AMERICAN BATTERY TECHNOLOGY Co

1. Organization and Nature of Operations

American Battery Technology Company (“the Company” or “ABTC”) is a 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.

2. Liquidity and Going Concern

During the three months ended September 30, 2024, the Company incurred a net loss of $11.8 million and used cash of $5.6 million for operating activities. At September 30, 2024, the Company has a cash balance of $5.8 million and an accumulated deficit of $225.0 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 to exist as to the Company’s ability to continue as a going concern for 12 months from issuance of these financial statements. These condensed 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 sources of liquidity.

Based on our current operating plan, unless we generate income from the operations of our facilities or 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). If such covenant violations are not waived by the Note holder, it would result in an event of default, causing an acceleration of the outstanding balances. 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.

3. Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U. S. Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements.

The condensed consolidated balance sheet at September 30, 2024, and the condensed consolidated statements of operations, comprehensive income (loss), and changes in stockholders’ equity, and cash flows for the three months ended September 30, 2024 and 2023 are unaudited, but include all adjustments, consisting of normal recurring adjustments the Company considers necessary for a fair presentation of the financial position, operating results, and cash flows for the periods presented. The results for the three months ended September 30, 2024 are not necessarily indicative of results to be expected for the year ending June 30, 2025 or for any future interim period. The condensed consolidated balance sheet at June 30, 2024 has been derived from audited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2024 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 as filed with the SEC on September 23, 2024. The Company’s consolidated subsidiaries consist of its wholly owned subsidiaries, Oroplata Exploraciones E Ingenieria SRL (dissolved), LithiumOre Corporation (formerly Lithortech Resources Inc), ABMC AG, LLC (dissolved) and Aqua Metals Transfer LLC.

The accompanying condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

As disclosed in the Company’s FY 2024 Form 10-K, 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 $1.6 million as of and for the quarter ended September 30, 2023. As certain of these awards are liability-classified, the correction of this error resulted in an increase of $0.2 million in accounts payable and accrued liabilities for the current portion of the awards, and an increase of $1.4 million in additional paid-in capital for the awards where the number of common share warrants or RSUs are fixed as of September 30, 2023.

The Company also identified an error in application of ASC 815, “Derivatives and Hedging,” related to the initial and subsequent recognition of a freestanding call option in the Company’s convertible notes that does not qualify for equity classification. ASC 815 requires bifurcation of the freestanding call option with subsequent changes in the fair value of the bifurcated derivative to be recorded in earnings. At issuance of the convertible notes, the Company should have recognized a derivative liability and a corresponding discount on the convertible notes resulting from bifurcation of the derivative, with subsequent changes in the fair value of the derivative liability and accretion of the discount recorded in earnings.

The correction of this error resulted in an increase in amortization and accretion of financing costs expense of less than $0.1 million for the quarter ended September 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 quarter ended September 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.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Use of Estimates

The preparation of these condensed 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, valuation and recoverability of long-lived assets and intangible assets subject to impairment testing, and deferred income tax asset valuation allowances.

Cash and Cash Equivalents

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 September 30, 2024 and June 30, 2024.

Fair Value of Financial Instruments

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 approximate fair value due to their short maturities.

The Company’s recurring fair value measurements include the valuation of the derivative liabilities for the bifurcated notes payable freestanding call and conversion options and for the liability-classified equity-linked contracts, both of which are classified as Level 3 of the fair value hierarchy. See Notes 6 and 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 September 30, 2024. See Note 7 for relevant fair value disclosures.

Adoption of Recent Accounting Pronouncements

The Company continually assesses new accounting pronouncements to determine their applicability. When it is determined a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a review to determine the consequences of the change to its consolidated financial statements and assures there are sufficient controls in place to ascertain the Company’s consolidated financial statements properly reflect the change.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. The amendments in this ASU are effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which updates income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.

In November 2024, the FASB Issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this update require disclosures, in the notes to financial statements, of specified information about certain costs and expenses. The amendment clarifies which certain costs and expenses that are included in cost of sales and selling, general, and administrative expense categories that should be disclosed with qualitative descriptions of amounts that are not separately disaggregated quantitatively. Additionally, the amendment requires disclosure of total amounts of selling expenses and an entity’s definition of selling expense. The update will be effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.

4. Inventories

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 carrying value of inventory includes those costs to acquire battery feedstock and any related carrying and processing costs incurred by the Company.

5. Government Grants and Tax Credit Awards

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 $0.1 million and $0.2 million as of September 30, 2024 and June 30, 2024, respectively. The Company recognizes invoiced government funds as an offset to R&D costs in the period the qualifying costs are incurred. During the period ended September 30, 2024, the Company recognized $1.4 million of invoiced government funds as an offset to R&D costs. 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 (the “AMMTO 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 September 30, 2024, the cumulative funds invoiced for this grant totaled $2.0 million, which represents 86% 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 (the “USABC grant”) 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, 2024. As of September 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 September 30, 2024, the cumulative funds invoiced for this grant totaled $2.5 million, which represents 4% 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 September 30, 2024, the cumulative funds invoiced for this grant totaled $0.9 million, which represents 9% of the total eligible reimbursements.

On March 28, 2024, ABTC 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 U.S.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 may be utilized both for the reimbursement of capital expenditures spent to date and also future capital expenditures at ABTC’s battery recycling facility in the Tahoe-Reno Industrial Center (TRIC) in Storey County, Nevada. As of September 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, ABTC 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 September 30, 2024, the Company has not incurred any qualifying expenditures towards this tax credit.

On September 23, 2024, the U.S. DOE announced that the Company had been selected for award negotiations for a highly competitive grant for $150 million to be applied towards the construction of a new lithium-ion battery recycling facility.

6. Derivative Liabilities

During the quarter ended September 30, 2024, the Company’s embedded conversion feature on its convertible notes and its outstanding warrants may be treated as derivative liabilities for accounting purposes under ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity,” due to insufficient authorized shares to settle these outstanding equity-linked contracts, while the terms of these instruments still allow the holders to exercise which would require the Company to net-cash settle the instrument. In such cases, the Company has adopted a sequencing approach under ASC 815-40 to determine the classification of its equity-linked financial instruments at issuance and at each subsequent reporting date. Under this sequencing policy, the Company reclassifies to liabilities those equity-linked financial instruments with the most recent issuance or modification date. The derivative liabilities are initial recorded at fair value and subsequently re-valued each reporting date, with changes in fair value reported in the condensed consolidated statements of operations. The Company utilizes the Black-Scholes option-pricing model to value the derivative liabilities at initial reclassification and subsequent valuation dates, adjusted for instrument-specific terms as applicable.

In August 2024, the Company issued common shares and warrants to purchase common shares under private placement subscription agreements. See further discussion at Note 13. As there were insufficient authorized shares available at the time of issuance, the warrants were classified as derivative liabilities, measured at fair value as of issuance, and re-measured to fair value as of September 30, 2024. Of the $1.9 million in proceeds received from the private placement, $0.6 million was received from related parties of the Company, including current employees and an immediate family member of the Chief Executive Officer. The Company recognized common shares and warrants to purchase common shares with a total fair value of $1.4 million, compensation expense of $0.7 million and a loss on private placement of $0.1 million in the condensed consolidated statements of operations. The Company recognized less than a $0.1 million loss on change in fair value of these liability-classified equity-linked financial instruments. As of September 30, 2024, derivative liabilities totaling $0.9 million relate to the warrants held by the related parties in this transaction and are included in long-term liabilities in the condensed consolidated balance sheets.

For the remaining private placement subscription agreements, the Company recognized the fair value of the warrants of $1.7 million and a loss on private placement of $0.6 million as of issuance, and a fair value of $1.7 million as of September 30, 2024, with the loss on change in fair value of less than $0.1 million recorded to change in fair value of liability-classified equity-linked contracts in the condensed consolidated statements of operations. The associated derivative liability is included in long-term liabilities in the condensed consolidated balance sheets.

In September 2024, the Company’s convertible notes were amended to increase the conversion rate of the conversion option. See further discussion at Note 11. Upon modification, the Company no longer had sufficient authorized shares to settle all equity-linked contracts including the convertible notes upon a potential conversion and accordingly, the embedded conversion feature was bifurcated from the convertible notes to be accounted for as a derivative liability. The Company calculated a fair value of the bifurcated conversion feature of $0.7 million as of the modification date and a fair value of $0.9 million as of September 30, 2024, with the loss on change in fair value of $0.2 million recorded to change in fair value of liability-classified financial instruments in the condensed consolidated statements of operations. The associated derivative liability is included in long-term liabilities in the condensed consolidated balance sheets.

During the quarter ended September 30, 2024, the Company issued additional common shares under its ATM and as a result of the Company’s sequencing policy did not have sufficient authorized shares to settle all of its equity-linked financial instruments. The Company reclassified warrants with a fair value of $0.2 million to liabilities and recognized a gain on change in fair value of liability-classified financial instruments of less than $0.1 million in the condensed consolidated statements of operations. The associated derivative liability is included in long-term liabilities in the condensed consolidated balance sheets

The table below sets forth the Black-Scholes inputs and assumptions for the Company’s valuation and re-valuation of its derivative liabilities for the quarter ending September 30:

A summary of the activity related to derivative liabilities for the quarter ending September 30, 2024, is as follows:

7. Property, Plant and Equipment

The table below presents the property, plant and equipment as of September 30, 2024 and June 30, 2024:

The Company recognized depreciation expense of $1.3 million and $36,502 for the three months ended September 30, 2024 and 2023, respectively.

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. As of September 30, 2024, there were no changes to the valuation of assets held-for-sale.

8. Mining Properties

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.

9. Intangible Assets

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. These have an unlimited useful life upon assignment to a property through use of a will-serve, which has no expiration date.

The table below presents total intangible assets at:

10. Accounts Payable and Accrued Liabilities

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

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 was accrued as of June 30, 2024. As of September 30, 2024, $0.9 million remained unpaid.

11. Notes Payable

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 million, comprised of (i) an initial term loan in the aggregate principal amount of $6 million and (ii) delayed draw term loan commitments in an aggregate amount equal to $14 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 the Credit Agreement 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 $22.2 million has been repaid. The remaining $26 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 15 th of each month or may convert the Notes into shares of common stock of the Company (“Conversion Shares”) 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, 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. SeeCorrection 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 three months ended September 30, 2024, the Company recorded a gain of $0.7 million within the change in fair value of the derivative liability in the condensed consolidated statements of operations. As of September 30, 2024, the fair value of the derivative liability was determined to be nil given the expiration of the freestanding call option on October 1, 2024.

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 three months ended September 30, 2024, amortization of debt discount and issuance costs totaled $0.8 million.

On September 13, 2024, the Notes were amended to allow payment of principal totaling $0.6 million in common shares of the Company in lieu of cash, with the remaining principal due in September 2024 deferred to October 2024. Subsequent to September 30, 2024, further payment on the Notes has been deferred by the Buyers while negotiations on a potential amendment to the Notes are on-going. Total common shares of 726,216 were issued with a fair market value of $0.7 million. The Notes were also amended to increase the conversion option rate. The Company concluded that the amendment to the Notes was an extinguishment for accounting purposes due to the increase in the conversion option fair value. The Company recognized a $0.7 million loss on extinguishment in the condensed consolidated statement of operations, comprised of the write-off of the remaining debt discount and debt issuance costs of $0.6 million and the excess of fair value of the common shares paid in lieu of cash over the principal owed of $0.1 million.

The table below presents the net carrying amounts of the Notes as of:

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

12. Leases

A lease provides the lessee the right to control the use of an identified asset for a period in exchange for consideration. Operating lease right-of-use assets (“RoU assets”) are presented within the asset section of the Company’s consolidated balance sheets, while lease liabilities are included within the liability section of the Company’s consolidated balance sheets at September 30, 2024 and June 30, 2024.

RoU assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company determines if an arrangement is a lease at inception. RoU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. 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 discount rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or when that is not readily determinable, the Company estimates a rate of 8.0% for the three months ending September 30, 2024 and 2023, based primarily on historical lending agreements. RoU assets include lease payments required to be made prior to commencement and exclude lease incentives. Both RoU assets and the related lease liability exclude variable payments not based on an index or rate, which are treated as period costs. The Company’s lease agreements do not contain significant residual value guarantees, restrictions, or covenants.

The Company occupies office facilities under lease agreements that expire at various dates, many of which do not exceed a year in length. Total operating lease costs for the three months ended September 30, 2024 and 2023, were each approximately $0.1 million. The Company does not have any finance leases as of September 30, 2024 and 2023.

As of September 30, 2024, current lease liabilities of $0.1 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 at September 30, 2024 and June 30, 2024:

The table below presents the maturities of operating lease liabilities as of September 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 September 30, 2024.

13. Stockholders’ Equity

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 four classes of preferred stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock. As of September 30, 2024 and June 30, 2024, there were 5 andnil shares of Series D Preferred Stock issued and outstanding. A description of each class of preferred stock is listed below.

On September 16, 2024, the Company entered into a Subscription and Investment Representation Agreement with Ryan Melsert, its Chief Executive Officer, who is an accredited investor, pursuant to which the Company agreed to issue and sell five (5) shares of the Company’s Series D Preferred Stock, par value $0.001 per share, to Mr. Melsert for an aggregate purchase price of $100, or $20 per share of Series D Preferred Stock. The sale closed on September 16, 2024. The Series D Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Series D Preferred Stock has no rights with respect to distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company. Each share of Series D Preferred Stock will have 12,000,000 votes and will vote together with the outstanding shares of the Company’s common stock as a single class exclusively with respect to a proposal to amend the Company’s articles of incorporation, as amended, to increase the number of authorized shares of common stock of the Company. The Series D Preferred Stock will be voted, without action by the holder, on such proposal in the same proportion, and in the same manner, as shares of common stock are voted by the shareholders and in no other manner. The Series D Preferred Stock has no other voting rights except as otherwise authorized by the Nevada Revised Statutes.

The Series D Preferred Stock shall be redeemed in whole, but not in part, at any time (i) if such redemption is ordered by the Board of Directors in its sole discretion or (ii) automatically upon the effectiveness of the amendment to the articles of incorporation, as amended, implementing an increase in the number of authorized shares of common stock of the Company. Upon such redemption, the holder of the Series D Preferred Stock will receive consideration of $100. Accordingly, as the Series D Preferred Stock is subject to possible redemption, it is presented as temporary equity, outside of stockholders’ equity, at its redemption amount on the condensed consolidated balance sheets.

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 September 30, 2024 and June 30, 2024.

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 September 30, 2024 and June 30, 2024.

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 September 30, 2024 and June 30, 2024.

Series D Preferred Stock

The Company has 5 shares of Series D Preferred Stock authorized with a par value of $0.001 per share. The Company had 5 shares andnil shares of Series D Preferred Stock issued and outstanding on September 30, 2024 and June 30, 2024.

Common Stock

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

Three months ended September 30, 2024:

During the period the Company issued 353,221 common shares upon vesting of share-based awards.

On April 3, 2024, the Company entered into an ATM sales agreement with Virtu Americas LLC, pursuant to whichthe 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. On September 30, 2024, the Company 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 5,938,786 common shares, related to the ATM sales agreement, for total proceeds of $6.3 million, of which $0.1 million is recorded as a subscription receivable on the consolidated balance sheet at September 30, 2024. In addition, the Company settled the issuance of 487,838 common shares for a total of $0.6 million that was included in subscriptions receivable as of June 30, 2024.

On August 1, 2024, the Company agreed to sellin a private placement 53 Group A Units (defined below) to several accredited investors and 23 Group B Units to the Company’s new Chief Operating Officer, to an immediate family member of the Chief Executive Officer, and to two current employees, a portion of which was rescinded on November 12, 2024, resulting in the sale of a total of only 18 Group A Units and 23 Group B Units in such private placement. Each “Group A Unit” consists of 25,000 shares of Common Stock,25,000 Series A warrants with a five-year term to purchase Common Stock (“Series A Warrants”) and 25,000 Series B Warrants with an 18-month term to purchase Common Stock (collectively with the Series A Warrants, the “Warrants”) with a purchase price of $25,000 per Unit; each “Group B Unit” consists of 19,531 shares of Common Stock and 39,062 Series A Warrants with a five-year term and a purchase price of U.S. $25,000 per Unit. The Company received an initial payment of approximately $1.9 million but after the recission retained only an aggregate purchase price of $1.0 million. The recission is an event that will be accounted for as part of the second quarter results.

Upon issuance, the Company concluded that it had insufficient authorized shares to settle the warrants (see Note 6). As the warrants are therefore liability-classified and remeasured at fair value each reporting period, the Company allocated the proceeds first to the warrants with any residual proceeds allocated to the common shares. A day-one loss is recognized to the extent the recognized fair value of common shares and warrants exceeds the proceeds received.

During the period, the Company issued 726,216 common shares pursuant to the debt conversion option in lieu of cash payment of $0.6 million (see Note 11). The fair value of the common shares issued of $0.7 million was recorded in additional paid-in capital for this transaction.

On July 22, 2024, the Board of Directors authorized and approved to extend the expiration date to April 30, 2025 for 600,000 certain warrants with an exercise price of $1.125 issued in connection with a previous equity offering which were previously scheduled to expire on October 31, 2024. Of the 600,000 warrants,200,000 warrants are held by Ryan Melsert, Chief Executive Officer. The modification of the warrants resulted in incremental fair value of $0.1 million as of the modification date, of which less than $0.1 million was recognized as stock-based compensation expense for those warrants held by the Chief Executive Officer and the remainder as a deemed dividend per the requirements of ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity.” The Company utilized a Black-Scholes option-pricing model to determine the incremental fair value with assumptions including volatility of 100.47% and a risk-free rate of 5.06%.

During the period, the Company recognized stock-based compensation expense of $3.2 million, which was an increase to additional paid-in capital of $2.4 million and an increase to the equity compensation liability of $0.1 million. Stock-based compensation expense also included the $0.7 million related to the excess fair value related to warrants issued to the Insiders and the incremental fair value from modification of certain warrants discussed above.

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

14. Share Purchase Warrants

During the three months ended September 30, 2024, there were 3,548,426 warrants issued pursuant to the Private Placement (see Note 13), of which 898,426 warrants were purchased by employees of the Company.

15. Equity Compensation Awards

The Company has 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, 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 three months ended September 30, 2024, the Company granted 0.2 million share awards, respectively.

15. Equity Compensation Awards (continued)

The table below reflects the share award activity for the period ended September 30, 2024:

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, “Compensation-Stock Compensation.” The Company accounts for forfeitures as they occur. The fair value of share awards that vested during the quarter ended September 30, 2024 totaled $0.4 million.

The Company recognized stock-based compensation expense of $3.2 million and $3.4 million for the three months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and June 30, 2024, the equity compensation liability totaled $0.5 million and $0.4 million related to warrants and RSUs awarded to officers of the Company, respectively, where the performance target had not yet been achieved by employees and officers but was probable of achievement. Subsequent to September 30, 2024, the performance target has been achieved and approval by the board of directors has occurred.

As of September 30, 2024, there were approximately $8.5 million of unamortized expenses relating to outstanding equity compensation awards to be recognized over a remaining weighted-average period of 2.6 years.

The table below presents the stock-based compensation expense per respective line item on the condensed consolidated statements of operations for the three months ended September 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.

16. Supplemental Statement of Cash Flow Disclosures

For the three months ended September 30:

17. Commitments and Contingencies

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 condensed 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 September 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.

18. Subsequent Events

On June 18, 2024, at the recommendation of the compensation committee of the Company, our board of directors adopted, subject to the receipt of shareholder approval, the American Battery Technology Company 2024 Employee Stock Purchase Plan (the “ESPP”) providing for the issuance of up to 3,000,000 shares of our common stock. On November 13, 2024, at our 2024 annual meeting of shareholders (the “Annual Meeting:”) our shareholders approved the ESPP. The purpose of the ESPP is to provide employees of the Company and its subsidiaries (as set forth in the ESPP) with an opportunity to acquire a proprietary interest in the Company through the purchase of shares of common stock.

On November 12, 2024, part of the private placement transaction executed on August 1, 2024 was rescinded, resulting in an aggregate issuance of 41 units made up of:(i) with respect to non-employee investors, 18 units consisting of 25,000 shares of Common Stock (the “Shares”), 25,000 Series A Warrants to Purchase Common Stock (“Series A Warrants” as further described herein) 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”) (such Shares and Warrants are collectively referred to herein as the “Units”), at the price of U.S. $25,000 per Unit; and (ii) with respect to employee investors, 23 units consisting of 19,531 Shares and 39,062 Series A Warrants (such Shares and Series A Warrants are collectively referred to herein as the “Employee Units”), at the price of U.S. $25,000 per Employee Unit. The Company retained an aggregate purchase price of $1.0 million.

On November 13, 2024, at the Annual Meeting, our shareholders approved and adopted an amendment (the “Amendment”) to the Company’s articles of incorporation, as amended, to increase the number of authorized shares of the Company’s common stock from 80,000,000 to 250,000,000. On November 14, 2024, the Amendment was filed with the Secretary of State of Nevada and was effective upon filing.