 30, 2026. However, the Company recorded U.S. current income tax expense in connection with the Exchange during the fiscal year ended June 30, 2025. The Company has concluded that it is more likely than not that its deferred tax assets will not be realized which resulted in the recording of a full valuation allowance during those periods.
Domestic and foreign components of loss before income taxes for the years presented are as follows.
| Year ended June 30, | ||
|---|---|---|
| 2026 | 2025 | |
| (in thousands) | ||
| United States | $42,908 | $31,376 |
| Australia | — | — |
| Total net loss | $42,908 | $31,376 |
The provision for income taxes for the years presented are as follows:
| Year ended June 30, | ||
|---|---|---|
| 2026 | 2025 | |
| (in thousands) | ||
| U.S. federal taxes: | ||
| Current | $— | $179 |
| Deferred | — | — |
| U.S. state taxes: | ||
| Current | — | — |
| Deferred | — | — |
| Foreign state taxes: | ||
| Current | — | — |
| Deferred | — | — |
| Income tax expense | $— | $179 |
A reconciliation of the income tax expense for the year ended June 30, 2026 to the amount computed by applying the 21.0% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows.
| ($ in thousands) | (percentage) | |
|---|---|---|
| Pre-tax book income/(loss) | $(42,908) | |
| Provision at U.S. federal statutory rate | (9,011) | 21.0% |
| State income taxes, net of federal benefit | — | 0.0% |
| Change in valuation allowance | 8,716 | (20.3%) |
| Non-taxable or non-deductible items | ||
| Share-based compensation | 114 | (0.3%) |
| Other | 39 | (0.1%) |
| Other | 142 | (0.3%) |
| Effective tax rate | $— | 0.0% |
The following table presents a reconciliation of the United States statutory income tax rate for the year ended June 30, 2025 to the Company’s effective income tax rate.
| Year ended | |
|---|---|
| ($ in thousands) | |
| Loss before income taxes | $31,376 |
| Statutory income tax rate | 21.0% |
| Income tax benefit at statutory tax rates | $6,589 |
| State income tax benefit (expense) | 1,954 |
| Share-based compensation | (2,083) |
| Cancellation of debt income | (2,898) |
| Other | (50) |
| Write-off of NOL due to Section 382 limitations | (9,017) |
| Change in valuation allowance | 5,326 |
| Income tax (expense) benefit | $(179) |
Income Taxes Paid
Cash income taxes paid, net of refunds, for the year presented are as follows.
| Year ended | |
|---|---|
| ($ in thousands) | |
| Federal | $179 |
| State | — |
| Income taxes paid, net of refunds | $179 |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred taxes as of each date presented below are as follows.
| June 30, | June 30, | |
|---|---|---|
| 2026 | 2025 | |
| ($ in thousands) | ||
| Deferred tax assets: | ||
| Net operating loss carryforward | $28,536 | $21,516 |
| Amortization of exploration expenditures | 10,066 | 9,605 |
| Share-based compensation | 946 | 983 |
| Depreciation | 4,838 | 1,720 |
| Interest Limitation Section 163(j) | 1,243 | 1,704 |
| Other deferred tax assets | 623 | 259 |
| Total deferred tax assets | 46,252 | 35,787 |
| Less: valuation allowance | (46,107) | (35,600) |
| Deferred tax assets, net of valuation allowance to offset | 145 | 187 |
| Deferred tax liabilities: | ||
| Capitalized interest | (24) | (23) |
| Other deferred tax liabilities | (121) | (164) |
| Net deferred tax assets | $— | $— |
As of June 30, 2026, the Company had U.S. federal, state, and Australian net operating loss (“NOL”) carryforwards of$96.4 million,$71.5 million and$10.2 million, respectively. As of June 30, 2025, the Company had U.S. federal, state, and Australian NOL carryforwards of$67.7 million,$40.7 million and$14.6 million, respectively. U.S. net operating loss carryforwards for the periods arising before December 31, 2018 have a 20-year carryforward, the earliest of which could expire in 2037. The amount of the post-tax reform U.S. federal NOL generated after tax year 2017 of approximately$96.4 million, can be carried forward indefinitely. California net operating losses have a 20-year carryforward, the earliest of which could expire beginning in 2037. Australia net operating losses can be carried forward indefinitely.
The utilization of the Company’s net operating loss or tax attributes are subject to annual limitations in accordance with IRC section 382 and similar state provisions resulting from certain ownership changes that occurred. Such an annual limitation could result in the expiration of the attributes before utilization. The federal and state NOL carryforwards at June 30, 2025 have been reduced to reflect IRC section 382 ownership changes through June 30, 2025 and resultant inability to utilize a portion of the NOL prior to its expiration due to annual limitations. The net operating loss carryforwards reported as of June 30, 2026 reflect the impact of previously identified Section 382 limitations. No additional ownership changes that affected the Section 382 ownership analysis were identified through June 30, 2026.
The Company evaluates both the positive and negative evidence available to determine the realizability of its deferred tax assets. As of June 30, 2026 and 2025, the Company had a valuation allowance of$46.1 million and$35.6 million, respectively, of which both primarily relate to net operating losses and exploration costs.
Changes in the balance of the Company’s deferred tax asset valuation allowance for the periods presented are as follows:
| Year ended June 30, | ||
|---|---|---|
| 2026 | 2025 | |
| ($ in thousands) | ||
| Valuation allowance | $10,507 | $(3,803) |
The Company hadno unrecognized tax benefits as of June 30, 2026 or 2025. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in its income tax provision, if applicable. The Company has not recognized any interest or penalties in the periods presented in these financial statements. The Company is subject to income tax in the U.S. federal jurisdiction, California and Australia. Tax years 2022 and forward remain subject to examination but there are currentlyno ongoing exams in any taxing jurisdictions.
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”). The OBBBA includes changes to U.S. tax law applicable to the Company beginning in 2025. The impact of the OBBBA on the Company’s consolidated financial statements has been reflected in its current and deferred taxes, however, there was no material impact for the year ended June 30, 2026.
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