AMERICAN BATTERY TECHNOLOGY Co: Form 10-K for the period ended Jun 30, 2024

Introduction

American Battery Technology Company (the “Company”, “we” and “us”) is a technology development and commercialization company in the battery materials sector of the lithium-ion battery industry. The Company is working to increase the domestic US production of critical battery metals. To do so, we are engaged in (i) the exploration of new primary resources of battery metals, (ii) the development and commercialization of new technologies for the extraction and refining of these battery metals from primary resources, and (iii) the commercialization of an internally developed integrated process for the recycling of lithium-ion batteries for the recovery of battery materials. Through this three-pronged approach we are working to both increase the domestic production of these battery materials through the acquisition and exploration of mining claims and to ensure that these constituent elemental metals are returned to the domestic manufacturing supply chain in a closed-loop fashion. In addition, we are committed to operating our business in a safe and environmentally responsible manner by working with our employees, customers, vendors, and local communities to minimize our environmental impact and comply with local, state and federal environmental laws and regulations.

The Company’s corporate headquarters are in Reno, Nevada, and its mineral exploration office is located in Tonopah, Nevada. The Company is commissioning its novel recycling plant for recycling lithium-ion batteries in McCarran, Nevada.

Company History

The Company was incorporated as Oroplata Resources, Inc. 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. On August 8, 2016, the Company formed Lithortech Resources Inc. as a wholly owned subsidiary of the Company to serve as its operating subsidiary for lithium resource exploration and mine development. On June 29, 2018, the Company changed the name of Lithortech Resources to LithiumOre Corp. (“LithiumOre”). On May 3, 2019, the Company changed its name to American Battery Metals Corporation. On August 12, 2021, the Company further changed its name to American Battery Technology Company, which better aligns with the Company’s current business activities and future objectives.

Industry Overview

Lithium-ion batteries have become the rechargeable battery of choice in cell phones, computers, electric vehicles, and large scale electric stationary storage systems. Global production capacity of lithium-ion batteries was approximately 1,570 gigawatt hours per year (“GWh/yr”) at the end of 2023 and is forecasted to grow to approximately 6,790 GWh/yr by 2031, primarily driven by demand for electric vehicles. There continues to be long-term regulatory and social movement driving demand growth for electric vehicles and large-format energy storage systems. This, in turn, is driving significant demand for battery materials such as lithium, cobalt, nickel, and manganese.

Lithium-ion batteries are designed in a variety of form-factors and chemistries. Current cell-level form-factors utilized are primarily cylindrical, prismatic, and pouch geometries. The most common battery cathode chemistries that have emerged are lithiated nickel cobalt aluminum oxide (“NCA”), lithiated nickel manganese cobalt oxide (“NMC”), lithiated cobalt oxide (“LCO”), and lithiated iron phosphate (“LFP”). The most common battery anode chemistries consist of graphite, silicon, and lithium metal. These chemistries are expected to evolve based on the development of new technologies and the availability, cost, and life-cycle environmental footprint of required minerals.

The current manufacturing supply chain for lithium-ion batteries is segmented and is organized into sub-industries that operate in a closed-loop fashion:

• battery material providers,
• chemical refiners,
• cell manufacturers, and
• end-use product (electric vehicle, stationary storage, consumer electronics, etc.) manufacturers.

Battery material providers can be classified into two categories: primary producers who explore for and extract virgin resources, and secondary producers who extract minerals from scrap and end-of-life products for re-sale into the lithium-ion battery supply chain. The Company intends to operate in both categories of the battery material supply segment, which is discussed in greater detail below.

Chemical refiners source battery-grade materials from suppliers to manufacture into cell components, including cathodes, anodes, electrolytes, and separators. Currently the vast majority of global refining capacity is located outside the United States, primarily in Asia.

Cell manufacturers source cell components and assemble those components into modules and packs, which are then sold to Original Equipment Manufacturers (“OEM” or “OEMs”). Cell manufacturing is also currently concentrated in Asia, with China accounting for over 75% of global cell manufacturing capacity.

The OEM segment is the final step to manufacturing any end-use product containing lithium-ion batteries. OEM manufacturing capacity for electric vehicles, stationary storage, and consumer electronics is distributed globally and is expected to increase more than an order of magnitude over the next several years.

Each segment of the lithium-ion battery supply chain has seen disparate quantities of investment, with those variations further pronounced with specific geographies. Investment in battery material suppliers, both primary and secondary, and chemical refining capacity, has been far outpaced by investments in cell manufacturing and end-use OEMs, with anticipated battery production capacity forecasted to be roughly ten times the forecasted capacity for precursor metal refining. This disconnect in available feedstock and refining capacity has caused significant imbalances in the global supply chain, with those imbalances even more pronounced within the United States and apparent by the volatility in price of these underlying materials. Further, while there is significant cell manufacturing and OEM manufacturing capacity in the United States, less than 1% of global battery materials needed to supply these facilities are sourced in the US, resulting in a severe domestic capacity imbalance and risk to the domestic economy. This risk in the security and cost of supply has resulted in numerous issues for industries reliant on lithium-ion batteries and has the potential to dramatically slow the adoption of electric vehicles, renewable energy storage and other uses for lithium-ion battery metals.

Overview of Battery Materials Supply

Supply of battery materials is currently dominated by primary production. Development of new sources of primary supply are typically subject to long development times and high capital costs, putting further constraints on the supply of these materials. In addition, the majority of primary production is concentrated in high geopolitical risk locations. Each of the primary minerals discussed are traded on a number of global commodity exchanges and market pricing for each is readily available. Additional details on the primary development of the main critical materials are discussed below:

Lithium: Primary lithium is traditionally extracted from lithium brines or from hard rock deposits, and with recent innovations to also manufacture primary lithium from lithium-bearing claystone resources. Lithium brine deposits are accumulations of saline groundwater that are enriched in dissolved lithium. These deposits can be found in salt flats (such as those in South America), geothermal deposits (such as the Salton Sea in California), and oil fields. Extraction of lithium from brines typically involves large-scale evaporation techniques, thus consuming large amounts of water and energy. Hard rock sources of lithium are typically found in spodumene pegmatite deposits (such as those in Western Australia) and are mined using conventional mining and processing techniques. Extraction of lithium from claystone resources is a relatively new technique with various extraction technologies currently under development.

Nickel: Primary nickel is mined from both surface and underground operations. Traditional processing techniques for nickel involve crushing, leaching, and floatation techniques. The primary competing source of demand for nickel is the steel industry, for both steel alloy and in plating of stainless steel. Supply is currently dominated by production from Indonesia, Philippines, and Russia.

Cobalt: Cobalt is typically mined from open pit and underground operations using traditional mining and processing techniques. The majority of cobalt production is a by-product of copper or nickel production. The competing source of demand for cobalt is steel production where cobalt is utilized as a high-strength steel alloy. Concentration of supply from the Democratic Republic of Congo has given rise to significant environmental, social, and governance (“ESG”) concerns over the supply of primary cobalt resources.

Manganese: Manganese is typically mined from open pit surface mines using traditional mining and processing techniques. As with the previously mentioned minerals, the primary competing source of demand is steel production, where manganese is used as an alloy and to deoxidize steel. South Africa is the world’s largest producer of manganese, followed by Australia and China.

Secondary supply of feedstock, or recycling, is a relatively new market segment that has seen limited investment compared to the other segments of the battery supply chain. Current recycling techniques can be classified into two categories: High temperature thermal processes (pyrometallurgy) and mechanical crushing/simple hydrometallurgy processes. Both techniques process the feedstock batteries into an intermediate compound, a metal matte or black mass, which is then further processed through a refining process to extract the constituent metals. Both processes mainly focus on the recovery of nickel and cobalt. The majority of these operations are located in China and South Korea.

High temperature thermal processes account for the majority of current recycling operations. Batteries are placed into high-temperature furnaces and melted. A number of the key battery materials are lost in the high temperature processing and smelting phase, including lithium, graphite, and aluminum. The remaining metal matte is then processed through a hydrometallurgical refining process. The high temperature processing can present challenges to refining the metal matte from this process into products that meet the high purity specifications required for battery cathode manufacturing. Further, the process is energy intensive and causes substantial air and water pollution.

The mechanical crushing/simple hydrometallurgy approach involves placing batteries into large shredding/grinding machines. The resulting shredded material is then processed to produce a black mass. This resulting back mass is then processed through a bulk hydrometallurgical process designed to remove impurities and extract the high-value minerals. The high level of impurities in the black mass resulting from the shredding/grinding process makes the recovery of battery grade materials challenging. Additionally, the solvents used in the extraction process have adverse environmental impacts and significantly increase the costs associated with the recycling process.

The black mass resulting from the recycling process has become a readily tradable commodity. However, the quality and value of the black mass is highly variable based on the chemistry of the battery that is being processed and the amount of remaining impurities in the material. Metal refiners are developing processes to extract battery-grade materials from the various forms of black mass. The market, and thus pricing, for black mass is still developing.

The overall market and pricing for battery feedstock materials will be driven by the supply/demand balance of each commodity. Chemical refiners require specific purity and quality standards for the inputs for their manufacturing processes. Competition will be based on the ability of producers, both primary and secondary, to deliver reliable quantities of materials that meet the specifications required in the battery manufacturing process, while maintaining cash costs that are below the marginal cost of supply.

Our Business

Lithium-Ion Battery Recycling

The Company has developed a universal lithium-ion battery recycling system that is capable of recycling batteries with both a wide range of form factors (packs, modules, cylindrical cells, prismatic cells, pouch cells, defect and intermediate waste cells, metal scraps, slurries, and powders) and of a wide range of cathode chemistries (lithiated cobalt oxide, lithiated nickel-cobalt-aluminum oxide, lithiated nickel-cobalt-manganese oxide, lithiated nickel-cobalt-manganese-aluminum oxide, lithiated nickel-oxide, and lithiated manganese-oxide) of various relative weighting of transition metals.

The Company’s recycling system is a two-phase process: an automated de-manufacturing process followed by a targeted chemical extraction train to separate the individual high-value metals. The Company intends to commission each phase in sequence. Phase 1, the automated de-manufacturing process, separates the components of battery feedstock material into its constituent components, including scrap metals and cathode and anode powders in the form of black mass filter cake. Scrap metals are then sold as byproducts under various offtake agreements or into the open scrap market. The black mass filter cake produced in this phase will also be sold under offtake contracts or into the open market. Upon commissioning of Phase 2, the black mass produced in Phase 1 will be fed into a proprietary chemical extraction train to extract lithium, nickel, cobalt, and manganese elemental metals and upgrade them to the battery cathode grade specifications demanded by high energy density cathode manufacturers. The commissioning of Phase 1 occurred in the fourth quarter of fiscal year 2024 and the commissioning of Phase 2 is expected to occur in fiscal year 2025.

The Company has acquired and leveraged the experience of several members of its leadership and implementation teams who worked on the design, construction, commissioning, and optimization of one of the largest lithium-ion battery manufacturing giga factories in the world. This significant pool of experience has enabled the team to leverage their knowledge of the failure mechanisms that can cause battery components, cells, and modules to fail leading to the development an automated deconstruction process combined with a targeted hydrometallurgical, non-smelting process that deconstructs battery packs to modules, modules to cells, cells to subcell components, and then sorting and separating those subcell components in a strategic fashion. Because of our uniquely pioneered recycling process, we are able to realize greater net benefits than current conventional methods. These benefits include:

• Decreased air and liquid pollutant emissions through strategic design, and with no high-temperature operations,
• Separation of low value materials early in the processing train allows for high recovery and purity of high value products,
• Metal products manufactured to meet battery cathode specifications are able to re-enter supply chain in closed-loop fashion,
• Throughput of recycling facilities equal to that of manufacturing facilities, on a per region basis,
• Low capital costs, through avoidance of high-temperature operations and minimal generation of waste, and
• Short processing residence times through high-speed strategic disassembly and material handling.

Additional details regarding the recycling plant are discussed in Item 2. Properties.

Industry Collaborations

In September 2019, the Company was selected as the sole winner of the battery recycling portion of the Circularity Challenge hosted by BASF, Stanley Black & Decker, and Greentown Labs. BASF is one of the largest high-energy density cathode manufacturing companies in the US and one of the largest global purchasers of lithium-ion battery metal materials. The challenge was developed to encourage new, innovative technologies for the recycling of large-format lithium-ion batteries, with a goal to establish and develop a circular economy in the battery supply chain. Participants were asked to demonstrate their ability to recycle an end-of-life lithium-ion battery into battery grade minerals that could then be used for the manufacture of new lithium-ion batteries. As the winner, the Company received seed funding, access to the Greentown Labs facilities (see Item 2. Properties), and the exploration of partnership agreements with the host companies. The Company and BASF continue to explore several avenues of collaboration to accelerate the commercialization of the Company’s lithium-ion battery recycling technology.

In October 2021, the Company, as a co-grantee, received a competitively bid $2 million contract award from the US Advanced Battery Consortium (“USABC”). USABC is a subsidiary of the United States Council for Automotive Research LLC and enabled by a cooperative agreement with the U.S. Department of Energy (DOE). The member companies include General Motors, Ford Motor Company, and Stellantis NV. USABC’s mission is to develop electrochemical energy storage technologies that advance commercialization of next generation electrified vehicle applications. 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 by cathode producer and lithium-ion battery recycler BASF, 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 by cell technology developer C4V. The demonstration of the entire closed-loop battery manufacturing supply chain within a single project is meant to foster the establishment of a domestic low-cost and low-environmental impact battery recycling infrastructure.

Competition

The Company expects to recover several types of byproducts as well as battery cathode grade lithium, nickel, cobalt, and manganese products through its recycling process and will compete with two categories of producers of these commodities: competing recycling processers and facilities and primary producers of the battery materials.

Competing recycling processes and facilities are primarily located in the United States, Europe, and China and employ various techniques for extraction of the contained battery metals. In general, processers that employ high-temperature thermal processes or shredding/solvent extraction techniques focus on the recovery of nickel and cobalt, with limited ability to recover lithium, manganese, or other metals. The Company’s process to extract each of the battery components enables the Company to extract additional value from the same amount of feedstock to enable low-cost and low-environmental operations.

Primary producers of lithium, nickel, cobalt, and manganese are distributed globally. Lithium production is largely located in the Americas, Australia, and Asia. Approximately two-thirds of cobalt production is sourced from the Democratic Republic of Congo. Nickel production is dominated by Indonesia, China, and Australia. Manganese production is concentrated in South Africa, Australia, and China.

The commodities and specialty chemicals that are ultimately used by cathode manufacturers are required to meet stringent specifications, whether that mineral is sourced from a primary or a secondary resource. Thus, the competition in these markets will be based on product quality and reliability of supply.

Primary Resource Development & Refining

The Company has been designing and optimizing our internally developed sustainable lithium extraction process for the manufacturing of battery cathode grade lithium hydroxide from Nevada-based sedimentary claystone primary resources. We are currently conducting exploratory drilling programs on over 10,000 acres as part of our Tonopah Flats Lithium Exploration Project. (See Item 2. Properties for additional information).

The Company is currently conducting geological mapping, sampling, geochemical analysis, and proprietary extraction trials to characterize the resource and to quantify the performance of the lithium extraction and manufacturing operations. In parallel with the current exploration activities, the Company is designing and constructing a multi-ton per day pilot scale facility to process sedimentary resource from the project. This facility is intended to demonstrate the commercial viability of the Company’s extraction and refining processes. The Company will continue to analyze the economic competitiveness of the project throughout the demonstration phases.

The Company’s in-house developed extraction technologies do not require the inefficient evaporation ponds associated with conventional lithium-from-brine mining. Our extraction process utilizes a selective leaching process for the low-cost extraction of lithium from claystone sedimentary resources that allows for significantly lower consumption of acid, lower levels of contaminants in the generated leach liquor, and lower overall costs of production.

Industry Collaborations

In October 2021, the Company, as the primary grantee, with DuPont Water Solutions as a sub-grantee, was awarded a $4.5 million competitive grant through the US Department of Energy’s Advanced Manufacturing Office, Critical Materials Innovation program to advance the research, development, and commercialization of its technologies for the mining and manufacturing of battery grade lithium hydroxide from its lithium-bearing claystone deposits. The grant provided partial funding for the development of a multi-tons per day processing facility to implement its lithium refining technology at pilot facility scale which was commissioned in the fourth quarter of fiscal year 2024.

Competition

Primary lithium production is concentrated in the Americas, Australia, and Asia. The lithium that is ultimately used by cathode manufacturers is required to meet stringent specifications, whether that mineral is sourced from a primary or a secondary resource. Thus, the competition in these markets will be based on product quality and reliability of supply.

Employees

As of September 15, 2024, the Company had 96 full-time and 2 part-time employees. Additional workers may be hired on a contract basis as needed.

Available Information

We are subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, we file periodic reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). We make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports on our website at https://americanbatterytechnology.com/ as soon as reasonably practicable after those reports are electronically filed with, or furnished to, the SEC.

An investment in the Company’s securities is subject to a number of risks at any given time. Below is a description of the principal risk factors affecting the Company. The risk factors set out below are not exhaustive and unidentified risks may have potential to adversely affect the Company’s financial condition, operating results, business or future prospects. Investors should carefully consider these risk factors, many of which are beyond the Company’s control, together with other disclosures and market information before investing in the Company’s securities.

Pre-Commercialization Company Risks

Because we have not yet achieved full commercialization, a company like ours is inherently subject to many risks. These risks and difficulties include (a) significant capital requirements and challenges with respect to obtaining financing until we can achieve full commercialization; (b) accumulated and continuing losses; (c) challenges in accurate financial planning; (d) uncertainties resulting from a relatively limited time period in which to develop and evaluate business strategies as compared to companies with longer operating histories; (e) cost and complexity of compliance with significant regulations in connection with our operations and products; (f) reliance on third parties for consulting, laboratory work, regulatory, commercialization or other activities; (g) reliance on third parties to carry out contractual arrangements; and (h) meeting the challenges of the other risk factors described herein. We are subject to all risks incident to an emerging company.

Working Capital Risks

We will need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all. We will need to raise capital over the next 12 months to satisfy such requirements, the receipt of which cannot be assured. We will also require capital in order to fully develop our recycling, extraction and refining operations. We intend to seek additional funds through various financing sources, including the private sale of our equity and debt securities, potential joint ventures with capital partners, grants, government loans, and project financing of our recycling facilities. However, there can be no guarantees that such funds will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to further pursue our business plan and we may be unable to continue operations, in which case you may lose your entire investment.

Risks of Competitive Industry

Inherent to competitive industries, there are risks the Company may be unable to maintain or acquire financing, seek available opportunities, retain existing personnel or hire new personnel, or maintain or acquire technical or other resources, supplies or equipment, all on terms it considers acceptable to complete the development of its projects. Battery recycling is a highly competitive and speculative business. Competing recycling processes and facilities are primarily located in the United States, Europe, and China and employ various techniques for extraction of the contained battery metals. In seeking available opportunities, we will compete with a number of other companies, including established, multi-national companies that have more experience and resources than we do. There also may be other small companies that are developing similar processes and are farther along than the Company. Because we may not have the financial and managerial resources to compete with other companies, we may not be successful in our efforts to develop technology which is commercially viable.

Business Model Risks

We intend to engage in the business of lithium recycling through proprietary recycling technology. While the production of lithium-ion recycling is an established business, to date most lithium-ion recycling has been produced by way of performing bulk high temperature calcinations or bulk acid dissolutions. We have developed a highly strategic recycling processing train that does not employ any high temperature operations or any bulk chemical treatments of the full battery. We have tested our recycling process on a small scale and to a limited degree; however, there can be no assurance that we will be able to produce battery metals in commercial quantities at a cost of production that will provide us with an adequate profit margin. The uniqueness of our process presents potential risks associated with the development of a business model that is untried and unproven as we undertake the build-out and operation of a large-scale facility capable of recycling commercial quantities. There can be no assurance that as we commence large scale manufacturing or operations that we will not incur unexpected costs or hurdles that might restrict the desired scale of our intended operations or negatively impact our projected gross profit margin.

Share Price Risks

The market price of the stock of a publicly traded company is affected by a number of variables, many of which are outside the Company’s control. Such factors include: the general condition of markets for resource stocks, and particularly for stocks of lithium exploration and development companies and other battery-metals stocks; the general strength of the economy; the availability and attractiveness of alternative investments; analysts’ recommendations and their estimates of financial performance; investor perception and reactions to disclosures made by the Company, and by the Company’s competitors; future securities sales; reputational risks of the Company; and the breadth of the public markets for the stock. Investors could suffer significant losses if the Company’s common stock is depressed or illiquid when an investor seeks liquidity.

Market Risks

The Company is exposed to commodity price movements for the inventory it holds and the products it plans to produce. Commodity price risk management activities are currently limited to monitoring market prices. The Company’s future revenues, if any, are sensitive to the market prices of the metals contained in its planned products.

The Company’s projects are highly dependent on the demand for and uses of lithium-based end products. This includes lithium-ion batteries for electric vehicles and other large format batteries that currently have limited market share and whose projected adoption rates are not assured. To the extent that such markets do not develop in the manner contemplated by the Company, then the long-term growth in the market for lithium products will be adversely affected. This would inhibit the potential for development of the projects, their potential commercial viability and would otherwise have a negative effect on the business and financial condition of the Company. In addition, as a commodity, lithium market demand is subject to the substitution effect in which end-users adopt an alternate commodity as a response to supply constraints or increases in market pricing. These circumstances could limit the quantity of customers and prices paid for our products. To the extent that these factors arise in the market for lithium, it could have a negative impact on overall prospects for growth of the lithium market and pricing, which in turn could have a negative effect on the Company and its projects.

Product Price and Quality Risks

The ability to reach and sustain profitable operations on the recycling and extraction projects, if and to the extent the projects are developed and enter full commercial operation, will be significantly affected by changes in the market price of lithium-based end products. The market price of these products fluctuates widely and is affected by numerous factors beyond the Company’s control, including world supply and demand, pricing characteristics for alternate energy sources such as oil and gas, government policy and laws, interest rates, the rate of inflation and the stability of currency exchange rates, and other geopolitical and global economic factors. Such external economic factors are influenced by changes in international investment patterns, various political developments and macro-economic circumstances. Furthermore, the price of lithium products is significantly affected by their purity and performance, and by the specifications of end-user battery manufacturers. If the products produced from the Company’s projects do not meet battery-grade quality and/or do not meet customer specifications, pricing will be reduced from that expected for battery-grade product. In turn, the company may lose or fail to attract customers. The Company may not be able to effectively mitigate pricing risks for its products. Depressed pricing for the Company’s products will affect the level of revenues expected to be generated by the Company, which in turn could affect the value of the Company, its share price and the potential value of its properties.

Project and Process Risks

The processes contemplated by the Company for refining of extracted materials and refining of recycled materials have not previously been demonstrated at commercial scale. There are risks that efficiencies of recovery and throughput capacity will not be met, and risks that scaled production will not be cost effective or operate as expected. In addition, there is potential for unforeseen costs, additional changes to the process chemistry and engineering, and other unforeseen circumstances that could result in delays to the projects or increased capital or operating costs.

The Company is in the process of exploring and assessing a mineral resource in Tonopah, Nevada, with the intent of progressing the project to mining and processing activities. The Company has no prior history of completing the development of a mining project or conducting mining operations. If found to be economically feasible, the future development of mineral resources will require the construction and operation of a mine, processing plant and related infrastructure. While certain members of management have mining development and operational experience, the Company does not have any such experience as a collective organization. As a result of these factors, the Company’s future success is more uncertain than if it had a proven operating history.

If the Tonopah project advances, the Company is and will continue to be subject to all risks inherent with establishing new mining operations including: the time and costs of construction of mining and processing facilities and related infrastructure; the availability and costs of skilled labor and mining equipment and supplies; the need to obtain necessary environmental and other governmental approvals, licenses and permits, and the timing of the receipt of those approvals, licenses and permits; the availability of funds to finance construction and development activities; potential opposition from non-governmental organizations, indigenous peoples, environmental groups or local groups which may delay or prevent development activities; and potential increases in construction and operating costs due to various factors, including changes in the costs of fuel, power, labor, contractors, materials, supplies and equipment.

It is common in new mining operations to experience unexpected costs, problems and delays during construction, commissioning and mine start-up, as well as delays in the early stages of mineral production.

The Company is concurrently overseeing the advancement of our major lithium projects. Work to advance these projects requires the dedication of considerable time and resources by the Company and its management team. The advancement of the projects concurrently brings with it the associated risk of strains on managerial, human and other resources. The Company’s ability to successfully manage each of these processes will depend on a number of factors, including its ability to manage competing demands on time and other resources, financial or otherwise, and successfully retain personnel and recruit new personnel to support its growth and the advancement of its projects.

Risks Relating to the U.S. DOE Grant Programs

The DOE’s invitation to enter into confirmatory due diligence and term sheet negotiations is not an assurance that DOE will offer a term sheet to the applicant, or that the terms and conditions of any term sheet will be consistent with the terms proposed by the applicant. The outcome of the Company’s application to the DOE for funding is wholly dependent on the results of DOE advanced due diligence and DOE’s determination whether to proceed, and there can be no assurances as to the outcome of such due diligence review, whether the DOE will determine to proceed and as to the terms and conditions of any term sheet that may be offered, if any.

Permitting Risks

Our operations in the United States are subject to the federal, state and local environmental, health and safety laws applicable to the reclamation of lithium-ion batteries and exploration for, and the development and operation of, mineral properties. Depending on how any particular operation is structured, our operations and related facilities will have to obtain environmental permits or approvals to operate, including those associated with, among other things, air emissions, water discharges, waste management and storage, and exploration and development of mineral properties on federal lands and related processing facilities. We may face opposition from local residents or public interest groups to the installation and operation of our facilities. Failure to secure (or significant delays in securing) the necessary approvals could prevent us from pursuing some of our planned operations and adversely affect our business, financial results and growth prospects. Additionally, there can be no certainty that current permits will be maintained, permitting changes will be approved, estimated permitting timelines will be met, estimated costs will be accurate, or additional or approvals required to carry out recycling, extraction and refining will be obtained. There is the risk that existing permits will be subject to challenges of regulatory administrative processes and similar litigation and appeal processes. Litigation and regulatory review processes can result in lengthy delays, with uncertain outcomes. Such issues could impact the expected timelines of the Company’s projects and consequently have a material adverse effect on the Company’s prospects and business.

Geopolitical Risks

In recent years there has been a substantial increase in political tensions, which is particularly acute in respect to lithium. Lithium has been identified as a ‘critical mineral’ in multiple jurisdictions and is the subject of increasingly active industrial policy. The Company does not believe this will result in a substantive adverse change to its business or operations. However, the Company does expect that over time it may limit our ability to undertake business opportunities with actors from non-Western countries.

Cost Estimate Risks

Capital costs, operating costs, raw materials costs, production and other estimates may differ significantly from those anticipated by the Company’s current estimates, and there can be no assurance that the Company’s actual costs will not be higher than currently anticipated. The Company’s actual costs and production may vary from estimates for a variety of reasons, including, but not limited to: lack of or availability of raw materials, resources or necessary supplies or equipment; inflationary pressures flowing from global supply chain shortages and increased transportation costs, which in turn are causing increased costs for supplies and equipment; increasing labor and personnel costs; unexpected construction or operating problems; higher than expected cost of commodities or feedstock; lower than expected realized lithium prices; revisions to construction plans; risks and hazards associated with exploration or mineral production; natural phenomena; floods; unexpected labor shortages or strikes; and general inflationary pressures. Many of these factors are beyond the Company’s control and could have a material effect on the Company’s operating cash flow, including the Company’s ability to service its indebtedness.

Operating Risks

The Company’s operations are subject to all the hazards and risks normally incidental to the exploration for, and the development and operation of, mineral properties. The Company strives to implement comprehensive health and safety measures designed to comply with government regulations and protect the health and safety of the Company’s workforce in all areas of its business. The Company also strives to comply with environmental regulations in its operations. Nonetheless, risks associated with the Company’s planned operations include fires, power outages, shutdowns due to equipment breakdown or failure, aging of equipment or facilities, unexpected maintenance and replacement expenditures, human error, labor disruptions or disputes, inclement weather, higher than forecast precipitation, flooding, shortages of water, explosions, releases of hazardous materials, landslides, earthquakes, industrial accidents and explosions, protests and other security issues, and the inability to obtain adequate machinery, equipment or labor due to shortages, strikes or public health issues such as pandemics.

Risk of Hazardous Substances

We may be held responsible for the costs of remediating contamination at the site of current or former activities or at third party sites or be held liable to third parties for exposure to hazardous substances should those be identified in the future. Under the U.S. Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) and its state law equivalents, current or former owners of properties may be held jointly and severally liable for the costs of site cleanup or required to undertake, remedial actions in response to unpermitted releases of hazardous substances at such property, in addition to, among other potential consequences, liability to governmental entities for the cost of damages to natural resources, which may be significant.

Costs and Requirements of Being a Public Company

As a public reporting company, we are subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended, and other federal securities laws, rules and regulations. Complying with these laws and regulations requires more time and attention of our Board of Directors and management and requires additional employees compared to a privately-held company. In addition, the costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC, furnishing audited reports to stockholders, maintaining more comprehensive compliance functions, policies and procedures, and corporate governance, are greater than that of a privately-held company.

Risk of Fraud, Misconduct, or Non-Compliance with Anti-Corruption Laws

We may be exposed to fraud, non-compliance with anti-corruption laws, or other misconduct committed by our employees, potential joint venture partners, representatives, agents, vendors, customers or other third parties undertaking actions on our behalf that could subject us to litigation, financial losses and fines or penalties imposed by governmental authorities and affect our reputation.

Such misconduct could include, but is not limited to, misappropriating funds, engaging in misrepresentation or fraudulent, deceptive or otherwise improper activities, including activities in exchange for personal benefit or gain or activities that otherwise do not comply with applicable laws or our internal policies and procedures. The risk of fraud or other misconduct could increase as we expand our business.

Risk of Failure to Meet Development Timelines and Capital Estimates

Our required capital expenditures can be complex and challenging to predict, may experience delays or other difficulties, and the costs may exceed our estimates.

Our capital expenditures primarily consist of substantial investments in new or used equipment, facilities and properties, as well as expenditures to maintain and improve existing equipment, facilities and properties. Execution of these capital expenditures can be complex, and commencement of production requires start-up, commission and certification of product quality by our customers, which may impact the expected output and timing of sales of product from such facilities. Construction of large operations is subject to numerous risks and uncertainties, including, among others, the ability to complete a project on a timely basis and in accordance with the estimated budget for such project and our ability to estimate future demand for our products. In addition, our returns on these capital expenditures may not meet our expectations. Future capital expenditures may be significantly higher, depending on the investment requirements of each of our business lines, and may also vary substantially if we are required to undertake actions to compete with new technologies in our industry. We may not have the capital necessary to undertake these capital investments. If we are unable to do so, we may not be able to effectively compete in some of our markets.

Risk of Failure to Comply with Covenants

The Company has contractual arrangements that contain affirmative and negative covenants that must be adhered to. It is possible that the Company could fail to meet the requirements of one or more covenants, resulting in penalties or acceleration of amounts due. No assurance can be given that a breach will not occur. This could result in a default under our credit agreements that would permit the applicable lenders to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. If we are unable to repay our debt, creditors would have the right to proceed against the collateral securing the debt. This in turn could have a material adverse effect on the Company’s business and operations.

Going Concern Risk

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 to meet expected cash requirements. 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. In their report on our financial statements included in this Form 10-K, our independent auditors have expressed substantial doubt about our ability to continue as a going concern.

Risks from Changing Regulations and Laws

Changes to government laws and regulations may affect the development of the Company’s projects. Such changes could include laws relating to grant funds availability, taxation, royalties, restrictions on production, environmental, biodiversity and ecological compliance, mine development and operations, mine safety, permitting and numerous other aspects of the business.

Environmental Risks and Regulations

The Company must comply with stringent environmental regulations. These are evolving in a manner that is expected to require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. Applicable environmental laws and regulations may require enhanced public disclosure and consultation. It is possible that a legal protest could be triggered through one of these requirements or processes that could delay development activities. No assurance can be given that new environmental laws and regulations will not be enacted or that existing environmental laws and regulations will not be applied in a manner that could limit or curtail the Company’s development programs. Such changes in environmental laws and regulations and associated regulatory requirements could delay and/or increase project costs or increase the risk of environmental liability associated with project operations. This in turn could have a material adverse effect on the Company’s business and operations.

Insurance Risks

While the Company maintains insurance to protect against certain risks associated with its business, insurance may not be available to insure against all risks, or the costs of such insurance may be uneconomic. The Company may also elect not to obtain insurance for other reasons. Insurance policies maintained by the Company may not be adequate to cover the full costs of actual liabilities incurred by the Company or may not be continued by insurers for reasons not solely within the Company’s control. The Company maintains liability insurance in accordance with industry standards. However, losses from uninsured and underinsured liabilities have the potential to materially affect the Company’s financial position and prospects.

Health and Safety Risks

The Company carries a risk of liability related to workers’ health and safety. Compliance with health and safety laws, and any changes to such laws, and the requirements of applicable permits and other regulatory requirements remains material to the Company’s business. The Company may become subject to government orders, investigations, inquiries or other proceedings (including civil claims) relating to health and safety matters. The occurrence of any of these events or any changes, additions to or more rigorous enforcement of health and safety laws, permits or other approvals could have a significant impact on operations and result in additional costs or penalties. In turn, these could have a material adverse effect on the Company’s reputation, operations and future prospects.

Risk of Catastrophic Events, Terrorism and War

The occurrence or threat of extraordinary events, including domestic and international terrorist attacks, may disrupt our operations and decrease demand for our products. Certain assets may be at greater risk of future terrorist attacks than other possible targets in the United States and around the world. Extraordinary events cannot be predicted, and their occurrence may negatively affect the economy in general, and the markets for our products in particular. The resulting damage from a direct attack on our assets, or assets used by us, could include loss of life and property damage. In addition, available insurance coverage may not be sufficient to cover all the damage incurred or, if available, may be prohibitively expensive.

Risk of Accounting Estimates and Impairment Charges

We make certain accounting estimates and projections in connection with our impairment analysis for long-lived assets in accordance with applicable accounting guidance. An impairment charge may be required if the impairment analysis indicates that the carrying value of an asset exceeds the sum of the expected undiscounted cash flows of the asset. The projection of future cash flows used in this analysis requires the use of judgment and a number of estimates and projections of future operating results. If actual results differ from Company estimates, additional charges for asset impairments may be required in the future. If impairment charges are significant, our financial results could be negatively affected.

Mineral Resource and Mineral Reserve Estimation Risks

Mineral Resources and Mineral Reserves figures are estimates only. Estimated tonnages and grades may not be achieved if the projects are brought into production; differences in grades and tonnage could be material; and, estimated levels of recovery may not be realized. The estimation of Mineral Resources and Mineral Reserves carries with it many inherent uncertainties, of which many are outside the control of the Company. Estimation is by its very nature a subjective process, which is based on the quality and quantity of available data, engineering assumptions, geological interpretation and judgements used in the engineering and estimation processes. Estimates may also need to be revised based on changes to underlying assumptions, such as commodity prices, drilling results, metallurgical testing, production, and changes to mine plans of operation. Any material decreases in estimates of Mineral Resources or Mineral Reserves, or an inability to extract Mineral Reserves could have a material adverse effect on the Company, its business, results of operations and financial position.

Any estimates of Inferred Mineral Resources are also subject to a high degree of uncertainty and may require a significant amount of exploration work to determine if they can be upgraded to a higher confidence category. Risks associated with upgrading the Tonopah project to a higher confidence category include the accuracy of fault modeling and offset of lithium-hosting lithologies on western-side of mineral resource, the lack of project-specific lithologic density data, the accuracy of processing cost used in the pit optimization to define the resource which can potentially affect resource cut-off grades, and the large fluctuations in commodity prices which can potentially affect resource cut-off grades.

Exploration Stage Company Risks

We cannot assure you about the existence of economically extractable mineralization at this time, nor about the quantity or grade of any mineralization we may have found. Because the probability of an individual prospect ever having reserves is uncertain, our properties may not contain any reserves and any funds spent on evaluation and exploration may be lost. Even if we confirm reserves on our properties, any quantity or grade of reserves we indicate must be considered as estimates only until such reserves are mined. We do not know with certainty that economically recoverable minerals exist on our properties. In addition, the quantity of any reserves may vary depending on commodity prices. Any material change in the quantity or grade of reserves may affect the economic viability of our properties. Further, our lack of established reserves means that we are uncertain about our ability to generate revenue from our operations.

Even if we do eventually discover a mineral reserve on one or more of our properties, there can be no assurance that they can be developed into producing mines and that we can extract those minerals. Both mineral exploration and development involve a high degree of risk, and few mineral properties that are explored are ultimately developed into producing mines.

Water Management Risks

Water management regulations are in place in Nevada where the Company’s projects are located. As such, the Company must obtain sufficient water rights and transfer those rights such that they may be used for planned recycling and extraction projects. The Company’s flowsheets are designed and/or being designed to lower the use of water to the extent possible by incorporating recycling technologies. The availability of water and pricing of water rights are risks that may be heightened by the potential effects of climate change and could have a material adverse effect on the Company’s business.

Climate Change Risks

The introduction of climate change legislation is an increasing focus of various levels of government worldwide. The Company is committed to developing its business with a view to contributing to the low carbon economy. This includes incorporating sustainable energy sources and minimizing the use of non-renewable sources of energy to the extent that renewable sources are available with sufficient capacity, at cost effective pricing and that are complementary to the facilities and site design. However, the use of such low carbon technologies may be more costly in certain instances than non-renewable options in the near-term, or may result in higher design costs, long-term maintenance costs or replacement costs. Additionally, if the trend toward increasing regulations continues, the Company may face increasing operating costs at its projects to comply with these changing regulations. Until then, the Company views the risk of occurrence of such litigation as being low.

Risk of Future Losses and Lack of Profitability

The Company anticipates it will continue to have negative cash flow from operating activities in future periods until profitable commercial production is achieved. Although the Company has cash on hand and access to additional cash, the Company’s ability to continue as a going concern will be dependent upon its ability to generate profits from its proposed operations, or to raise capital through equity or debt financing to continue to meet its obligations and repay its liabilities arising from normal business operations when they come due.

Intellectual Property Risks

The Company relies on the ability to protect its intellectual property rights and depends on patent, trademark and trade secret legislation to protect its proprietary know-how. There is no assurance that the Company has adequately protected or will be able to adequately protect its valuable intellectual property rights or will at all times have access to all intellectual property rights that are required to conduct its business or pursue its strategies, or that the Company will be able to adequately protect itself against any intellectual property infringement claims. There is also a risk that the Company’s competitors could independently develop similar technology, processes or know-how; that the Company’s trade secrets could be revealed to third parties; that any current or future patents, pending or granted, will be broad enough to protect the Company’s intellectual property rights; or, that foreign intellectual property laws will adequately protect such rights. The inability to protect the Company’s intellectual property could have a material adverse effect on the Company’s business, results of operations and financial condition. Additionally, the applied science industry is characterized by frequent allegations of intellectual property infringement. Though we do not expect to be subject to any of these allegations, any allegation of infringement could be time consuming and expensive to defend or resolve, result in substantial diversion of management resources, cause suspension of operations or force us to enter into royalty, license, or other agreement, rather than dispute the merits of such allegation. If patent holders or other holders of intellectual property initiate legal proceedings, we may be forced into protracted and costly litigation. We may not be successful in defending such litigation and may not be able to procure any required royalty or license agreements on acceptable terms or at all.

Risk of Defects in Title

We have investigated our rights to the assets we have purchased and developed, and, to the best of our knowledge, those rights are in good standing. However, no assurance can be given that such rights will not be revoked, or significantly altered, to our detriment. There can also be no assurance that our rights will not be challenged or impugned by third parties, including by governments and non-governmental organizations.

Risks Related to Research, and Development, and Changing Technology

Our research and development efforts may not succeed in addressing changes in our customers’ needs, and our competitors may develop more effective or successful products. The development and adoption of new battery technologies could rely on inputs other than lithium compounds which could significantly impact our prospects and future revenues.

Current and next generation high energy density batteries for use in electric vehicles rely on lithium compounds as a critical input. The pace of advances in current battery technologies, the development and adoption of new battery technologies that rely on inputs other than lithium compounds, or a delay in the development and adoption of next generation high nickel battery technologies that utilize lithium hydroxide could significantly impact our prospects and future revenues. Many materials and technologies are being researched and developed with the goal of making batteries lighter, more efficient, faster charging and less expensive. Some of these could be less reliant on lithium hydroxide or other lithium compounds, especially if the demand for batteries for use in electric vehicles outstrips the available supply of lithium hydroxide or other lithium compounds. We cannot predict which new technologies may ultimately prove to be commercially viable and their share in the overall mix over any time horizon. Commercialized battery technologies that use less lithium compounds could materially and adversely impact our prospects and future revenues.

Joint Venture, Acquisition and Strategic Alliance Risks

Our business strategy includes, in part, entering into potential joint ventures, acquisitions, and strategic alliances with parties involved in the manufacture and recycling of lithium-ion products. Failure to successfully identify or integrate such potential joint ventures, acquisitions or strategic alliances into our operations could adversely affect our business. Joint ventures, acquisitions and strategic alliances may involve significant other risks and uncertainties, including distraction of management’s attention away from normal business operations, insufficient revenue generation to offset liabilities assumed and expenses associated with the transaction, and unidentified issues not discovered in our due diligence process, such as product quality, technology issues and legal contingencies. In addition, we may be unable to effectively integrate any such initiatives into our operations. Our operating results could be adversely affected by any problems arising during or from such activity.

Risks of Relying on Consultants

The Company has relied on, and may continue to rely on, consultants and others for mineral exploration and exploitation expertise. The Company believes that those consultants are competent and that they have carried out their work in accordance with internationally recognized industry standards. However, if the work conducted by those consultants is ultimately found to be incorrect or inadequate in any material respect, the Company may experience delays or increased costs in developing its properties.

Risk of No Dividends

The Company has not paid dividends on its Common Shares since incorporation, and currently has no ability to generate earnings as it is pre-revenue. The Company anticipates that it will retain its earnings and other cash resources for future operations and the ongoing development of its business. As such, the Company does not intend to declare or pay any cash dividends in the foreseeable future. Payment of any future dividends is solely at the discretion of the Board, which will take into account many factors including the Company’s operating results, financial condition and anticipated cash needs.

Information Technology and Cybersecurity Risks

Threats to information technology systems associated with cybersecurity risks and cyber incidents or attacks continue to grow and evolve in terms of severity and sophistication, particularly with the increase in remote work that began during the COVID-19 pandemic. A cybersecurity attack has the potential to compromise the business, financial and other systems of the Company, and could go unnoticed for some time. Risks associated with cybersecurity threats include, among other things, loss of intellectual property, disruption of business operations and safety procedures, loss or damage to worksite data delivery systems, privacy and confidentiality breaches, and increased costs and time to prevent, respond to or mitigate cybersecurity incidents. The Company has implemented a cybersecurity policy and provided training to its personnel as mitigation measures. System and network maintenance, upgrades and similar best practices are also followed. However, despite these measures, the occurrence of a significant cybersecurity incident could have a material adverse effect on the Company’s business and result in a prolonged disruption to it.

Talent Risk

The Company highly values the contributions of its key personnel. The success of the Company continues to depend largely upon the performance of key officers, employees and consultants who have advanced the Company to its current stage of development and contributed to its potential for future growth. The market for qualified talent has become increasingly competitive, with shortages of qualified talent relative to the number of available opportunities being experienced in all markets where the Company conducts its operations. The ability to remain competitive by offering higher compensation packages and programs for growth and development of personnel, with a view to retaining existing talent and attracting new talent, has become increasingly important to the Company and its operations in the current climate. Any prolonged inability to retain key individuals, or to attract and retain new talent as the Company grows, could have a material adverse effect upon the Company’s growth potential and prospects.

Additionally, the Company has not purchased any “key-man” insurance for any of its directors, officers or key employees and currently has no plans to do so.

Implementation of Business Plan Risks

Our ability to successfully implement our business plan requires an effective planning and management process. If funding is available, we may elect to increase the scope of our operations and acquire complementary businesses. Implementing our business plan will require significant additional funding and resources. If we grow our operations, we will need to hire additional employees and make significant capital investments. If we grow our operations, it will place a significant strain on our existing management and resources. Additionally, we will need to improve our financial and managerial controls and reporting systems and procedures, and we will need to expand, train and manage our workforce. Any failure to manage any of the foregoing areas efficiently and effectively would cause our business to suffer.

Risk of Failure of Internal Control Over Financial Reporting

Our reporting obligations as a public company place a significant strain on our management, operational and financial resources and systems. Because we failed to maintain an effective system of internal control over financial reporting, we could experience delays or inaccuracies in our reporting of financial information, or non-compliance with the SEC, reporting and other regulatory requirements. This could subject us to regulatory scrutiny and result in a loss of public confidence in our management, which could, among other things, cause our stock price to drop.

Risks of Legal Proceedings

The Company may be subject to a variety of regulatory requirements, and resulting investigations, claims, lawsuits and other proceedings in the ordinary course of its business, as a result of its status as a publicly traded company and because of its mining exploration and development business. Litigation related to environmental and climate change-related matters, ESG disclosure, and securities class actions arising from share price volatility is also on the rise. The occurrence and outcome of any legal proceedings cannot be predicted with any reasonable degree of certainty due to the inherently uncertain nature of litigation, including the effects of discovery of new evidence or advancement of new legal theories, the difficulty of predicting decisions of judges and juries and the possibility that decisions may be reversed on appeal. Defense and settlement costs of legal claims can be substantial, even with respect to claims that are determined to have little or no merit.

Litigation may be costly and time-consuming and can divert the attention of management and key personnel away from day-to-day business operations. The Company and its projects are, from time to time, subject to legal proceedings or the threat of legal proceedings. If the Company were to be unsuccessful in defending any such claims against it, or unable to settle claims on a satisfactory basis, the Company may be faced with significant monetary damages, injunctive relief or other negative impacts that could have a material adverse effect on the Company’s business and financial condition. To the extent the Company is involved in any active litigation, the outcome of such matters may not be determinable, and it may not be possible to accurately predict the outcome or quantum of any such proceedings at a given time.

Changes to Tax Laws and Other Tax Risks

Changes to U.S. tax laws could adversely affect the Company or holders of the Common Shares. In recent years, many changes to U.S. federal income tax laws have been proposed and made, and additional changes to U.S. federal income tax laws are likely to continue to occur in the future.

We are subject to review and audit by U.S. federal, state, local tax authorities. Tax authorities may disagree with or challenge tax positions we take, which if successful could harm our business. We may be subject to additional tax liabilities due to changes in non-income based taxes resulting from changes in federal, state or local tax laws, changes in taxing jurisdictions’ administrative interpretations, decisions, policies, and positions, results of tax examinations, settlements, or judicial decisions, changes in accounting principles, changes to our business operations, including acquisitions, as well as the evaluation of new information that results in a change to a tax position taken in a prior period. In the future, the company may also be subject to foreign jurisdictions where tax law changes may pose a similar risk.

Risk Management and Strategy

We have processes in place for assessing, identifying, and managing material risks from cybersecurity threats, including potential unauthorized occurrences on or through both, our physical systems and electronic information systems, that could adversely affect the confidentiality, integrity, or availability of our information systems or the information residing on those systems. These include a wide variety of mechanisms, controls, technologies, methods, systems, and other processes that are designed to prevent, detect, or mitigate data loss, theft, misuse, unauthorized access, or other security incidents or vulnerabilities affecting the data. The data include confidential, proprietary, and business and personal information that we collect, process and store as part of our business, including on behalf of third parties. Additionally, we use processes to oversee and identify material risks from cybersecurity threats associated with our use of third-party technology and systems, including: technology and systems we use for encryption and authentication; employee email; content delivery to customers; back-office support; and other functions.

As part of our risk management process, we conduct application security assessments, vulnerability management, and ongoing risk assessments. We also maintain a variety of incident response plans that are utilized when incidents are detected. We are implementing a plan to require employees with access to information systems, including all corporate employees, to undertake data protection and cybersecurity training and compliance programs at least annually.

Governance

We have a unified and centrally-coordinated team, led by our Chief Financial Officer, that is responsible for implementing and maintaining centralized cybersecurity and data protection practices at the Company in close coordination with senior leadership and other teams across the Company. In addition, we also engage assessors, consultants, auditors, or other third parties to assist with assessing, identifying and managing cybersecurity risks.

Our cybersecurity risks and associated mitigations are evaluated by senior leadership, including as part of our risk assessments that are reviewed by the board of directors.

The board of directors oversees our policies and procedures for protecting our cybersecurity infrastructure and for compliance with applicable data protection and security regulations and related risks. They also oversee the response to any significant cybersecurity incidents. Our Chief Financial Officer, who has extensive cybersecurity knowledge and skills, heads the team responsible for implementing and maintaining cybersecurity and data protection practices at the Company and reports directly to the Chief Executive Officer.

We describe cybersecurity risks have or that are reasonably likely to affect our Company under the heading “Information Technology and Cybersecurity Risks” included as part of our Item 1A. Risk Factors of this Annual Report on Form 10-K, which disclosures are incorporated by reference herein.

The Company is engaged in the construction of a recycling plant to recycle end-of-life lithium-ion batteries and in the exploration of its lithium-bearing claystone unpatented mining claims. To do so, the Company owns or holds long-term leases on multiple properties, all located within the United States, along with leases on laboratory facilities that support our research and development functions. In addition, the Company holds rights to certain assets, which facilitate the effective use of our properties. We believe that all of our properties and facilities are well maintained, effectively used, and are adequate to operate our business. Information regarding significant properties operated by us is outlined below.

Corporate Headquarters

The Company currently leases executive offices located at 100 Washington Street, Suite 100 in Reno, Nevada, USA. The office space consists of approximately 5,831 square feet and the lease expires November 30, 2024. The Company is currently in negotiations to an extension or renewal.

Recycling Operations

McCarran, Nevada

The Company closed on the purchase of the recycling facility in August 2023, and in tandem, the Company has developed new facility and technology-specific environmental, safety, operational standards and procedures, and is in the process of recruiting, hiring, and training of new staff in preparation for operations.

This facility is in the Tahoe-Reno Industrial Center, located at 2500 Peru Drive, McCarran, Nevada, and was previously utilized for the recycling of lead-acid batteries, and was already equipped with much of the infrastructure and utility equipment necessary to implement the Company’s recycling processes, including the electrical distribution, HVAC, compressed air, water treatment, material handling, analytical quality control, and operational control rooms.

The facility houses the Company’s first-of-kind integrated battery recycling system which utilizes a strategic de-manufacturing and targeted chemical extraction train in order to recover battery materials with high yields, low cost, and with a low environmental footprint. These processes are fundamentally different than conventional methods of battery recycling, which utilize high temperature furnaces, such as smelting, or non-strategic shredding or grinding systems. The Company’s system results in battery metals separation, recovery and purification of high-value, battery-grade products with less environmental impact and greater potential cost efficiencies than conventional methods.

As the Company ramps up operations of its integrated recycling processes, the facility will be commissioned in phases. In the first phase, which was commissioned in the fourth quarter of fiscal 2024, battery materials are recycled into products including copper, aluminum, steel, a lithium intermediate, and a black mass intermediate material. In the second phase, expected to be commissioned in fiscal year 2025, this lithium intermediate will be further refined into a battery grade lithium hydroxide product, and the black mass intermediate material will be further refined into battery grade nickel, cobalt, manganese, and lithium hydroxide products.

Fernley, Nevada (held-for-sale)

On August 14, 2020, the Company purchased approximately 12.44 acres of undeveloped industrial land in Fernley, Nevada in a Qualified Opportunity Zone (QOZ). The Company began construction before prioritizing the new location in McCarran, Nevada. During the quarter ended June 30, 2024, Management and the Board of Directors approved a plan to sell the Fernley facility and the Company has classified the facility and land as held for sale. See Note 7 of the consolidated financial statements for further details.

Feedstock Storage – Fernley, Nevada (held-for-sale)

On July 23, 2021, the Company purchased 11.55 acres of industrial-zoned land in Fernley, Nevada. The Company intended to construct a supplemental storage facility for recycled battery feedstock on this site. The City of Fernley has approved the City Use Permit for the site. During the quarter ended June 30, 2024, Management and the Board of Directors approved a plan to sell the land and the Company has classified the facility as held for sale. See Note 7 of the consolidated financial statements for further details.

Land for Supplemental Storage – McCarran, Nevada

On June 28, 2021, the Company purchased approximately 13.87 acres of industrial-zoned land in McCarran, Nevada. The Company intends to construct a supplemental storage facility to store feedstock on this site.

Water Rights

To date, the Company has purchased water rights in the City of Fernley, Nevada for $3.8 million. The Company allocated approximately $0.1 million of water rights to the Company’s Fernley plant which is now classified as held-for-sale. The remaining water rights are intangible assets the Company can use in the future or make available for sale. These water rights have an indefinite life and are recorded within intangible assets on the consolidated balance sheet. See Note 9 of the consolidated financial statements for further details.

Laboratory Facilities

To support the development of both its lithium-ion battery recycling and battery metal extraction technologies, the Company operates out of two laboratory facilities: The Center for Applied Research at the University of Nevada, Reno in Reno, Nevada and Greentown Labs in Somerville, Massachusetts. The Company has developed long-standing partnerships with the operators of these facilities and all leases are in good standing.

Nevada Center for Applied Research - Reno, Nevada

The Company leases laboratory and office space from the University of Nevada, Reno. As of June 30, 2024, the Company occupies five laboratories totaling over 3,000 square feet. All laboratories and offices are housed within the Nevada Center for Applied Research (NCAR). The laboratory space is used to advance the Company’s in-house, first-of-kind developed battery metals extraction technologies for both the recycling of spent batteries and for the manufacturing of primary battery metals from domestic-based resources.

Greentown Labs - Somerville, Massachusetts

The Company occupies office and wet chemistry laboratory space in Greentown Labs, which is the largest clean technology incubator in North America. The Company has access to both desk and lab space at the facility. The Company was afforded this opportunity by winning the Greentown Labs Circularity Challenge, an accelerator program for start-ups developed in partnership with BASF, one of the world’s leading chemical companies.

Tonopah Flats Lithium Exploration Project

The Company currently holds the rights to 517 Unpatented Lode Claims near Tonopah, Nevada. In addition, the Company maintains an office to oversee these claims and the associated activity in Tonopah, Nevada.

On September 1, 2021, the Company signed an exploration agreement with 1317038 Nevada Ltd., which gave the Company exclusive access to explore 305 Unpatented Lode Claims in the Tonopah Mining District (“Tonopah Flats”) in Nye and Esmeralda Counties, Nevada. The agreement gave the Company the right to explore the claims for critical battery materials. The agreement also gave the Company the option to purchase the Claims upon expiration of the exploration agreement. The Company completed its preliminary surface sampling of the property in February 2022 and proceeded with an exploration drilling program. In July 2022, the Company exercised the option to acquire the rights to those claims.

In addition to signing the exploration agreement mentioned above, the Company also staked additional claims in the region surrounding the claims included in the agreement. In total, the Company holds approximately 10,340 acres in the region that it intends to explore for economic lithium deposits.

The Company began surface sampling of these claims in the Summer of 2021, and subsequently performed additional subsurface drilling programs at depths of up to 1,430 feet totaling over 12,000 feet of exploration covering approximately 65% of its claims. The results of these initial successful exploration programs led to the development and publication of a third-party Qualified Person (QP) audited SK-1300 compliant Inferred Resource Report in February 2023. Based on the results, the Company disclosed its intention to continue the exploration of the deposit.

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 8 additional drill holes and includes 6,500 feet of total drilling.

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 (“RESPEC”), a qualified person, in compliance with Item 1300 of Regulation S-K and with an effective date of April 5, 2024.

Geology, Infrastructure, and Permitting

Property Area and Claim Type

The area where Tonopah Flats Lithium Exploration Project is located is known for its unique sedimentary claystone resources. The Tonopah Flats property consists of 517 unpatented Federal lode mining claims covering approximately 10,680 acres and is centered at 38.1099° North Latitude and 117.3479° West Longitude. The Company owns 100% of the claims comprising the Tonopah Flats property. Ownership of the unpatented mining lode claims is in the name of the holder (locator), subject to the paramount title of the United States of America. Under the Mining Law of 1872, the locator has the right to explore, develop, and mine minerals on unpatented mining lode claims without payments of production royalties to the U.S. government. The 517 unpatented lode claims include rights to all locatable subsurface minerals.

The project is located approximately seven miles northwest of Tonopah in Esmeralda and Nye Counties, Nevada and is intersected by Highway 6. The project has other necessary infrastructure nearby including access to power, additional road access, and water. In addition, there is an available workforce in Tonopah and the surrounding area.

The Company has been conducting geological mapping, sampling, geochemical analysis, and proprietary extraction trials to characterize these resources and to quantify the performance of the lithium extraction and manufacturing operations.

Mineral Resource Estimate

The mineral resources for Tonopah Flats described and tabulated in our Amended IA report (full copy provided here: https://americanbatterytechnology.com/projects/tonopah-flats) are classified as Measured, Indicated, and Inferred in accordance with the SEC SK1300 New Mining Disclosure Rule and were estimated to reflect potential open-pit extraction. These resources were constrained with an optimization and cutoff grade satisfactory to meet the requirement of reasonable prospects for economic extraction. The pit shells created using these optimization parameters were further constrained to limit the project resources to a grade of 300ppm within claystone only, which was done as a conservative measure to avoid extremely low cutoff grades despite economics. It should be noted that without the grade constraint, the resulting pit shell using these parameters would be larger than has been used for the resources reported herein.

The table below summarizes the Tonopah Flats lithium resources:

Tonopah Flats Mineral Resources

a) The estimate of mineral resources was performed by RESPEC.

b) Tonopah Flats resources are classified as Measured, Indicated, and Inferred.

c) Mineral resources comprised all model blocks at a 300ppm ton Li cutoff that lie within an optimized pit.

d) The estimated mineral resources include data from the 29 sampled holes.

e) Lithium Hydroxide Monohydrate (LHM) tons were calculated using a factor of 6.0459 relative to Li.

f) Mineral resources that are not mineral reserves do not have demonstrated economic viability.

g) The effective date of the estimate is December 21, 2023.

h) Rounding may result in apparent discrepancies between tons, grade, and contained metal content.

Price trends throughout 2022 and early 2023 reflected an average market price that was much higher than averages over previous years. The second half of 2023 and early 2024 saw the stabilization of market prices. There is some risk that a significant commodity price drop would change the economic inputs to the pit constraints used to report this resource. As a result, a conservative cutoff concentration of 300 ppm Li within the optimized pit is used in this analysis. It should be noted that without this grade constraint, the resulting pit shell using these parameters would be larger than has been used for the resources reported herein.

Capital and Operating Costs

Mining capital and mine operating costs were estimated by RESPEC. Process capital and process operating costs were estimated by the Company and Woods Process Services, LLC. The project capital estimate includes a total of $785.4 million in initial (years 1 through 3) capital, and $258.8 million in sustaining capital throughout the mine life, based on an owner mining fleet of equipment. This totals $1.04 billion for the 50-year mine life. Capital and operating costs have an accuracy of plus or minus 50%.

Net operating costs are estimated to be $15.45/ton processed or $5,720 per ton of LHM. The life of mine operating cost summary is presented in the table below.

Overview of Mine Operating Costs

Initial Economic Assessment (“IA”)

RESPEC completed an IA by creating a cash-flow model based on the production schedule and resulting revenue stream in accordance with the costs presented. Only measured and indicated mineral resources were used to create the revenue stream and inferred resources were assumed to be waste. The IA limits the project to a mine life of 50 years for approximately 597 million tons with an average of 4,111 ppm LHM grade processed and a recovery of 65.7%. With $785.4 million in initial capital costs, processing costs of $4,302/ton of LHM, overall operating costs of $5,720/ton of LHM produced, and average annual production of 33,000 tons of LHM, RESPEC estimates a $10.05 billion after-tax net present value (NPV) at a 5% discount rate. At a discount rate of 10%, the after-tax net NPV is $4.67 billion. The project has a 69.8% Internal Rate of Return (IRR) and 2.3-year payback of initial capital. The IA is preliminary in nature and includes only measured and indicated material. There is no certainty that the conclusions reached in the IA will be realized. Mineral resources that are not categorized as reserves do not have demonstrated economic viability.

Mineral Rights and Annual Property Holding Costs

Ownership of the unpatented mining lode claims is in the name of the holder (locator), subject to the paramount title of the United States of America, under the administration of the U.S. Bureau of Land Management (“BLM”). Under the Mining Law of 1872, which governs the location of unpatented mining lode claims on federal lands, the locator has the right to explore, develop, and mine minerals on unpatented mining lode claims without payments of production royalties to the U.S. government, and subject to the surface management regulation of the BLM. The 517 unpatented lode claims include rights to all locatable subsurface minerals. Currently, annual claim-maintenance fees of $165 per claim are the only Federal payments related to unpatented mining lode claims. The annual property holding costs, including claim fees and county recording fees total $91,569 which include Annual Federal Claim Fees of $85,305 and Annual County Recording Fees of $6,264. Surface rights sufficient to explore, develop, and mine minerals on the unpatented mining lode claims are inherent to the claims as long as the claims are maintained in good standing. The surface rights are subject to all applicable state and federal environmental regulations.

Significant Encumbrances and Permitting

The Tonopah Flats property is owned 100% by the Company with no significant encumbrances or agreements such as leases, options, or purchase payments known and there are no royalties associated with the property. Tonopah Flats is currently operated as a mid-stage project with studies advancing for mineral resources, metallurgy and processing, engineering and economics, and environmental permitting. Key BLM permits and bonding for these activities are in place and include:

• BLM Notice of Operations NVN-100850
• The reclamation bonds associated with the above activities are:
• Exploration Bond #4969389 current obligation - $59,646

The BLM Nevada State Office currently holds BLM cash bond number 4969389 with the Company as principal, in the amount of $59,646. The bond provides surface reclamation coverage for operations conducted by the Company at the Tonopah Flats property. The total projected surface disturbance for the exploration permits as of November 2023 is approximately 4.47 acres. The Company is currently in compliance with all issued permits.

Internal Controls

We have internal controls for reviewing and documenting the information supporting the exploration, describing the methods used, and ensuring the validity of the results. These internal control processes were not materially impacted by the adoption of S-K 1300. Information that is utilized to conduct exploration is prepared and certified by appropriate QPs and is subject to our internal review process, which includes review by a QP. The QP and management agree on the reasonableness of the criteria for the purposes of the exploration. Calculations using these criteria are reviewed and validated by the QP. We recognize the risks inherent in exploration, such as the geological complexity, interpretation and extrapolation of data, changes in operating approach, macroeconomic conditions and new data, among others. Overestimated resources resulting from these risks could have a material effect on future profitability.

A map of the project is included in Figure 1 below.

Figure 1: Tonopah Flats Lithium Exploration Project

On August 22, 2022, John Lukrich, former Chief of Staff at the Company, filed a complaint against the Company in California state court. The Company removed the action to federal court on diversity grounds, and the case is now pending in the United States District Court for the Northern District of California, Case No. 3:22-cv-06690. Lukrich asserts claims for: (1) Breach of Contract; (2) Failure to Timely Pay Wages; and (3) Violation of Labor Code Section 925, all related to his previous employment and associated compensation. Lukrich seeks general damages to recover the compensation he alleges is owed to him, declaratory relief related to the terms of his Offer Letter, attorneys’ fees, and costs. On September 1, 2024, the parties entered into a settlement agreement, agreeing to dismiss the case, wherein the Company agreed to monetary payments totaling $300,000, with each party bearing their own attorneys’ fees and costs. All settlement terms should then be completed, and the case dismissed with prejudice, in or around January 2025.

On July 27, 2023, the U.S. Department of Labor Occupational Safety and Health Administration (“OSHA”) notified the Company that Kimberly Eckert, former Chief Financial Officer, filed a complaint with case number 201018556 against the Company, alleging unlawful retaliation. Ms. Eckert alleges that she was unlawfully terminated by the Company. Specifically, Ms. Eckert alleges that the Company’s board of directors terminated her in retaliation for complaining about other officers of the Company allegedly withholding financial information from her. The Company served its response to the complaint on August 16, 2023, in order to provide OSHA with a written account of the facts and a statement of the Company’s position. The Company believes the claims are without merit and intends to vigorously contest the allegations in the complaint. Additionally, in a related complaint, on January 21, 2024, Ms. Eckert filed a Charge of Discrimination with the U.S. Equal Employment Opportunity Commission, Denver Field Office, case number 541-2023-03183, alleging that the Company discriminated against her due to her sex (female) and retaliation in violation of Title VII of the Civil Rights Act of 1964, as amended. The Company served its response to the complaint on August 16, 2023, in order to provide the agency with a written account of the facts and a statement of the Company’s position. The Company believes the claims are without merit and intends to vigorously contest the allegations in the complaint. With respect to the foregoing Eckert matters, no further agency or party action has been taken that is known to the Company as of June 30, 2024, and, as of the filing of this Form 10-K.

Other than these proceedings, to the best of our knowledge, we are not currently a party to any legal proceedings that, individually or in aggregate, are deemed to be material to our financial condition or results of operations.

Forward-Looking Statements

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this Form 10-K. The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements except as required by applicable securities laws.

Overview

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 exploration of new domestic-United States primary resources of battery metals, development and commercialization of new technologies for the extraction of these battery metals from primary resources, and 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 spent batteries have their elemental battery metals returned to the domestic manufacturing supply chain in an economical, environmentally-conscious, closed–loop fashion.

To implement this business strategy, the Company has constructed its first integrated lithium–ion battery recycling facility, which takes in waste and end–of–life battery materials from the electric vehicle, stationary storage, and consumer electronics industries. The ramp-up and operations of this facility are of the highest priority to the Company, and as such it has significantly increased the resources devoted to its execution including the further internal hiring of technical staff, expansion of laboratory facilities, and purchasing of equipment which led to the Company’s first revenue generation in the fourth quarter of fiscal 2024. The Company has been awarded a competitively bid grant from the U.S. Advanced Battery Consortium to support a $2 million project to accelerate the development and demonstration of the technologies within this integrated lithium–ion battery recycling facility. The Company has also been awarded an additional grant from the U.S. Department of Energy (“DOE”) to support a $20 million project under the Bipartisan Infrastructure Law to validate, test, and deploy three next-generation disruptive advanced separation and processing recycling technologies.

Additionally, the Company is accelerating the demonstration and commercialization of its internally developed low–cost and low–environmental impact processing train for the manufacturing of battery grade lithium hydroxide from Nevada–based sedimentary claystone resources. The Company has been awarded a grant cooperative agreement from the DOE’s Advanced Manufacturing and Materials Technologies Office through the Critical Materials Innovation program to support a $4.5 million project for the construction and operation of a multi–ton per day integrated continuous demonstration system to support the scale–up and commercialization of these technologies. The Company has also been awarded an additional grant award under the Bipartisan Infrastructure Law to support a $115 million project to design, construct, and commission a first-of-kind commercial-scale refinery to produce 30,000 MT of battery-grade lithium hydroxide per year from this resource.

The Company has completed the construction and commissioning of its lithium hydroxide (LiOH) pilot plant, marking a significant milestone in the commercialization of its internally-developed processes to access an unrealized domestic primary lithium resource. The construction and commissioning of this pilot plant enables the Company to demonstrate its technologies for accessing the lithium housed in its unconventional resource, Tonopah Lithium Flats Project (“TLFP”), in an integrated and continuous system, and to generate large amounts of battery grade lithium hydroxide for delivery to customers for qualifications and evaluation. The construction and operation of this pilot demonstration plant are supported by a competitively awarded grant from the DOE for this $4.5 million effort. Product from the pilot plant is being sent for analysis to confirm and validate the resource.

The Company has filed an Amended IA for its TFLP. The TFLP is one of the largest identified lithium resources in the United States, and while initial pit designs and economic analyses in previous assessments evaluated the full resource, this updated Initial Assessment utilizes a commercialization pathway with a more rigorous mine plan that contemplates utilization of only Measured and Indicated Mineral Resources, and excludes Inferred Mineral Resources, to supply the planned commercial-scale lithium hydroxide monohydrate (“LHM”) refinery. This commercialization pathway allows for an engineered phased development, with improved access to the higher quality portions of the resource, and improved project economics.

On March 28, 2024, the Company was selected for an approximately $19.5 million tax credit through the Qualifying Advanced Energy Project Credits program (the “48C program”). 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 $19.5 million tax credit can be utilized both for the reimbursement of capital expenditures spent to date, and also for equipment and infrastructure for additional value-add operations at the Company’s battery recycling facility in the Tahoe-Reno Industrial Center (TRIC) near Reno, Nevada. 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 has been selected for an additional $40.5 million tax credit through the 48C program to support the design and construction of a new, next-generation, commercial battery recycling facility to be located in the United States. As with the Company’s initial $19.5 million tax credit under the 48C program supporting the construction and buildout of its battery recycling facility in Nevada, this additional award 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. As of June 30, 2024, the Company has not incurred any qualifying expenditures towards this tax credit.

2024 Financial Highlights:

• In the 4th quarter, the Company generated its first revenue from the sale of Black Mass produced by its first integrated lithium-ion battery recycling facility. Once fully ramped, this facility has the capacity to process approximately 20,000 MT/year of battery materials and to produce multiple streams of battery grade metals and other byproducts.
• The prime agreement contract with the DOE for the Company’s grant to support its $115 million project for its commercial-scale lithium hydroxide refinery was issued with a project start date of September 1, 2023. The Company began receiving funds related to this award during the period ended December 31, 2023.
• The prime agreement contract with the DOE for the Company’s grant to support its $20 million project for its next-generation advanced battery recycling technologies was issued with a project start date of October 1, 2023. The Company began receiving funds related to this award during the period ended December 31, 2023.
• Government grant funding increased to $3.3 million for the fiscal year ended June 30, 2024, compared to $0.9 million during the prior year. Out of the current period’s $3.3 million in grant funding, $1.0 million was recorded as an offset to fixed assets, as reimbursements related to equipment purchases, and $2.3 million was recorded as an offset to research and development costs within the consolidated statement of operations.
• As of June 30, 2024, the Company had total cash on hand of $7.0 million.
• Cash used in investing activities was $12.9 million for the acquisition of property, construction, equipment, mineral rights and water rights for the fiscal year ended June 30, 2024. Cash used in the same period of the prior year totaled $36.7 million primarily for acquisition of the Peru facility, water rights and equipment.
• Cash used in operations for the fiscal year ended June 30, 2024 was $16.9 million, compared to $13.4 million use of cash during the fiscal year ended June 30, 2023.
• On August 29, 2023, the Company entered into a Securities Purchase Agreement for up to $51.0 million of a new series of senior secured convertible notes. To date, $25.0 million of these notes have been issued and the Company has no plans to use the remaining facility.
• On April 3, 2024, the Company entered into an At-the-Market Sales Agreement (“ATM”) with Virtu Americas LLC having an aggregate offering price of up to $50.0 million which may be used to fund operations. During the fiscal year ended June 30, 2024, the Company sold 9,109,573 common shares and received proceeds of $12.1 million under the ATM.

Components of Statements of Operations

Revenue

During the year ended June 30, 2024, our net sales were $0.3 million. These sales related to our Black Mass product resulting from recycling operations and were the initial revenue generated by the Company. The materials were sold to a customer who took delivery at our plant and the materials will remain at our plant to be further processed when phase two of the plant is complete.

Cost of Goods Sold

Cost of goods sold during the year ended June 30, 2024 was $3.3 million, well above the value of the related revenue. The high cost of goods sold is related to the in-service date and depreciation of the recycling facility fixed assets, which is time based, and the finalization of the production process. We expect these costs to continue to rise but will be reduced as a percentage of revenue as we scale our production and gain efficiencies in the process.

Operating Expenses

During the fiscal year ended June 30, 2024, the Company incurred $44.8 million of operating expenses compared to $22.4 million of operating expenses during the fiscal year ended June 30, 2023. The increase is primarily due to the items described below:

General and administrative expenses consist of personnel, legal, finance, recruiting, business development, public relations, and general facility expenses. For the fiscal year ended June 30, 2024 and 2023, general and administrative expenses were $16.1 million and $12.8 million, respectively. The increase of $3.3 million is primarily related to increases in employee stock-based compensation, compliance and insurance costs.

Research and development expenses consist primarily of personnel, laboratory leases, and supplies. Research and development expenses for the fiscal year ended June 30, 2024, and 2023, were $14.3 million and $7.6 million, respectively. The increase of $6.8 million is primarily due to increased employee headcount, stock-based compensation, insurance and facility costs. These costs are partially offset by federal grant funds for awards that the Company has contracted with various United States federal agencies. The Company recognized an offset to its research and development costs of $3.3 million and $0.9 million related to these awards for the fiscal year ended June 30, 2024, and 2023, respectively.

Exploration costs consist primarily of personnel, drilling, assay, claim fees, office and warehouse costs, travel, and other costs related to exploration of claims in central Nevada. Exploration expenses totaled $4.1 million for the fiscal year ended June 30, 2024, compared to $2.0 million during the prior year. The increase year-over-year resulted principally from increased drilling, assaying and engineering costs to further define and potentially upgrade the geological classification of the mineral rights.

An impairment loss on assets held-for-sale was recorded in the year ended June 30, 2024 and is related to certain assets, primarily to land and a building, at the Fernley, Nevada location the Company has decided to sell. Upon this decision, the Company performed a valuation analysis to determine the potential realizable value of these and that estimated amount was $10.2 million less than the carrying value of the assets. These assets have a carrying value of $8.4 million at June 30, 2024 and are subject to further impairment, if warranted, until the assets are sold.

Other (Expense) Income

Other expense was $4.7 million in the year ended June 30, 2024 versus other income of $0.2 million in the prior year. The increase of $4.9 million is primarily due to the accretion of financing costs of $4.2 million and the change in fair value of derivative liability of $0.3 million. During the fiscal year ended June 30, 2024, the Company reported a correction of prior periods related to the derivative liability (see Note 3 of the consolidated financial statements for further detail).

Net Loss

During the fiscal year ended June 30, 2024, the Company incurred a net loss of $52.5 million or $1.02 loss per share compared to a net loss of $22.2 million or $0.51 loss per share during the fiscal year ended June 30, 2023.

Liquidity and Capital Resources

At June 30, 2024, the Company had cash of $7.0 million and total assets of $77.7 million compared to cash of $2.3 million and total assets of $74.7 million at June 30, 2023. The increase in cash is primarily due to utilization of the common stock purchase agreement with Tysadco and ATM agreement with Virtu offset by many uses of cash for the continued build out of our production process during the year.

The Company had total current liabilities of $15.8 million at June 30, 2024, compared to $13.7 million at June 30, 2023. The increase is primarily related to an increase in accounts payable and accrued liabilities which include the full amount of $1.8 million related to the settlement of Mercuria Marketing Agreement.

As of June 30, 2024 the Company had positive working capital of $2.2 million compared to a working capital deficiency of $9.0 million at June 30, 2023. The positive working capital is related to the current classification of $8.4 million of held-for-sale assets at June 30, 2024. Absent this classification, we would have a working capital deficiency of $5.8 million compared to a deficiency of $9.0 million in the prior year. The working capital deficiency is largely attributed to the current classification of all of the convertible notes, as well as acquisitions of property and equipment and cash used in operating activities.

Going Concern

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, which could provide a source of liquidity.

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. During the period, the Company sold 9,109,573 common shares for total proceeds of $12.1 million.

Based on our current operating plan, unless we generate income from the operations of our facilities and receipt of cash from United States 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, which, if such violation is not waived, could 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.

Grant Awards

On January 20, 2021, the US 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 (“AMO 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 ended 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 US Advanced Battery Consortium (the “USABC grant”) as part of a competitively bid project, through which the Company will receive reimbursement for up to $500,000 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 ended June 30, 2022. 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 US DOE announced that the Company has been selected for award negotiation for a five-year project with a total budget of $115.5 million to expand domestic manufacturing of battery grade lithium hydroxide for lithium-ion batteries for electric vehicles, 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, or 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 in fiscal 2024. 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 US DOE announced that the Company has 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, or up to $10.0 million. The Company is expected to begin receiving funds associated with this during the fiscal year ended June 30, 2024. As of June 30, 2024, the cumulative funds invoiced for this grant totaled $0.6 million, which represents 6% of the total eligible reimbursements.

Cash Flows

For the fiscal years ended June 30:

Cash from Operating Activities.

During the fiscal year ended June 30, 2024, the Company used $16.7 million of cash for operating activities as compared to $13.4 million used during the fiscal year ended June 30, 2023. The increase is mainly due to non-cash items related to the write down loss on held-for-sale assets of $10.3 million, stock-based compensation expense of $14.6 million, and accretion of financing costs of $4.2 million. The change in operating assets was mainly driven by costs for engineering and research and development as well as increased exploration expenses. Increased engineering and research and development costs were to support the development of the Company’s process for the recycling of lithium-ion batteries and for the extraction of lithium from the Company’s lithium claystone mining claims. The Company has also incurred a steady increase in exploration activity expenses as it continues to evaluate its claims in the Tonopah, Nevada region. General and administrative expenses have increased to further support the Company’s business objectives.

Cash from Investing Activities

During the fiscal year ended June 30, 2024, the Company used cash for investing activities of $12.9 million, consisting primarily of $11.4 million related to property and equipment for its recycling facilities. This is in comparison to cash used for investing activities of $36.7 million for the fiscal year ended June 30, 2023, including $28.6 million of acquisition costs associated with property and equipment for its recycling facilities and $8.1 million for mineral rights acquired in Tonopah, Nevada.

As of June 30, 2024, the Company had total non-current assets of $59.3 million compared to $69.9 million at June 30, 2023. The Company will continue to see an increase in investing activities as it continues to invest heavily in its recycling and primary resource extraction activities.

Cash from Financing Activities

During the year ended June 30, 2024, the Company had net cash provided by financing activities of $34.4 million compared to $23.4 million for the fiscal year ended June 30, 2023. The increase is due to the use of share purchase agreements.

During the period, the Company issued 17.3 million shares of common stock pursuant to purchase agreements for net proceeds of $38.1 million and the Company issued convertible notes for net proceeds of $20.3 million. These were partially offset by repayment of notes payable during the period totaling $24 million.

Off-Balance Sheet Arrangements

As of June 30, 2024 and 2023, we had no off-balance sheet arrangements.

Working Capital

Future Financings

We will continue to rely on sales of our common shares, debt, or other financing to fund our business operations. Issuance of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the securities or arrange for debt or other financing to fund planned operating activities, acquisitions and exploration activities.

Critical Accounting Estimates and Judgments

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. These accounting principles require us to make estimates, judgments and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, and contingencies. All significant estimates, judgments and assumptions are developed based on the best information available to us at the time made and are regularly reviewed and updated when necessary. Actual results could differ from these estimates. Changes in estimates are reflected in our financial statements in the period of change based upon on-going actual experience, trends, or subsequent realization depending on the nature and predictability of the estimates and contingencies.

Certain accounting estimates, including those concerning revenue recognition, share based compensation, impairments of long-lived assets, assets held-for-sale, and accounting for income taxes, are considered to be critical in evaluating and understanding our financial results because they involve inherently uncertain matters and their application requires the most difficult and complex judgments and estimates. These are described below. For further information on our accounting policies, see Note 3 to our consolidated financial statements.

Fair Value Measurements

Recurring Valuations. The Company’s recurring fair value measurements include the valuation of the derivative liability for the bifurcated notes payable freestanding call option. In making these fair value determinations, we were required to make assumptions that affected the recorded amounts, including volatility, risk free rates, and duration of time. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain.

Nonrecurring Valuations. The Company’s nonrecurring fair value measurements include the valuation of assets held-for-sale. In making these fair value determinations, we were required to make assumptions that affected the recorded amounts, including estimates related to construction work, comparable market listings for similar assets and current market conditions. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain.

Revenue Recognition

Revenue recognition requires judgment and the use of estimates, especially in identifying and evaluating the various non-standard terms and conditions in our contracts with customers as to their effect on reported revenue.

We account for revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is to recognize revenue upon the transfer of services or products to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those services or products. We apply a five-step framework to recognize revenue as described in our Revenue Recognition policy included in Note 3 of our consolidated financial statements included in this Annual Report on Form 10-K.

Generally, we recognize revenue related to sales of our products upon shipment, when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed or determinable, and collectability is reasonably assured. The Company has limited revenue recognition history. There are no provisions for payment discounts, product return allowances and uncollectable accounts at this time.

Bill and Hold Transactions

The majority of revenue is derived from a bill and hold arrangement. In this case, at the customer’s request, we enter into bill-and-hold transaction whereby title transfers to the customer, but the product does not ship until a specified later date. We recognize revenue associated with bill-and-hold arrangements when the product is complete and ready to ship, hold criteria have been met, the amount due from the customer is fixed, and collectability of the related receivable is reasonably assured. All of the foregoing requires us to apply our judgment. Bill-and-hold arrangements most often occur when the customer requests us to hold the product for potential future processing or until they provide us further instructions at a later date to ship the product to a different location.

Assets Held-for-Sale

Management considers whether events and circumstances such as a change in strategic direction and changes in business climate would impact the fair value of long-lived assets. The Company used critical judgements in analyzing certain market data and estimates to calculate the value of the assets held-for-sale. Significant assumptions that form the basis of fair value include market comparison of similar properties, construction cost estimates and using certain dollar per square foot amounts to derive fair value. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain.

Stock-Based Compensation

The fair value of share-based payments are subject to the limitations of the Black-Scholes option pricing model that incorporates market data and involves uncertainty in estimates used by management in the assumptions. Because the Black-Scholes option pricing model requires the inputs of highly subjective assumptions, including the volatility of share prices, changes in subjective input assumptions can materially affect the estimate.

Accounting for Income Taxes

Tax interpretations, regulations and legislation in the various jurisdictions in which the Company operates are subject to change and interpretation. As such, income taxes are subject to measurement uncertainty. Assessing the recoverability of deferred tax assets requires the Company to make estimates related to the expectations of future taxable income and the application of existing tax laws. To the extent that future taxable income differs significantly from estimates, the ability of the Company to realize deferred tax assets could be impacted.

New Accounting Pronouncements

New accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption. For further discussion on recent accounting pronouncements, please see Note 3, “Accounting Pronouncements,” to our consolidated financial statements included in this Annual Report on Form 10-K for additional information.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of June 30, 2024, the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2024, the Company’s disclosure controls and procedures are not effective, based on the material weaknesses described below.

Management’s Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Management, with the participation of the principal executive officer and principal financial officer, under the oversight of our Board of Directors, assessed the effectiveness of our internal control over financial reporting as of June 30, 2024 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based on this assessment, management concluded that, as of June 30, 2024, our internal control over financial reporting was not effective, due to the material weaknesses in internal control over financial reporting, described below.

Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including the individuals serving as our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

Material Weaknesses in Internal Control over Financial Reporting

The Company did not have a sufficient complement of personnel with appropriate technical expertise to perform an effective risk assessment of complex transactions and account for such transactions properly. In addition, the Company did not maintain proper segregation of duties related to accounting processes. As a consequence, internal control deficiencies related to the design and operation of process-level controls were determined to be pervasive throughout the Company’s financial reporting processes. While these material weaknesses did result in immaterial misstatements of the Company’s consolidated financial statements, these material weaknesses create a reasonable possibility that a material misstatement of account balances or disclosures in the consolidated financial statements may not be prevented or detected in a timely manner. Therefore, we concluded that the deficiencies represent material weaknesses in the Company’s internal control over financial reporting and our internal control over financial reporting was not effective as of June 30, 2024.

Remediation Plan

During the fiscal year ended June 30, 2024, remediation efforts included removing accounting personnel access to both create and post a journal entry, moving the systems administration tasks to personnel outside of the accounting department, and adding review procedures by qualified personnel over complex accounting matters by way of engaging third-party professionals with whom to consult regarding complex accounting applications and valuations. However, there is no guarantee that these measures will remediate the material weaknesses described above.

We are committed to ensuring that our internal control over financial reporting is designed and operating effectively. While we believe procedures are in place as of June 30, 2024 to address the material weaknesses, remediation steps are required to be in place and effective for an adequate period of time. We cannot provide assurance that such material weaknesses will be remediated, and we may discover additional material weaknesses that may require additional time and resources to remediate.

In addition to the above steps taken, in July 2024, we hired a new corporate controller with extensive experience technical accounting, SEC reporting and internal control over financial reporting. We plan to continue to utilize an outside CPA firm for technical expertise, we plan to hire qualified accounting personnel to build out the finance team and we plan to perform a complete risk assessment and update our control procedures to mitigate segregation of duties. We expect to remediate these material weaknesses by the end of fiscal year 2025.