AMERICAN BATTERY TECHNOLOGY Co

For the fiscal years ended June 30, 2024 and June 30, 2023

American Battery Technology Company (the “Company”) is a relatively new entrant in the lithium-ion battery industry that is working to increase the domestic U.S. production of battery materials, such as lithium, nickel, cobalt and manganese through its engagement in the exploration of new primary resources of battery metals, in the development and commercialization of new technologies for the extraction of these battery metals from primary resources, and in the commercialization of an internally developed integrated process for the recycling of lithium-ion batteries. Through this three-pronged approach the Company is working to both increase the domestic production of these battery materials, and to ensure that as these materials reach their end of lives that the constituent elemental battery metals are returned to the domestic manufacturing supply chain in a closed-loop fashion.

The Company was incorporated under the laws of the State of Nevada on October 6, 2011, for the purpose of acquiring rights to mineral properties with the eventual objective of being a producing mineral company. We have a limited operating history and generated our initial revenue in the fourth quarter of fiscal 2024. Our principal executive offices are located at 100 Washington Ave., Suite 100, Reno, Nevada 89503.

During the fiscal year ended June 30, 2024, the Company incurred a net loss of $52.5 million and used cash of $16.7 million for operating activities. At June 30, 2024, the Company has an accumulated deficit of $213.3 million.

The continuation of the Company as a going concern is dependent upon generating profit from its operations and its ability to obtain debt or equity financing. There is no assurance that the Company will be able to generate sufficient profits, obtain such financings, or obtain them on favorable terms, which could limit its operations. Any such financing activities are subject to market conditions. These uncertainties cause substantial doubt about the Company’s ability to continue as a going concern for 12 months from issuance of these financial statements. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material.

The going concern assessment excludes the Company’s at-the-market (“ATM”) offering (Note 13), which could provide a source of liquidity.

Based on our current operating plan, unless we generate income from the operations of our facilities and receipt of cash from U.S. Government grant awards, raise additional capital (debt or equity), it is possible that we will be unable to maintain our financial covenants under our existing Note agreement (Note 11), which, if such violation is not waived, could result in an event of default, causing an acceleration of the outstanding balance. If we do raise additional capital through public or private equity offerings, as opposed to debt or additional Note issuances, the ownership interest of our existing stockholders may be diluted.

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is June 30.

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Oroplata Exploraciones E Ingenieria SRL (inactive) and LithiumOre Corporation (formerly Lithortech Resources Inc) and ABMC AG, LLC (inactive). All inter-company accounts and transactions, if any, have been eliminated upon consolidation.

On September 11, 2023, the Company effected aone-for-fifteen reverse stock split with respect to the issued and outstanding shares of common stock. All share and per-share amounts included in this Form 10-K are presented as if the stock split had been effective from the beginning of the earliest period presented.

Immaterial Correction of Previously Issued Consolidated Financial Statements

Subsequent to the issuance of the Company’s fiscal year 2023 consolidated financial statements, the Company identified errors in the application of Accounting Standards Codification (“ASC”) 710, “Compensation-General,” and ASC 718, “Compensation-Stock Compensation,” related to expense recognition for cash and equity awards that are subject to both service and performance conditions. ASC 710 and ASC 718 require recognition of compensation cost once achievement of the performance condition becomes probable as the requisite service is provided. Historically, the Company did not recognize compensation cost for certain cash and equity awards until the performance conditions in the form of milestones were achieved, and for the Company’s common share warrant performance-based awards, no compensation cost had previously been recognized when the performance conditions either became probable of achievement or were achieved. As the common share warrant and restricted stock unit (“RSU”) performance-based awards to executive officers and key employees are granted with a fixed dollar value and settled in a variable number of common share warrants or RSUs, these awards are liability-classified until the number of common share warrants or RSUs are fixed, and the corresponding compensation cost should be recorded to current or long-term liabilities, or additional paid-in capital, depending on expected timing of settlement of the award, once the performance conditions become probable of achievement.

The correction of this error resulted in an increase in compensation cost of $0.9 million as of and for the fiscal year ended June 30, 2023. As certain of these awards are liability-classified, the correction of this error resulted in an increase of $0.3 million in accounts payable and accrued liabilities for the current portion of the awards, and an increase of $0.8 million in additional paid-in capital for the awards where the number of common share warrants or RSUs are fixed as of June 30, 2023.

The Company has evaluated the effects of the correction detailed in the tables below on the previously issued consolidated financial statements, individually and in the aggregate, in accordance with the guidance in ASC 250, “Accounting Changes and Error Corrections.” The Company has concluded such corrections to be immaterial to its previously issued consolidated financial statements. While management believes the effect of the error is immaterial to the Company’s previously issued consolidated financial statements as of and for the year ended June 30, 2023, the financial statement line items impacted by this error have been corrected.

The tables below reflect the sections of the Company’s consolidated financial statements that were impacted by the error.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

The preparation of these consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company regularly evaluates estimates and assumptions related to the fair value of stock-based compensation, useful lives of fixed assets, valuation and recoverability of long-lived assets and intangible assets, fair value less cost to sell of assets held-for-sale, and deferred income tax asset valuation allowances.

The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations may be affected.

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of June 30, 2024 and 2023.

Inventory is stated at the lower of cost or market (net realizable value). The Company performs an assessment of the recoverability of capitalized inventory during each reporting period and writes down any excess and obsolete inventories to their net realizable value in the period in which the impairment is first identified.

Long-lived assets, such as property and equipment, mineral properties, and purchased intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable in accordance with ASC 360, “Property, Plant, and Equipment.” Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. The Company’s long-lived assets consist of buildings, vehicles, equipment, and land. Buildings, vehicles and equipment are depreciated on a straight-line basis over their estimated value lives, which are as follows:

The recoverability of assets is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by an asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount exceeds the estimated fair value of the asset. The estimated fair value is determined using a discounted cash flow analysis or comparable market values. Any impairment in value is recognized as an expense in the period when the impairment occurs. The Company took an impairment loss on assets it has decided to sell and are classified as held-for-sale. The impairment loss was recorded in the fiscal ended June 30, 2024 and is related to certain assets comprised primarily of land and a building at the Fernley, Nevada location. No other impairment charges were recorded in the fiscal years ended June 30, 2024 and 2023.

Expenses for major repairs and maintenance which extend the useful lives of property and equipment are capitalized. All other maintenance expenses, including planned major maintenance activities, are expensed as incurred. Gains or losses from property disposals are included in income or loss from operations.

The Company accounts for its leases under ASC 842,“Leases.” Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheets as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use assets are amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line expense over the lease term. Variable lease expenses, if any, are recorded when incurred.

In calculating the right-of-use assets and lease liabilities, the Company elected the practical expedient to combine lease and non-lease components. Additionally, the Company excludes short-term leases having initial terms of 12 months or less as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.

Costs of lease, exploration, carrying and retaining unproven mineral properties are expensed as incurred. The Company expenses all mineral exploration costs as incurred as it is still in the exploration stage. If the Company identifies proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it will enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs are amortized on a units-of-production basis over the proven and probable reserves following the commencement of production. Interest expense, if any allocable to the cost of developing mining properties and to construct new facilities, is capitalized until assets are ready for their intended use. For the fiscal years ended June 30, 2024 and 2023, no interest expense was capitalized.

To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all exploration costs are being expensed.

ASC 930-805, “Extractive Activities-Mining: Business Combinations,” states that mineral rights consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include mineral rights which are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented mining claims.

Intangible assets consist of water rights that have indefinite useful lives and are tested annually for impairment, or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value. Annually, or when there is a triggering event, the Company first performs a qualitative assessment by evaluating all relevant events and circumstances to determine if it is more likely than not that the indefinite-lived intangible assets are impaired; this includes considering any potential effect on significant inputs to determining the fair value of the indefinite-lived intangible assets. When it is more likely than not that an indefinite-lived intangible asset is impaired, then the Company calculates the fair value of the intangible asset and performs a quantitative impairment test. The Company performs its annual impairment test on June 30. No impairment charges for intangible assets were recorded in the fiscal year ended June 30, 2024 and 2023.

The Company classifies assets as held-for-sale (“disposal group”) in the period when all of the relevant criteria to be classified as held for sale are met. These criteria include management’s commitment to sell the disposal group in its present condition and the sale being deemed probable of being completed within one year. Assets held for sale are reported at the lower of their carrying value or fair value less cost to sell. The fair values of disposal groups are estimated using accepted valuation techniques, including indicative listing prices. The Company considers historical experience, guidance received from third parties, and all information available at the time the estimates are made to derive fair value. Any loss resulting from the measurement is recognized in the period when the held for sale criteria are met. The Company assesses the fair value of a disposal group, less any costs to sell, each reporting period it remains classified as held for sale and reports any subsequent changes as an adjustment to the carrying value of the disposal group, as long as the new carrying value does not exceed the initial carrying value of the disposal group. Assets held-for-sale are not amortized or depreciated.

The Company is subject to various claims and contingencies related to lawsuits. A liability is recorded for claims, legal costs or other contingencies when the risk of loss is probable and reasonable estimable. The required reserves may change due to new developments in each period.

The Company evaluates all conversion, repurchase and redemption features contained in a debt instrument to determine if there are any embedded features that require bifurcation as a derivative. The Company accounts for its convertible notes as a long-term liability, with the current portion reclassified to a short-term liability, equal to the proceeds received from issuance, including any embedded conversion features, net of the unamortized debt discount and offering costs in the accompanying unaudited condensed consolidated balance sheets. The debt discount, debt issuance and offering costs are amortized over the term of the convertible notes, using the effective interest method, as interest expense in the accompanying consolidated statements of operations.

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the issuance date and is then re-valued at each reporting date, with changes in the fair value reported in earnings in the consolidated statements of operations.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is an exit price concept that assumes an orderly transaction between willing market participants and is required to be based on assumptions that market participants would use in pricing an asset or a liability. Current accounting guidance establishes a three-tier fair value hierarchy as a basis for considering such assumptions and for classifying the inputs used in the valuation methodologies. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities that the reporting entity can assess at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability which include the Company’s assumptions regarding the data market participants would use in pricing the asset or liability based on the best information available under the circumstances.

The carrying values of the Company’s cash, accounts receivable, prepaid expenses and deposits, notes payable, accounts payable and accrued liabilities approximates fair value due to their short maturities.

The Company’s recurring fair value measurements include the valuation of the derivative liability for the bifurcated notes payable freestanding call option. See Note 11 for relevant fair value disclosures. Given use of unobservable inputs, there is inherently uncertainty that the inputs could reasonably have been different as of the reporting date.

The Company’s non-recurring fair value measurements include the valuation of the assets held-for-sale as of June 30, 2024. See Note 7 for relevant fair value disclosures.

The Company’s initial revenues were recorded in the fourth quarter of fiscal year 2024 andwere generated from the operation of the lithium-ion battery recycling plant. The Company follows the five-step approach to revenue recognition in accordance with ASC 606, “Revenue from Contracts with Customers:”

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

The Company recognizes revenue from the sale of black mass and services for recycling lithium-ion batteries which includes coordination of logistics and destruction of batteries. Revenue is measured based on the consideration to which the Company expects to be entitled under a contract with a customer. The Company recognizes revenue when it transfers control of a product or service to a customer as outlined in the contractual terms. The Company has elected the practical expedient to not recognize a financing component when payment is expected within one year of satisfaction of the performance obligation. Payment terms are typically 30 days or less.

For sale of products, revenue is recognized when control of the goods has transferred, typically when the goods have been transferred to the customer. A receivable is recognized by the Company when the goods are transferred to the customer as this represents the point in time at which the right to consideration becomes unconditional, as only the passage of time is required before payment is due. Recycling service revenue is recognized at a point in time either upon receipt of the batteries from the customers or upon completion of the services. The price for services is separately identifiable within each contract.

Bill and Hold Arrangements

As of June 30, 2024, the Company has entered into bill and hold arrangements with a certain customer. Under these arrangements, the Company recognizes revenue at the time of billing, even though the physical transfer of goods has not yet occurred. The following criteria are met to recognize revenue under a bill and hold arrangement:

In the ordinary course of business, the Company may have consideration payable to customers in relation to recycling services in the form of battery feedstock purchases, which is recognized in the cost basis of the inventory and is not netted against revenues.

Cost of goods sold is primarily comprised of direct materials and supplies consumed in the manufacturing of product, as well as manufacturing labor, depreciation expense, repair and maintenance expense and direct and indirect overhead expenses associated with manufacturing product for sale.

Mineral property acquisition costs are capitalized as incurred. Exploration and evaluation costs are expensed as incurred until proven and probable reserves are established. The Company assesses the carrying costs for impairment under ASC 360, “Property, Plant, and Equipment*,*” at each period end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property are capitalized on a prospective basis. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. As of June 30, 2024 and 2023, the Company has not capitalized any such mineral property costs.

Research and development (“R&D”) costs are accounted for in accordance with ASC 730, “Research and Development.” ASC 730-10-25 requires that all R&D costs be recognized as an expense as incurred. However, some costs associated with R&D activities that have an alternative future use (e.g., materials, equipment, facilities) may be capitalizable. As of June 30, 2024, no costs associated with R&D activities have been capitalized.

The Company has been awarded U.S. federal grant awards for specific R&D programs. Under Accounting Standards Update (“ASU”) No. 2021-10, “Government Assistance,” the Company recognizes invoiced government funds as an offset to R&D costs in the period the qualifying costs are incurred. As the federal grants receivable are not deemed to have any significant realization risk, the Company believes this best reflects the expected net expenditures associated with these programs.

The Company records stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation,” using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. The Company utilizes the Black Scholes method when calculating stock-based compensation expense relating to stock option awards and warrants.

The table below sets forth the assumptions used on the date of grant for estimating the fair value of options granted during the fiscal years ending June 30:

The Company records the stock-based compensation expense attributed to share awards in accordance with US GAAP using the graded-vesting method. The Company amortizes the grant date fair value over the respective vesting period, beginning with recognition on the date of grant. Compensation in the form of warrants is limited to executives, and recorded as a liability until the warrant is exercised or expires. Executives may also receive compensation in the form of RSUs that are recorded as a liability until the award is settled in shares of common stock. The liability classification of these awards is based on the total value of the award granted at a fixed value but settled in a variable number of warrants or RSUs until the performance milestones are achieved and the warrants or RSUs are issued.

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes.” The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards.

Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

Any uncertain tax position liabilities have been applied against the deferred tax balance given that there is a sufficient net operating loss to cover any penalties and fees associated with the uncertain tax position. The Company assesses each of its identified uncertain positions and determines whether any potential penalties and interest liability should be accrued at the consolidated balance sheet dates. Interest and penalties accrued on unrecognized tax benefits are included within income tax expense in the consolidated financial statements.

Due to the Company’s net loss position since inception, the likelihood of deferred tax assets being realized does not meet the more likely than not assessment guidelines. Accordingly, a valuation allowance equal to the deferred tax asset has been recorded at June 30, 2024 and 2023.

The Company computes net income (loss) per share in accordance with ASC 260, “Earnings per Share.” ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the consolidated statement of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and awards. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As the Company has reported losses for all periods presented, all potentially dilutive securities are anti-dilutive, and accordingly, basic net loss per share equaled diluted net loss per share

The Company had the following potentially dilutive shares outstanding as of June 30:

For government grants, the Company recognizes a benefit in the consolidated statements of operations, as a reduction to the expense for which the individual government grant is designed to compensate, over the duration of the program when the Company has reasonably assurance that it will comply with the conditions under the grant and that the grant will be received. Grants related to investments in property and equipment are recognized as a reduction to the cost basis of the underlying assets with an ongoing reduction to depreciation expense over the assets’ estimated useful life.

The Company operates as one segment. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who reviews financial information for purposes of making operating decisions, assessing financial performance, and allocating resources. The Company’s CODM evaluates financial information on a consolidated basis. As the Company operates as one operating segment, all required segment financial information is found in the consolidated financial statements.

Certain prior period amounts in the consolidated financial statements and notes thereto have been reclassified to conform to current period presentation. These reclassifications had no significant effect on the result of operations or financial position for any period presented.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendment in this update expands segment disclosures by requiring disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. This update is effective for our annual report for fiscal year 2025, for interim period reporting beginning in fiscal year 2026, with early adoption permitted, and will be applied retrospectively to all prior periods presented in the consolidated financial statements. We are currently evaluating the timing of adoption and the impact of this ASU on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvement to Income Tax Disclosures.” The amendments further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This ASU is effective for our annual report for fiscal year 2026, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the timing of adoption and impact of this ASU on our consolidated financial statements and related disclosures.

The Company’s inventory for its lithium-ion battery recycling operation is comprised of raw materials, in the form of battery feedstock, and finished goods, in the form of black mass and other metals. Inventory is valued at the lower of average cost or net realizable value. The net carrying value of inventory includes those costs to acquire battery feedstock and any related carrying and processing costs incurred by the Company.

The table below presents the components of inventory as of June 30:

Grants receivable represent qualifying costs incurred where there is reasonable assurance that the conditions of the grant have been met but the corresponding funds have not been received as of the reporting date. As collections from the federal government have been and are expected to continue to be timely, no allowance for doubtful accounts has been established. If amounts become uncollectible, they will be charged to operations. Grants receivable was $0.2 million and $0.3 million as of June 30, 2024 and 2023, respectively. The Company recognizes invoiced government funds as an offset to R&D costs in the period the qualifying costs were incurred. Grants related to investments in property and equipment are recognized as a reduction to the cost basis of the underlying assets with an ongoing reduction to depreciation expense over the assets’ estimated useful life.

On January 20, 2021, the U.S. Department of Energy (“DOE”) announced that the Company had been selected for award negotiation for a three-year project with a total budget of $4.5 million for the field demonstration of its selective leaching, targeted purification, and electro-chemical production of battery grade lithium hydroxide from domestic claystone resources technology. Through this grant award the Company is eligible to receive reimbursement of up to 50% of eligible expenditures, or up to $2.3 million. The prime agreement contract for this grant was issued with a project start date of October 1, 2021. The Company began receiving funds related to this award during the fiscal year ending June 30, 2022. As of June 30, 2024, the cumulative funds invoiced for this grant totaled $1.7 million, which represents 73% of the total eligible reimbursements.

On August 16, 2021, the Company received a contract award for a 30-month project with a total budget of $2.0 million from the United States Advanced Battery Consortium as part of a competitively bid project, through which the Company will receive reimbursement for up to $0.5 million of eligible expenditures. The objective of the contract award is for the commercial-scale development and demonstration of an integrated lithium-ion battery recycling system, the production of battery cathode grade metal products, the synthesis of high energy density active cathode material from these recycled battery metals, and the fabrication of large format automotive battery cells from these recycled materials and the testing of these cells against otherwise identical cells made from virgin sourced metals. The Company began receiving funds related to this award during the fiscal year ending June 30, 2023. As of June 30, 2024, the cumulative funds invoiced for this grant totaled $0.5 million, which represents 97% of the total eligible reimbursements.

On October 21, 2022, the U.S. DOE announced that the Company had been selected for award negotiation for a five-year project with a total budget of $115.5 million to design, construct, and commission a first-of-kind lithium hydroxide refinery using Nevada-based claystone as the feedstock to expand domestic manufacturing of battery grade lithium hydroxide for lithium-ion batteries for electric vehicles, with a focus on domestic processing of materials and components that are currently imported from foreign countries. Through this grant award the Company is eligible to receive reimbursement of up to 50% of eligible expenditures, up to $57.7 million. The prime agreement contract for this grant was issued with a project start date of September 1, 2023. The Company began receiving funds related to this award during the period ending December 31, 2023. As of June 30, 2024, the cumulative funds invoiced for this grant totaled $1.7 million, which represents 3% of the total eligible reimbursements.

On November 17, 2022, the U.S. DOE announced that the Company had been selected for award negotiation for a three-year project with a total budget of $20.0 million to demonstrate and commercialize next generation techniques for its lithium-ion battery recycling processes to produce low-cost and low-environmental impact domestic battery materials. Through this grant award the Company is eligible to receive reimbursement of up to 50% of eligible expenditures, up to $10.0 million. The prime agreement contract for this grant was issued with a project start date of October 1, 2023. The Company began receiving funds related to this award during the period ending December 31, 2023. As of June 30, 2024, the cumulative funds invoiced for this grant totaled $0.6 million, which represents 6% of the total eligible reimbursements.

On March 28, 2024, the Company was selected for a tax credit for up to $19.5 million through the Qualifying Advanced Energy Project Credits program (“48C”). This tax credit was granted by the U.S. Department of Treasury Internal Revenue Service following a highly competitive technical and economic review process performed by the DOE, which evaluated the feasibility of applicant facilities to advance America’s buildout of globally competitive critical material recycling, processing, and refining infrastructure. This tax credit provides up to a 30% credit on investments to build production facilities for advances in technology and may be utilized both for the reimbursement of capital expenditures spent to date at the Company’s battery recycling facility in the Tahoe-Reno Industrial Center (“TRIC”) in McCarran and future build out of additional phases of our production capabilities at this facility. As of June 30, 2024, the Company has incurred qualifying expenditures for this tax credit but will not recognize any amounts until it has reasonable assurance of compliance with the relevant standards.

Also on March 28, 2024, the Company was selected for an additional tax credit of up to $40.5 million through the 48C program, which may be used in support of the design and construction of a new commercial battery recycling facility to be located in the United States. As of June 30, 2024, the Company has not incurred any qualifying expenditures towards this tax credit.

The table below summarizes the effects of government grants on the consolidated financial statements for the fiscal years ended June 30:

On March 1, 2023, the Company and Linico Corporation (“Linico”) entered into an Asset Purchase Agreement (“APA”) whereby the Company acquired specific tangible equipment and personal property for an aggregate purchase price of $6.0 million. Contemporaneously with the signing of the APA, the Company and Linico entered into another agreement, the Membership Interest Purchase Agreement (“MIPA”), whereby the Company would acquire 100% of the membership interests in Aqua Metals Transfer, LLC, principally real property consisting of land and a building in the Tahoe-Reno Industrial Center (“TRIC”) at 2500 Peru Drive, McCarran, Nevada, for an aggregate purchase price of $21.6 million.

On June 30, 2023, the Company and Linico entered into an amendment to the MIPA. Pursuant to the terms of the amended agreement, the parties agreed to (i) remove the requirement that $1.5 million of the purchase price be held in escrow for the settlement of indemnification claims, (ii) transfer back to the Company 128,206 common shares, previously issued by the Company, in exchange for the elimination of such indemnification escrow, (iii) add a purchase price adjustment to the extent that, as of four months after the registration statement on Form S-3 filed by the Company is declared effective by the SEC, the value of the portion of the purchase price comprised of shares does not equal at least $6.0 million, (iv) provide for an interim water rights agreement through the final purchase price payment date, (iv) advance the closing date to as soon as practicable after the declaration of effectiveness of the resale registration statement on Form S-3, and (v) remove the deadline to close the acquisition by June 30, 2023. The purchase was finalized on August 11, 2023 at which time the aggregate total of $27.6 million from both agreements above was bifurcated between both real and personal property assets.

The table below presents the property, plant and equipment as of June 30:

The Company recognized depreciation expense of $1.7 million and $0.1 million during the fiscal years ended June 30, 2024 and 2023, respectively.

On August 11, 2023, the Company finalized the purchase of its commercial-scale battery recycling facility located in the TRIC, as indicated in Note 6. At that time, the aggregate total of $27.6 million in deposits was reclassified to Property and Equipment. The Company has installed additional equipment on site to accelerate the first commercial scale implementation of its internally developed lithium-ion battery recycling technologies.

During the fourth quarter of fiscal 2024, the Company approved a plan to sell certain assets comprised primarily of land and a building from our Fernley location. The Company made this decision due to the acquisition of the Peru facility that would accelerate our time to production and commercialization. The assets located at Fernley had a carrying amount of $18.6 million and water rights with a carrying amount of $0.1 million. These assets have been classified as held-for-sale as of June 30, 2024 and are expected to be sold within the next twelve months. The Company recorded an impairment charge on the assets held-for-sale of $10.3 million for the fiscal year ended June 30, 2024. The fair value of the assets held-for-sale is classified within Level 3 of the fair value hierarchy and was determined based on indicative market listing prices of the assets.

On July 21, 2022, the Company exercised the option to purchase the rights to unpatented lode claims in Tonopah, Nevada. Since that time, the Company has worked with third parties to conduct drill programs and analysis to verify the grade and continuity of the mining claims. Over 50% of the inferred mineral resources have been upgraded to measured and indicated classifications. The Company is still in the exploration stage and expenses all mineral exploration costs. If the Company identifies proven and probable reserves and develops an economic plan for operating a mine, it will enter the development stage and capitalize future costs until production is established.

On July 22, 2023, the Company began a third exploration program to advance its Tonopah Flats Lithium Project. This drill program includes core infill and step out drilling to support the evolution of its domestic resource with the goal of upgrading to a ‘measured and indicated’ resource classification. The Company selected and engaged KB Drilling for the collection of infill and step out samples for this latest drill program, which consists of sample collections from eight additional drill holes and includes 6,500 feet of total drilling.

In December 2023, the Company entered into a vacant land offer and acceptance agreement for the Company’s acquisition of certain mineral patents totaling $0.2 million which was capitalized to mining properties.

On April 24, 2024, the Company announced the completion of the “Amended Resource Estimate and Initial Assessment with Project Economics for the Tonopah Flats Lithium Project, Esmeralda and Nye Counties, Nevada, USA” (“Amended IA”) and the publication of the S-K 1300 Technical Report Summary (“TRS”) disclosing mineral resources, including an initial economic assessment, for the Tonopah Flats Lithium Project. The TRS was completed by RESPEC Company LLC, a qualified person, in compliance with Item 1300 of Regulation S-K and with an effective date of April 5, 2024.

On September 12, 2023, the Company acquired approximately 40.52-acre feet of water rights from the Thomas C. Woodward Living Trust, valued at $0.1 million. The water rights are treated in accordance with ASC 350, “Intangible Assets,” and have an unlimited useful life subject to beneficial use.

The Company’s acquisition of the commercial-scale battery recycling facility at the TRIC included water rights valued at $0.7 million and are described as an eighteen and forty-five one-hundredths (18.45) acre-foot/annually portion of the Truckee-Carson Irrigation District, Serial Number 1081-A-1. These have an unlimited useful life upon assignment to a property through use of a will-serve, which has no expiration date.

As of June 30, 2024, the Company allocated $0.1 million of water rights to assets held-for-sale at our Fernley location and are included in the impairment charge discussed in Note 7 above.

The table below presents total intangible assets at:

The table below presents total accounts payable and accrued liabilities at:

As of June 30, 2024, the Company had no supplier that accounted for greater than 10% of the total accounts payable and accrued liabilities balance. As of June 30, 2023, the Company had a significant construction supplier that accounted for 28% of the total accounts payable and accrued liabilities balance. On July 3, 2024, the Company entered into a settlement agreement related to a marketing agreement executed in May of 2023 with Mercuria Energy America, LLC. Under the terms of the Settlement Agreement, the Company agreed to make six monthly payments to Mercuria Energy of $0.3 million. The total amount of the settlement is $1.8 million and broken out in the table above.

On May 17, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with Mercuria Investments US, Inc. for pre-payment on the purchase of the Company’s recycled battery metal products. As such, inventory serves as collateral for outstanding balances. The Credit Agreement provides for an aggregate loan amount of up to $20.0 million, comprised of (i) an initial term loan in the aggregate principal amount of $6.0 million and (ii) delayed draw term loan commitments in an aggregate amount equal to $14.0 million. Borrowings under the Credit Agreement carry interest calculated as the secured overnight financing rate published on the Federal Reserve Bank of New York’s website, plus the applicable credit spread adjustment, based on the elected interest period, plus an applicable margin rate of 6%. The agreement contains provisions that allow the Company to remit principal and interest payments via future delivery of its initial recycling byproduct, black mass.

On August 30, 2023, the Company caused the repayment in full of all indebtedness, liabilities and other obligations under, and terminated, its former credit agreement, dated as of May 17, 2023 by and among the Company, as Borrower, and Mercuria Investments US, Inc., as Agent. The Company did not incur any material early termination penalties because of such termination of the credit agreement.

On August 29, 2023, the Company and High Trail (the “Buyers”) entered into a Securities Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company sold to the Buyers up to $51.0 million of a new series of senior secured convertible notes (the “Notes”). To date, $25.0 million has been received and $18.0 million has been repaid. The remaining $26.0 million under the facility includes $13.5 million with the condition that the Company started trading on the Nasdaq Capital Market, had $250,000 in sales, and establish an ATM or ELOC, and another $12.5 million at the discretion of the Buyers. Buyers may request partial redemptions of up to an aggregate of $1.8 million on the 15th of each month or may convert the Notes into shares of common stock of the Company at a conversion rate of 110% of the last reported sales price on the date of the agreement to acquire such Notes. The Notes bear zero coupon with an effective interest rate of 14.31%, mature on September 1, 2025, require a minimum of $5.0 million maintained in cash and cash equivalents, and are secured by certain real property and cash and investment accounts of the Company.

The Company analyzed the conversion features of the Notes for derivative accounting considerations under ASC 815-15, “Derivatives and Hedging,” and determined a freestanding call option should be bifurcated and separately accounted for as a derivative liability. Accordingly, the derivative liability is carried at fair value at each reporting date with the corresponding gain or loss reflected in earnings in the condensed consolidated statements of operations. See Correction of Previously Issued Consolidated Financial Statements in Note 3. The Company determined the derivative liability to have a fair value of $0.4 million at issuance of the Notes. For the fiscal year ended June 30, 2024, the Company recorded a loss on the change in fair value of the derivative liability of $0.3 million. As of June 30, 2024, the fair value of the derivative liability was $0.7 million. The fair value of the derivative liability is classified within Level 3 of the fair value hierarchy and was determined using the Black-Scholes option pricing model with assumptions as of June 30, 2024 including a volatility of 78.1% and a risk-free-rate of 4.96%.

Note discount and issuance costs totaled $5.1 million and reduced the carrying value of the Notes as a debt discount. The carrying value, net of debt discount and issuance costs, is being accreted over the term of the Notes from date of issuance to date of full repayment, expected to be in October 2024 based on partial redemption payments, using the effective interest rate method. For the fiscal year ended June 30, 2024, amortization of debt discount and issuance costs totaled $3.8 million.

The table below presents the net carrying amounts of the Notes as of June 30, 2024:

The table below presents the maturities of notes payable as of June 30, 2024:

The Company occupies office facilities under lease agreements that expire at various dates, many of which do not exceed one year in length. Total operating lease costs and cash paid for the fiscal years ended June 30, 2024 and 2023 were approximately $0.1 million each. The Company does not have any finance leases as of June 30, 2024 and 2023. Most operating leases contain renewal options that provide for rent increases based on prevailing market conditions. The terms used to calculate the ROU assets for certain properties include the renewal options that the Company is reasonably certain to exercise. The Company’s lease agreements do not contain significant residual value guarantees, restrictions, or covenants.

As of June 30, 2024 and 2023, current lease liabilities of $0.1 million and $0.2 million are included in “Accounts payable and accrued liabilities” on the consolidated balance sheets. The table below presents total operating lease ROU assets and lease liabilities:

The table below presents the maturities of operating lease liabilities as of June 30, 2024:

The table below presents the weighted average remaining lease term for operating leases and weighted average discount rate used in calculating operating lease right-of-use asset as of June 30, 2024 and 2023.

On September 21, 2023, the Company’s common stock began trading on the Nasdaq Capital Market under the symbol “ABAT.” The Company was previously traded on the OTCQX Markets under the symbol “ABML.”

Preferred Stock

Our amended and restated articles of incorporation authorize shares of preferred stock and provide that shares of preferred stock may be issued from time to time in one or more series. Our board of directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our board of directors will be able to, without stockholder approval, issue shares of preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of our board of directors to issue shares of preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management.

To date, the Company has authorized a total of 1,666,667 shares of preferred stock. Of this amount the Company has designated a total of 233,334 shares to three classes of preferred stock, Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock. As of June 30, 2024 and 2023, no shares of any of these classes are issued and outstanding. A description of each class of preferred stock is listed below.

Series A Preferred Stock

The Company has 33,334 shares of Series A Preferred Stock authorized with a par value of $0.001 per share. The Company hadnil shares of Series A Preferred Stock issued and outstanding on June 30, 2024 and 2023.

Series B Preferred Stock

The Company has 133,334 shares of Series B Preferred Stock authorized with a par value of $10.00 per share. The Company hadnil shares of Series B Preferred Stock issued and outstanding on June 30, 2024 and 2023.

Series C Preferred Stock

The Company has 66,667 shares of Series C Preferred Stock authorized with a par value of $10.00 per share. The Company hadnil shares of Series C Preferred Stock issued and outstanding on June 30, 2024 and 2023.

Common Stock

The Company has 80.0 million shares of common stock authorized, with a par value of $0.001 per share.

On September 11, 2023, in preparation for listing on the Nasdaq Capital Market, the Company implemented a one-for-fifteen (1-for-15) reverse split of our common stock. Prior to the reverse stock split the Company had 692,068,218 shares of common stock issued and outstanding, and after the reverse stock split, the Company had approximately 46,137,882 shares of common stock issued and outstanding. Immediately after the reverse stock split, each stockholder’s percentage ownership interest in the Company and proportional voting power remained unchanged aside from rounding fractional shares into whole shares, resulting in an additional 59,164 common shares issued. The reverse stock split did not change the par value of the common stock or preferred stock. As of June 30, 2024, the Company has 64,061,763 shares of common stock issued and outstanding.

Fiscal year ended June 30, 2024

During the period the Company issued 1,326 common shares that were previously listed as issuable as of June 30, 2023. These shares for professional services relate to previously earned board compensation.

During the period, the Company issued 1,306,480 common shares with an issuance date fair value of $5.3 million to executives, directors and employees pursuant to share award service and performance achievements. This included 171,500 RSUs granted upon election by officers of the Company to receive warrants and RSUs in lieu of cash bonuses.

On July 28, 2023, the Company recorded an increase of $0.2 million to stockholders’ equity for the change in fair value between the balance sheet date of June 30, 2023 and the fair value on the date the shares were returned. These shares were pursuant to the Company modifying its building purchase agreement to nullify a $1.5 million indemnification requirement and reclaim 128,205 shares that it had previously issued to the Selling Stockholder (See Note 6).

During the period, the Company filed prospectus supplements related to the offer and sale from time to time of up to 8,666,667 common shares directly by the Company at market prices, to Tysadco Partners, LLC, a Delaware limited liability company (“Tysadco”), pursuant to the terms of written sales agreement(s) (“Tysadco Agreement”). Pursuant to the Tysadco Agreement, the Company may offer and sell up to 8,666,667 common shares of the Company at a purchase price of 95% of the weighted-average price, with a minimum request of 33,333 shares. During the period, the Company sold 8,209,262 common shares for total proceeds of $27.8 million, of which $1.5 million is recorded as a subscription receivable offset within equity on the consolidated balance sheet at June 30, 2024.

On April 3, 2024, the Company entered into an ATM sales agreement with Virtu Americas LLC, pursuant to which the Company may offer and sell, from time to time through the sales agent, shares (the “Shares”) of the Company’s common stock, par value $0.001 per share, having an aggregate offering price of up to $50,000,000, subject to the terms and conditions of the Sales Agreement. The Company has filed a prospectus supplement to its registration statement on Form S-3 (File No. 333-252492) offering the Shares. During the period, the Company sold 9,109,573 common shares for total proceeds of $12.1 million, of which $0.6 million is recorded as a subscription receivable on the consolidated balance sheet at June 30, 2024.

During the period, the Company issued 45,545 common shares pursuant to cashless exercise of 50,000 share purchase warrants exercised as of June 30, 2023. During the period, the Company received cash proceeds of $37,500 pursuant to 33,334 share purchase warrants. Also, during the period, the Company issued 39,883 common shares pursuant to cashless exercise of 66,667 share purchase warrants.

During the period, the Company recognized stock-based compensation expense of approximately $14.6 million, which was an increase to additional paid-in capital of approximately $14.2 million and an increase in the equity compensation liability of $0.4 million. Stock-based compensation in additional paid-in capital also includes $0.3 million of bonuses settled in equity awards in lieu of cash. Of total stock-based compensation, approximately $7.5 million was recognized for officers and directors of the Company. See Correction of Previously Issued Consolidated Financial Statements in Note 3.

Fiscal year ended June 30, 2023

During the period, the Company issued 399,024 common shares with an issuance date fair value of $4.2 million to executives, directors and employees pursuant to share award service and performance achievements. These common shares were under the Company’s Retention Plan.

During the period, the Company issued 733,333 common shares with a fair value of approximately $7.4 million towards the acquisition of its new recycling facility. These shares have recently been registered to be sold under the Company’s shelf S-3, effective August 8, 2023. Considering the lack of marketability at the time of issuance, the shares were issued with approximately a 15% discount. This was in line with the Company’s fair value analysis, given that the shares were restricted at the time of issuance. Pursuant to the terms of the agreement, the Company agreed to acquire 100% of the ownership interests in Aqua Metals Transfer, LLC, a legal entity to transfer real property and equipment, in exchange for a combination of cash and common shares of common stock. We also agreed to prepare and file a registration statement with the SEC to register the resale of the common shares issued, which will be held by an affiliate of LiNiCo, Comstock Inc., a Nevada corporation, the seller. Pursuant to the original purchase agreement, LiNiCo had an obligation to indemnify us for certain matters and to fund an escrow account for the purposes in the event such indemnification events arise. The seller was required to contribute $1.5 million of the net proceeds it receives from its sale of shares to fund the indemnification escrow account. On June 30, 2023, the Company modified the agreement to nullify the $1.5 million indemnification requirement and reclaim 128,205 shares that it had previously issued to the Selling Stockholder, which it received after June 30, 2023. The Company has recognized a $1.5 million reduction to the carrying value of its long-term deposits and a respective reduction to stockholders’ equity, at June 30, 2023.

In March 2023, the Company entered into a share purchase agreement for the purchase and sale of 952,381 common shares at an issuance price of $10.50 per share. In addition to the issuance of common shares, the Company issued 952,381 Series A warrants that are exercisable into one common share of the Company at $12.00 per share for a period of five years from the date of issuance and 952,381 Series B warrants that are exercisable into one common share of the Company at $10.50 per share for a period of eighteen months from the date of issuance. As part of the financing, the Company engaged a placement agent in connection with the offering and agreed to pay the placement agent a cash fee of 7.5% of the gross proceeds of the offering, a 1% expense allowance, and other reimbursable expenses. In addition, the Company issued 57,143 warrants to the placement agent as a commission fee, which are exercisable at $13.13 per share for a period of five years from the date of issuance. The Company received net proceeds under this share purchase agreement of $8.9 million.

In May 2023, the Company entered into multiple share purchase agreements for the purchase and sale of 476,187 million common shares at an issuance price of $10.50 per share. In addition to the issuance of common shares, the Company issued 476,187 Series A warrants that are exercisable into one common share of the Company at $12.00 per share for a period of five years from the date of issuance and 476,187 Series B warrants that are exercisable into one common share of the Company at $10.50 per share for a period of eighteen months from the date of issuance. The Company received net proceeds under this share purchase agreement of $5.0 million.

On May 12, 2023, the Company entered into the First Amendment to Second Amended and Restated Membership Interest Purchase Agreement (the “Amendment”), which amended the Purchase Agreement, for the purchase of the Recycling Facility. Under the Amendment, the Selling Stockholder required the Company to deliver an additional 66,667 common shares of the Company to LiNiCo, resulting in the Company issuing a total of 733,333 shares of common stock as part of the purchase price under the Agreements and Amendment, though.

On April 2, 2021, the Company entered into a common share purchase agreement with Tysadco. Pursuant to the agreement, Tysadco had committed to purchase, subject to certain restrictions and conditions, up to $75.0 million worth of the Company’s common stock over a 24-month period, expiring March 31, 2023. The Company shall then have the right to direct Tysadco to buy shares at a purchase price of 95% of the average of the 5-day median share price, with a minimum request of $25,000. Under this agreement and during the period, the Company issued 400,000 common shares for aggregate proceeds of $3.6 million.

On June 26, 2023, the Company filed a prospectus supplement related to the offer and sale from time to time of up to 1,666,667 common shares directly by the Company at market prices, or to Tysadco, pursuant to the terms of written sales agreement(s) (“June Prospectus”). Pursuant to the June Prospectus, the Company may offer and sell up to 1,666,667 common shares of the Company at a purchase price of 95% of the weighted-average of the 5-day median share price, with a minimum request of 33,333 shares. During the period, the Company issued 33,333 common shares. Proceeds of $2.7 million were received after the consolidated balance sheet date of June 30, 2023.

On May 17, 2023, the Company reclaimed 58,712 common shares from a former professional service provider. The Company recorded an adjustment to stockholders’ equity for the par value of these shares.

During the fiscal year ended June 30, 2024, there were 118,762 common shares issued related to warrants exercised, of which 85,428 common shares were issued pursuant to cashless exercise. In addition, there were 539,435 warrants vested related to previously granted stock-based compensation to officers of the Company, and of those,171,500 warrants granted upon election by officers of the Company to receive warrants and RSUs in lieu of cash bonuses. The weighted average grant date fair value of warrants issued during the fiscal year ended June 30, 2024 totaled $1.90. The warrants have contractual terms offive years and vest over the respective employee’s requisite service period ofthree tofive years.

During the fiscal year ended June 30, 2023, the Company received cashless warrant exercises of 50,000, however the resulting 45,545 common shares were issued after year-end, during the first fiscal quarter ending September 30, 2023.

The Company established the 2021 Retention Plan (“the Retention Plan”) to issue shares in the effort to retain key executives, directors, and employees. The Retention Plan allows for several different types of awards to be granted, including but not limited to, warrants, restricted share units and restricted share awards, collectively referred to as “share awards”. Share awards generally have the same expense characteristics under US GAAP and generally vest over a four-year period at a rate of 25% per annum.

Under the Retention Plan, the Company is authorized to issue shares of common stock to employees and non-employees up to ten percent (10%) of the total number of shares of common stock outstanding as of December 31, 2022, on a fully diluted basis. The Company adjusts the authorized shares under the plan each December 31, while the Retention Plan remains in effect. During the fiscal year ended June 30, 2024 and 2023, the Company granted 3.3 million and 2.2 million share awards, respectively, under the Retention Plan.

The table below reflects the share award activity for the periods ended June 30, 2024 and 2023:

As awards are granted, stock-based compensation equivalent to the fair market value of the underlying common stock on the date of grant is expensed over the requisite service period, generally four years with a maximum contractual term of ten years, using the graded vesting attribution method as acceptable under ASC 718, “Stock-Based Compensation.” The Company accounts for forfeitures as they occur. The fair value of share awards that vested during the fiscal year ended June 30, 2024 totaled $5.3 million.

The Company recognized stock-based compensation expense of $14.6 million and $9.8 million for the fiscal years ended June 30, 2024 and 2023, respectively. Of these amounts, $7.5 million and $4.5 million, respectively, were related to officers and directors of the Company. For the fiscal years ended June 30, 2024 and 2023, total stock-based compensation expense included $1.9 million and $0.8 million, respectively, related to warrants awarded to officers of the Company. As of June 30, 2024 and 2023, the equity compensation liability totaled $0.4 million andnil related to warrants awarded to officers of the Company, respectively. See Correction of Previously Issued Consolidated Financial Statements in Note 3. As of June 30, 2024 several grant performance targets for the fiscal year ended June 30, 2024 have been defined via employee and retention agreements. These performance targets have not yet been achieved by employees and officers; thus, the Company has deferred recognition of stock-based compensation expense of $0.4 million until such achievements are probable of achievement and approval by the board of directors has occurred.

As of June 30, 2024, there were approximately $11.2 million of unamortized expenses relating to outstanding equity compensation awards to be recognized over a remaining weighted-average period of 2.8 years.

The table below presents the stock-based compensation expense per respective line item of the consolidated statements of operations for the fiscal years ended June 30:

Executive officers and selected other key employees are eligible to receive common share performance-based awards, as determined by the board of directors. The payouts, in the form of share awards, vary based on the degree to which corporate operating objectives are met. These performance-based awards typically include a service-based requirement, which is generally four years.

The Company has not recognized any income tax provisions for the fiscal years ended June 30, 2024 and 2023. The U.S. federal corporate statutory rate of 21.0% is the only applicable corporate tax rate used for fiscal years ended June 30, 2024 and 2023. The statutory rate differs from the Company’s computed expected tax recovery rate due to the following adjustments for the fiscal years ended June 30:

The significant components of deferred income tax assets and liabilities at June 30, after applying the statutory corporate income tax rate, are as follows for the fiscal years ended June 30:

We believe that it is more likely than not that the benefit from certain NOL carryforwards will not be realized. At June 30, 2024 and 2023, respectively, we have provided a valuation allowance of $32.2 and $21.0 million on the deferred tax assets recorded to date. If our assumptions change and we determine that we will be able to realize these NOL carryforward amounts, the Company will adjust its disclosures appropriately.

As of June 30, 2024, the Company has accumulated federal and state net operating loss carryforwards of approximately $120.8, and $5.4 million, respectively. If unused, $2.5 million of our federal net operating loss carryforwards will expire in 2032, and $118.3 million will carryforward indefinitely. Approximately $3.5 million of our state net operating loss carryforwards will begin toexpire in 2041 and $1.9 million will carryforward indefinitely .In addition, under the Tax Cuts and Jobs Act (Tax Act) the amount of federal net operating losses generated in taxable periods beginning after December 31, 2017, that we are permitted to deduct in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the net operating loss deduction itself. The Tax Act generally eliminates the ability to carry back any net operating loss to prior taxable years, while allowing post-2017 unused net operating losses to be carried forward indefinitely. The Company also has $0.3 million of federal Research and Development Credit carryforwards that will expire in 2041.

Utilization of net operating losses, credit carryforwards, and certain deductions may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The tax benefits related to future utilization of federal and state net operating losses, tax credit carryforwards, and other deferred tax assets may be limited or lost if cumulative changes in ownership exceeds 50% within any three-year period. Additional limitations on the use of these tax attributes could occur in the event of possible disputes arising in examinations from various taxing authorities. Any net operating loss or credit carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets.

Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective for fiscal years beginning after January 1, 2022. The mandatory capitalization requirement increases our deferred tax assets and is fully offset with the valuation allowance.

The Company has recorded uncertain tax positions (“UTP”) that result in unrecognized tax benefits recorded on the books of the Company. The unrecognized tax benefits for the Company are as follows as of June 30:

In the fiscal year ended June 30, 2022, the Company recorded an uncertain tax position related to shares issued to service providers during open tax years. In fiscal year ended June 30, 2023 the Company filed all necessary tax returns and paid approximately $75,000 in penalties and interest remediating past-due payroll tax requirements, for which the Company had accrued at June 30, 2022 and therefore reversed the associated uncertain tax position during the fiscal year ended June 30, 2023.

The Company accrued for an uncertain tax position during the fiscal year ended June 30, 2023 related to Section 162(m) of the Internal Revenue Code, which limits the deductibility of compensation paid to certain executive officers in excess of $1.0 million in any fiscal year. The Company reversed the unrecognized tax position during the fiscal year ended June 30, 2024 and has accounted for the limitation as a reduction of its net operating loss carryforward.

The Company does not have an accrual for interest or penalties related to uncertain tax positions as of June 30, 2024.

The Company files U.S. and state income tax returns with varying statutes of limitations. The tax returns for fiscal years ended September 30, 2016, to June 30, 2023, remain open to examination due to the carryover of unused NOL carryforwards and tax credits. The Company is not under examination by any tax authority as of June 30, 2024.

For the fiscal years ended June 30:

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Except as otherwise identified herein, management is currently not aware of any such legal proceedings or claims that could have, individually or in aggregate, a material adverse effect on our business, financial condition, or operating results.

Operating Leases

The Company leases its principal office location in Reno, Nevada. It also leases lab space at the University of Nevada, Reno on short term leases. The principal office location lease expires on November 30, 2024 and the Lab leases expire on November 30, 2024. Consistent with the guidance in ASC 842, The Company has recorded the principal office lease in its consolidated balance sheet as an operating lease. For further information on operating lease commitments, see Note 12 – Leases.

Financial Assurance

Nevada and other states, as well as federal regulations governing mine operations on federal land, require financial assurance to be provided for the estimated costs of mine reclamation and closure, including groundwater quality protection programs. The Company has satisfied financial assurance requirements using a combination of cash bonds and surety bonds. The amount of financial assurance The Company is required to provide will vary with changes in laws, regulations, reclamation and closure requirements, and cost estimates. At June 30, 2024, the Company’s financial assurance obligations associated with U.S. mine closure and reclamation/restoration cost estimate totaled $0.1 million, for which the Company is legally required to satisfy its financial assurance obligations for its mining properties in Tonopah, Nevada. The Company was previously released of all of its liability in the Railroad Valley region of Nevada.

On July 3, 2024, the Company and Mercuria Energy America, LLC agreed to resolve their respective disputes related to a Marketing Agreement entered into in May 2023. Under the terms of the Settlement Agreement, the Company agreed to make six monthly payments to Mercuria Energy America, LLC of $0.3 million. Upon the completion of the payments, the parties agreed to release any and all claims, disputes, actions, suits, proceedings, demands and/or liabilities in law and/or equity or otherwise. The total amount of payments due of $1.8 million has been accrued as of June 30, 2024.

On August 1, 2024, the Company agreed to sell 76 Units (the “Units” as defined below) to several accredited investors (“Investors”) and two employees (“Insiders”), pursuant to a Subscription Agreement (the “Subscription Agreement”) in a private placement offering (the “Private Placement”). Each Unit for the Investors consists of 25,000 shares of Common Stock (the “Shares”) of the Company,25,000 Series A Warrants to Purchase Common Stock (“Series A Warrants” as further described herein) of the Company and 25,000 Series B Warrants to Purchase Common Stock (“Series B Warrants” as further described herein and collectively, with the Series A Warrants, the “Warrants”) (the Shares and Warrants are collectively referred to herein as the “Units”), at the price of U.S. $25,000 per Unit. Each Unit for the Insiders consists of 19,531 shares of Common Stock (the “Shares”) of the Company and 39,062 Series A Warrants to Purchase Common Stock (“Series A Warrants” as further described herein) of the Company (the “Warrants”) (the Shares and Warrants are collectively referred to herein as the “Units”), at the price of U.S. $25,000 per Unit. The Company sold 76 Units for an aggregate purchase price of $1.9 million.

In August 2024, the Company decided to sell some or all of its individual water rights that are recorded as intangible assets on the balance sheet. The Company has an estimated 290.19-acre feet of standalone water rights available for sale.