# EDGAR Filing Document

**Accession Number:** 0001888654
**File Stem:** 0000950170-23-002389
**Filing Date:** 2023-2
**Character Count:** 103405
**Document Hash:** eb84e2b8ed7dedb90607e229a13ff1a3
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-23-002389.hdr.sgml**: 20230209

**ACCESSION NUMBER**: 0000950170-23-002389

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 70

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230209

**DATE AS OF CHANGE**: 20230209

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** 5E Advanced Materials, Inc.
- **CENTRAL INDEX KEY:** 0001888654
- **STANDARD INDUSTRIAL CLASSIFICATION:** MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 0630

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-41279
- **FILM NUMBER:** 23607104

**BUSINESS ADDRESS:**
- **STREET 1:** 9329 MARIPOSA
- **STREET 2:** SUITE 210
- **CITY:** HESPERIA
- **STATE:** CA
- **ZIP:** 92344
- **BUSINESS PHONE:** 442 292 2120

**MAIL ADDRESS:**
- **STREET 1:** 9329 MARIPOSA
- **STREET 2:** SUITE 210
- **CITY:** HESPERIA
- **STATE:** CA
- **ZIP:** 92344

?xml version="1.0" encoding="ASCII"? 10-Q

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**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION** 

**Washington, D.C. 20549** 

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**FORM** 10-Q

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**(Mark One)** 

☒ **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** 

**For the quarterly period ended** **December 31, 2022** 

**or** 

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** 

**For the transition period from to** 

**Commission File Number** 001-41279

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5E ADVANCED MATERIALS, INC.

![img210701471_0.jpg](img210701471_0.jpg)

**(Exact name of Registrant as specified in its Charter)** 

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---

| | |
|:---|:---|
| Delaware | 87-3426517 |
| **(State or other jurisdiction of<br>incorporation or organization)** | **(I.R.S. Employer<br>Identification No.)** |

---

---

| | |
|:---|:---|
| 19500 State Highway 249**,** Suite 125<br>Houston**,** TX | 77070 |
| **(Address of principal executive offices)** | **(Zip Code)** |

---

**Registrant's telephone number, including area code: (**346**)** 439-9656

**Securities registered pursuant to Section 12(b) of the Act:** 

---

| | |
|:---|:---|
| **Title of each class**<br>| &nbsp;&nbsp;&nbsp;**Name of each exchange**<br>**on which registered**<br>|
| Common Stock, $0.01 par value<br> FEAM | The Nasdaq Global Select Market |

---

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

---

| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ |  |  |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of February 9, 2023, there were 44,149,172 shares of the Registrant's common stock outstanding.

------

**Table of Contents** 

---

| | | |
|:---|:---|:---|
|  |  | **Page** <br>|
| **Part I - Financial Information** | **Part I - Financial Information** |  |
| Item 1. | [<u>Financial Statements</u>](#tx324202_1) | 3 |
| Item 2. | [<u>Management's Discussion and Analysis of Financial Condition and Results of Operations</u>](#tx324202_2) | 15 |
| Item 3. | [<u>Quantitative and Qualitative Disclosures About Market Risk</u>](#tx324202_3) | 21 |
| Item 4. | [<u>Controls and Procedures</u>](#tx324202_4) | 21 |
| **Part II - Other Information** | **Part II - Other Information** |  |
| Item 1. | [<u>Legal Proceedings</u>](#tx324202_5) | 21 |
| Item 1A. | [<u>Risk Factors</u>](#tx324202_6) | 21 |
| Item 2. | [<u>Unregistered Sales of Equity Securities and Use of Proceeds</u>](#tx324202_7) | 22 |
| Item 3. | [<u>Defaults Upon Senior Securities</u>](#tx324202_8) | 23 |
| Item 4. | [<u>Mine Safety Disclosures</u>](#tx324202_9) | 23 |
| Item 5. | [<u>Other Information</u>](#tx324202_10) | 23 |
| Item 6. | [<u>Exhibits</u>](#tx324202_11) | 24 |
| [<u>Signatures</u>](#tx324202_12) | [<u>Signatures</u>](#tx324202_12) | 25 |

---

------

**Part I - Financial Information** 

**Item 1. Financial Statements.** 

**5E ADVANCED MATERIALS, INC.** 

**CONDENSED CONSOLIDATED BALANCE SHEET** 

**(Unaudited)** 

**(In thousands, except share data)**

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **June 30,** |
|  | **2022** | **2022** |
| **ASSETS** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $56751 | $31057 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 1032 | 1506 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 57783 | 32563 |
| Mineral rights and properties, net | 8525 | 8364 |
| Construction in progress | 46914 | 25625 |
| Properties, plant and equipment, net | 3006 | 2871 |
| Reclamation bond deposit | 1086 | 1086 |
| Right of use asset | 287 | 371 |
| Other assets | 6 | 6 |
| Total assets | $117607 | $70886 |
| **LIABILITIES AND STOCKHOLDERS' EQUITY** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities | $12312 | $7212 |
| &nbsp;&nbsp;&nbsp;Lease liabilities, current | 163 | 164 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 12475 | 7376 |
| Long-term debt, net | 33075 | 148 |
| Lease liabilities | 129 | 211 |
| Accrued reclamation liabilities | 665 | 489 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 46344 | 8224 |
| Commitments and contingencies (Note 12) |  |  |
| Stockholders' Equity: |  |  |
| &nbsp;&nbsp;&nbsp;Common stock, $0.01 par value; 180,000 shares authorized; 43,889 and<br> 43,305 shares outstanding December 31 and June 30, respectively | 439 | 433 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 188445 | 169593 |
| &nbsp;&nbsp;&nbsp;Retained earnings (accumulated deficit) | (117621) | (107364) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 71263 | 62662 |
| Total liabilities and stockholders' equity | $117607 | $70886 |

---

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

------

**5E ADVANCED MATERIALS, INC.** 

**CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)**

**(Unaudited)** 

**(In thousands, except per share amounts)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended December 31,** | **Three months ended December 31,** | **Six Months Ended December 31,** | **Six Months Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;Project expenses | $3404 | $2990 | $6999 | $7775 |
| &nbsp;&nbsp;General and administrative | 7701 | 7830 | 12587 | 13671 |
| &nbsp;&nbsp;Research and development | 39 |  | 78 |  |
| &nbsp;&nbsp;Depreciation and amortization expense | 42 | 20 | 79 | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 11186 | 10840 | 19743 | 21486 |
| Income (loss) from operations | (11186) | (10840) | (19743) | (21486) |
| Non-operating income (expense) |  |  |  |  |
| &nbsp;&nbsp;Other income | 22 |  | 36 | 10 |
| &nbsp;&nbsp;Interest income | 465 | 1 | 526 | 2 |
| &nbsp;&nbsp;Derivative gain (loss) | (2166) |  | 11743 |  |
| &nbsp;&nbsp;Interest expense | (1985) |  | (2806) | (2) |
| &nbsp;&nbsp;Other income (expense) | (13) | (200) | (13) | 969 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total non-operating income (expense) | (3677) | (199) | 9486 | 979 |
| Income (loss) before income taxes | (14863) | (11039) | (10257) | (20507) |
| Income tax provision (benefit) |  |  |  |  |
| Net income (loss) | $(14863) | $(11039) | $(10257) | $(20507) |
| Net income (loss) per common share — basic and diluted | $(0.34) | $(0.28) | $(0.24) | $(0.52) |
| Weighted average common shares outstanding — basic and diluted | 43772 | 39878 | 43561 | 39294 |
| Comprehensive income (loss): |  |  |  |  |
| Net income (loss) | $(14863) | $(11039) | $(10257) | $(20507) |
| &nbsp;&nbsp;Reporting currency translation gain (loss) |  | 776 |  | (829) |
| &nbsp;&nbsp;&nbsp;Comprehensive income (loss) | $(14863) | $(10263) | $(10257) | $(21336) |

---

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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**5E ADVANCED MATERIALS, INC.** 

**CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS** 

**(Unaudited)**

**(In thousands)**

---

| | | |
|:---|:---|:---|
|  | **For the six months ended December 31,** | **For the six months ended December 31,** |
|  | **2022** | **2021** |
| Cash Flows From Operating Activities: |  |  |
| Net income (loss) | $(10257) | $(20507) |
| Adjustments to reconcile net income (loss) to net cash used by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 79 | 40 |
| &nbsp;&nbsp;&nbsp;Share based compensation | 3533 | 3087 |
| &nbsp;&nbsp;&nbsp;Common stock issued for consulting fees |  | 3408 |
| &nbsp;&nbsp;&nbsp;Unrealized (gain) loss on convertible note derivative instrument | (11743) |  |
| &nbsp;&nbsp;&nbsp;Accretion of reclamation liability | 9 | 3 |
| &nbsp;&nbsp;&nbsp;Amortization of debt issuance costs and discount — convertible note | 2001 |  |
| &nbsp;&nbsp;&nbsp;Amortization of right of use asset | 84 |  |
| &nbsp;&nbsp;&nbsp;Interest earned on reclamation bond |  | (1) |
| &nbsp;&nbsp;&nbsp;Net foreign exchange (gain) loss |  | (969) |
| Change in: |  |  |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 474 | (295) |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities | (363) | 2416 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | (16183) | (12818) |
| Cash Flows From Investing Activities: |  |  |
| &nbsp;&nbsp;&nbsp;Construction in progress | (15908) | (1662) |
| &nbsp;&nbsp;&nbsp;Mineral rights and properties additions |  | (87) |
| &nbsp;&nbsp;&nbsp;Properties, plant and equipment additions | (208) | (1058) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (16116) | (2807) |
| Cash Flows From Financing Activities: |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from issuance of convertible note | 55840 |  |
| &nbsp;&nbsp;&nbsp;Payments on note payable | (19) | (1) |
| &nbsp;&nbsp;&nbsp;Proceeds from issuance of common stock |  | 26309 |
| &nbsp;&nbsp;&nbsp;Share offering costs |  | (797) |
| &nbsp;&nbsp;&nbsp;Proceeds from exercise of stock options | 2172 | 2907 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 57993 | 28418 |
| Net increase (decrease) in cash and cash equivalents | 25694 | 12793 |
| Effect of exchange rate fluctuation on cash |  | 139 |
| Cash and cash equivalents at beginning of period | 31057 | 40811 |
| Cash and cash equivalents at end of period | $56751 | $53743 |
| Supplemental Disclosure of Cash Flow Information: |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid for interest | $4 | $— |
| Noncash Investing and Financing Activities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities change related to construction in progress | $5381 | $844 |
| &nbsp;&nbsp;&nbsp;Construction in progress transferred to properties, plant and equipment |  | 55 |
| &nbsp;&nbsp;&nbsp;Equipment acquired with notes payable |  | 227 |
| &nbsp;&nbsp;&nbsp;Recognition of operating lease liability and right of use asset |  | 17 |
| &nbsp;&nbsp;&nbsp;Increase (decrease) in asset retirement costs | 167 |  |

---

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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**5E ADVANCED MATERIALS, INC.** 

**CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY** 

**(Unaudited)**

**(In thousands)** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | **Additional** | **Accumulated** |  | **Total** |
|  | **Common Stock** | **Common Stock** | **Paid-in** | **Comprehensive** | **Accumulated** | **Stockholders'** |
|  | **Shares** | **Amount** | **Capital** | **Income (loss)** | **Deficit** | **Equity** |
| **Balance at June 30, 2022** | 43305 | $433 | $169593 | $— | $(107364) | $62662 |
| Shares issued for: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Exercise of stock options | 50 | 1 | 255 |  |  | 256 |
| Share based compensation |  |  | 1300 |  |  | 1300 |
| Net income (loss) |  |  |  |  | 4606 | 4606 |
| **Balance at September 30, 2022** | 43355 | 434 | 171148 |  | (102758) | 68824 |
| Shares issued for: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Exercise of stock options | 525 | 5 | 1911 |  |  | 1916 |
| &nbsp;&nbsp;&nbsp;Vesting of restricted share units | 9 |  |  |  |  |  |
| Share based compensation |  |  | 2233 |  |  | 2233 |
| Convertible note derivative<br>&nbsp;&nbsp;&nbsp;&nbsp;liability reclassification |  |  | 13153 |  |  | 13153 |
| Net income (loss) |  |  |  |  | (14863) | (14863) |
| **Balance at December 31, 2022** | 43889 | $439 | $188445 | $— | $(117621) | $71263 |
|  |  |  | **Additional** | **Accumulated** |  | **Total** |
|  | **Common Stock** | **Common Stock** | **Paid-in** | **Comprehensive** | **Accumulated** | **Stockholders'** |
|  | **Shares** | **Amount** | **Capital** | **Income (loss)** | **Deficit** | **Equity** |
| **Balance at June 30, 2021** | 38391 | $384 | $101180 | $1417 | $(40652) | $62329 |
| Shares issued for: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Exercise of stock options | 303 | 3 | 1083 |  |  | 1086 |
| &nbsp;&nbsp;&nbsp;Consulting fees | 150 | 1 | 1538 |  |  | 1539 |
| Share based compensation |  |  | 1776 |  |  | 1776 |
| Net income (loss) |  |  |  |  | (9468) | (9468) |
| Other comprehensive income (loss),<br>&nbsp;&nbsp;&nbsp;&nbsp; net of tax |  |  |  | (1606) |  | (1606) |
| **Balance at September 30, 2021** | 38844 | 388 | 105577 | (189) | (50120) | 55656 |
| Shares issued for: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash | 1760 | 17 | 26291 |  |  | 26308 |
| &nbsp;&nbsp;&nbsp;Exercise of stock options | 865 | 9 | 1813 |  |  | 1822 |
| &nbsp;&nbsp;&nbsp;Consulting fees | 150 | 2 | 1867 |  |  | 1869 |
| &nbsp;&nbsp;&nbsp;Share issuance costs |  |  | (797) |  |  | (797) |
| Share based compensation |  |  | 1311 |  |  | 1311 |
| Net income (loss) |  |  |  |  | (11039) | (11039) |
| Other comprehensive income (loss),<br>&nbsp;&nbsp;&nbsp;&nbsp; net of tax |  |  |  | 776 |  | 776 |
| **Balance at December 31, 2021** | 41619 | $416 | $136062 | $587 | $(61159) | $75906 |

---

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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**5E ADVANCED MATERIALS, INC.** 

**NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL** 

**STATEMENTS** 

**1. Basis of Financial Statement Presentation**

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and should be read in the context of the consolidated financial statements and footnotes thereto for the year ended June 30, 2022 included in our annual report filed with the Securities and Exchange Commission on Form 10-K, as amended. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of our financial position as of December 31, 2022, results of operations for the three and six months ended December 31, 2022 and 2021 and cash flows for the six months ended December 31, 2022 and 2021 have been included. Operating results for the three and six months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, 2023.

**Basis of Consolidation** 

The unaudited condensed consolidated financial statements comprise the financial statements of 5E Advanced Materials, Inc. and its wholly owned subsidiaries, American Pacific Borates Pty Ltd. and 5E Boron Americas, LLC (formerly Fort Cady (California) Corporation), (collectively, "5E," "we," "our," "us" or the "Company").

**Risk and Uncertainties** 

We are subject to a number of risks similar to those of other companies of similar size in our industry, including but not limited to, the success of our exploration activities, need for significant additional capital (or financing) to fund operating losses, competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, and dependence on key individuals. We currently generate no revenues from operations and will need to rely on raising additional capital or financing to sustain operations in the long-term.

It is our opinion, based on our current capital resources, that with a modified business plan, we will have sufficient assets to discharge our liabilities as they become due, construct and operate our small scale facility (the "Small-Scale Facility"), and to meet our administrative and overhead requirements for at least the next 12 months from the date these interim financial statements are issued. Future financings to fund additional engineering and capital expenditures to scale our business are anticipated through efforts to raise additional equity, issue new corporate debt or project specific debt, pursuit of government funding opportunities and incentives, and/or other means. Our continued operations beyond 12 months are dependent on our ability to obtain additional financing prior to the second half of calendar year 2023 or alter the timing of controllable expenditures by May 2023 to the extent needed to maintain adequate liquidity and preserve ongoing environmental obligations. However, there can be no assurance that we will be successful in our efforts to raise additional capital on terms favorable to us, or at all, or our ability to adequately reduce expenses, if necessary, to maintain sufficient liquidity or capital resources.

As of today, we are currently operating under our normal business plan which indicates that available cash resources are expected to be exhausted in the fourth quarter of calendar year 2023. Absent additional financing as outlined above, we would no longer be able to meet our ongoing obligations or progress operations under that plan. We have prepared and approved a modified business plan that, if necessary and initiated beginning in May 2023, would alter the timing of controllable expenditures and would preserve available liquidity into the first quarter of calendar year 2024. This modified business plan alleviates substantial doubt about our ability to continue as a going concern. As discussed in Note 7, our Convertible Note contains a financial covenant requiring us to maintain a cash balance of at least $10 million. Our available liquidity will fall below $10 million by the end of February 2024 based on our modified business plan. If we are not able to procure other financing cash flows and our cash balance falls below $10 million, an event of default under the Convertible Note indenture would occur if not cured within 30 days. An event of default would cause our Convertible Note balance outstanding to become immediately due and payable, of which we would not have the resources to repay without additional financing.

**Significant Accounting Policies**

Convertible Debt

Upon the issuance of convertible debt, we evaluate the embedded conversion features to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for separately as a derivative. If the conversion feature does not require derivative treatment, the instrument is evaluated for consideration of any beneficial conversion features. If a conversion feature is deemed to be beneficial, the intrinsic value of the conversion feature is recorded as additional paid in capital.

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Derivative Financial Instruments

We record derivative instruments on the balance sheet at fair value as either an asset or a liability with changes in fair value recognized currently in earnings. The related cash flow impact of our derivative activities is reflected as cash flows from operating activities unless the derivatives are determined to have a significant financing element at inception, in which case they are classified within financing activities.

Debt Issue Costs

Costs incurred in connection with the issuance of debt are recorded as a reduction of the related debt and are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amount is expensed in the period of conversion.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The authoritative guidance requires disclosure of the framework for measuring fair value and requires that fair value measurements be classified and disclosed in one of the following categories:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. We consider active markets as those in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that can be valued using observable market data. Substantially all of the inputs are observable in the marketplace throughout the full term of the derivative instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace.

Level 3 - Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity).

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy. We periodically review our inputs to ensure the fair value level classification is appropriate. When transfers between levels occur, it is our policy to assume that the transfer occurred at the date of the event or change in circumstances that caused the transfer.

**Recently Issued and Adopted Accounting Pronouncements** 

In August 2020, FASB issued ASU No. 2020-06–Debt–Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The update is to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. We adopted this standard during the quarter ended September 30, 2022. The adoption of this standard did not have an effect on our previously reported consolidated financial statements as we had no transactions that were the subject of the pronouncement. During the quarter ended September 30, 2022, we issued convertible debt and accounted for it in accordance with the updates provided for by ASU No. 2020-06.

In May 2021, FASB issued ASU No. 2021-04—Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity's Own Equity (Subtopic 815-40) Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The update is to clarify and reduce diversity in accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The adoption of this standard during the quarter ended September 30, 2022 did not have an effect on our consolidated financial statements.

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**2. Mineral Rights and Properties, Net**

Mineral rights and properties, net consisted of the following.

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **June 30,** |
|  | **2022** | **2022** |
|  | (in thousands) | (in thousands) |
| Mineral properties | $6733 | $6733 |
| Hydrology wells | 547 | 547 |
| Mineral interest – Elementis lease | 908 | 908 |
| Asset retirement cost, net of accumulated amortization<br> of $12 and $6 at December 31 and June 30, 2022, respectively(1) | 337 | 176 |
| Mineral rights and properties, net | $8525 | $8364 |

---

<sup>(1)</sup> Asset retirement costs represent the carrying value of capitalized costs associated with asset retirement obligations discussed in Note 5.

**3. Construction in Progress**

Construction in progress consisted of the following.

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **June 30,** |
|  | **2022** | **2022** |
|  | (in thousands) | (in thousands) |
| Engineering services | $9119 | $8656 |
| Equipment | 25224 | 13548 |
| Construction | 8678 |  |
| Injection and recovery wells | 3749 | 3421 |
| Capitalized interest | 144 |  |
| &nbsp;&nbsp;&nbsp;Total construction in progress | $46914 | $25625 |

---

**4. Properties, Plant and Equipment, Net**

Properties, plant, and equipment, net consisted of the following.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Depreciation** | **Estimated useful** | **December 31,** | **June 30,** |
| **Asset category** | **method** | **life (in years)** | **2022** | **2022** |
|  |  |  | (in thousands) | (in thousands) |
| Land | N/A |  | $1533 | $1533 |
| Buildings | Straight-line | 7-15 | 873 | 873 |
| Vehicles | Straight-line | 3-5 | 344 | 276 |
| Plant and equipment | Straight-line | 5-10 | 480 | 340 |
|  |  |  | 3230 | 3022 |
| Less accumulated depreciation |  |  | (224) | (151) |
| Properties, plant and equipment, net |  |  | $3006 | $2871 |

---

For the three and six months ended December 31, 2022 and 2021, we recognized depreciation expense of approximately $38.5 and $73.4 thousand, and $17.9 and $38.2 thousand, respectively.

.

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**5. Reclamation Liabilities**

The change in our ARO during the periods presented, and the balance of our accrued reclamation liabilities at the end of each period is set forth below.

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| | | |
|:---|:---|:---|
|  | **December 31,** | **June 30,** |
|  | **2022** | **2022** |
|  | (in thousands) | (in thousands) |
| Asset retirement obligation — beginning of period | $191 | $79 |
| &nbsp;&nbsp;&nbsp;Obligation incurred during the period |  | 106 |
| &nbsp;&nbsp;&nbsp;Revisions to previous estimates | 167 | (3) |
| &nbsp;&nbsp;&nbsp;Accretion | 9 | 9 |
| Asset retirement obligation — end of period | 367 | 191 |
| Accrued reclamation costs | 298 | 298 |
| Total accrued reclamation liabilities | $665 | $489 |

---

Accrued reclamation costs of $298 thousand relate to surface reclamation obligations at Fort Cady.

**6. Accounts Payable and Accrued Liabilities**

Accounts payable and accrued liabilities consisted of the following at the end of each period presented.

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| | | |
|:---|:---|:---|
|  | **December 31,** | **June 30,** |
|  | **2022** | **2022** |
|  | (in thousands) | (in thousands) |
| Accounts payable - trade (1) | $2883 | $3459 |
| Accrued expenses | 807 | 1584 |
| Accrued capital expenditures | 6207 | 1351 |
| Accrued payroll | 1431 | 780 |
| Accrued interest | 945 |  |
| Current portion of debt | 39 | 38 |
| Accounts payable and accrued liabilities | $12312 | $7212 |

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<sup>(1)</sup> includes $2.1 million and $1.6 million related to capital expenditures, respectively

**7. Long-term Debt**

Long-term debt consisted of the following at the end of each period presented.

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| | | |
|:---|:---|:---|
|  | **December 31,** | **June 30,** |
|  | **2022** | **2022** |
|  | (in thousands) | (in thousands) |
| Convertible note | $60000 | $— |
| Vehicle notes payable | 167 | 186 |
| &nbsp;&nbsp;&nbsp;Total debt | 60167 | 186 |
| Current portion of debt | 39 | 38 |
| Long-term debt | 60128 | 148 |
| Unamortized convertible note discount — embedded conversion feature | (23181) |  |
| Unamortized debt issuance costs - convertible note | (3872) |  |
| &nbsp;&nbsp;&nbsp;Long-term debt, net | $33075 | $148 |

---

At December 31, 2022 the fair value of the convertible note was $43.1 million.

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Interest expense consisted of the following.

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| | | |
|:---|:---|:---|
|  | **Six months ended December 31,** | **Six months ended December 31,** |
|  | **2022** | **2021** |
|  | (in thousands) | (in thousands) |
| Convertible note interest | $945 | $— |
| Notes payable interest |  | 2 |
| Vehicle notes payable interest | 4 |  |
| Amortization of debt issuance costs and discount — convertible note | 2001 |  |
| &nbsp;&nbsp;&nbsp;Gross interest expense | 2950 | 2 |
| &nbsp;&nbsp;&nbsp;Less: amount capitalized to construction in progress | 144 |  |
| &nbsp;&nbsp;&nbsp;Interest expense, net of amounts capitalized | $2806 | $2 |
| Effective interest rate — convertible note | 25.70% |  |

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Convertible Note

On August 11, 2022, we executed a $60 million private placement of Senior Secured Convertible Note ("the Note" or "Convertible Note"), with Bluescape Energy Partners ("Bluescape"). The Note, which is convertible into our common stock and matures in August 2027, closed on August 26, 2022. At our election, the Note bears interest at an annual rate of 4.50% if paid in cash, or at an annual rate of 6.00% if paid through the issuance of additional notes and contains a financial covenant requiring us to maintain a cash balance of at least $10 million. The purchaser may convert the Note at any time before August 2027 at a conversion price of $17.60 ("Conversion Price"). We have the right, at any time on or before the twenty-four (24) month anniversary of the closing date of the Note ("Closing Date"), to convert the Note to our common stock in whole or in part if the closing price of our common stock is at least 200% of the Conversion Price of the Note ("Threshold Price") for each of the twenty (20) consecutive trading days prior to the time we deliver a conversion notice. The Threshold Price for our right to convert the Note decreases to 150% after the twenty-four (24) month anniversary of the Closing Date and on or before the thirty-six (36) month anniversary of the Closing, and to 130% at any time after the thirty-six (36) month anniversary of the Closing Date.

Due to a provision in the Convertible Note agreement that allowed for a change in the conversion price upon a digressive issuance by us within three months of the closing date, the conversion feature of the Note was deemed an embedded derivative requiring separate accounting as a stand-alone derivative instrument (convertible note derivative). The Note was recorded at its face amount of $60 million less debt issuance costs of $4.2 million and the fair value of the convertible note derivative of $24.9 million. Fair value information for the convertible instrument follows. The provision resulting in the separate derivative accounting for the conversion feature expired November 26, 2022, and accordingly, the fair value of the convertible note derivative at expiration of the provision was transferred to additional paid-in capital (see Note 8).

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| | | |
|:---|:---|:---|
|  | **November 26,** | **August 26,** |
|  | **2022** | **2022** |
|  | **(Termination)** | **(Inception)** |
|  | (in thousands) | (in thousands) |
| Fair value of convertible note (Level 2) | $36388 | $35104 |
| Fair value of embedded conversion feature (Level 3) | 13153 | 24896 |
| &nbsp;&nbsp;&nbsp;Total fair value of convertible note instrument | $49541 | $60000 |

---

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**8. Convertible Note Derivative**

Our convertible note derivative relates to the Convertible Note described above and was valued upon initial recognition at fair value using a with-and-without methodology utilizing a binomial lattice model (Level 3). The convertible note derivative is re-measured at fair value at each period end using a Black-Scholes option valuation model with the resulting gain or loss recognized in the statement of operations. As described above in Note 7, the fair value of the convertible note derivative was transferred to additional paid-in capital during the three months ended December 31, 2022. The components of changes to the fair value of the convertible note derivative are summarized below.

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| | | |
|:---|:---|:---|
|  | **December 31,** | **September 30,** |
|  | **2022** | **2022** |
|  | (in thousands) | (in thousands) |
| Convertible note derivative — beginning of period | $10987 | $— |
| &nbsp;&nbsp;&nbsp;Additions |  | 24896 |
| &nbsp;&nbsp;&nbsp;Fair value adjustment (gain) loss | 2166 | (13909) |
| &nbsp;&nbsp;&nbsp;Reclassified to additional paid-in capital | (13153) |  |
| Convertible note derivative — end of period | $— | $10987 |

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The valuation model requires the input of subjective assumptions including expected share price volatility, risk-free interest rate and debt rate. Changes in the input assumptions as well as our underlying share price can materially affect the fair value estimate and reported net income (loss). The assumptions used in the valuation model include the following, with a change in volatility and debt rate having the most significant impact on the valuation.

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| | | | |
|:---|:---|:---|:---|
|  | **November 26,** |  | **August 26,** |
|  | **2022** | **September 30,** | **2022** |
|  | **(Termination)** | **2022** | **(Inception)** |
| Risk-free interest rate | 3.9% | 4.1% | 3.2% |
| Volatility | 40.0% | 40.0% | 40.0% |
| Debt rate | 17.7% | 18.6% | 17.3% |

---

**9. Financial Instruments and Fair Value Measurements**

At December 31, 2022, cash equivalents as well as trade and other payables approximate their fair value due to their short-term nature. Our financial instruments also consist of environmental reclamation bonds which are invested in certificates of deposit and money market funds which are classified as Level 1, and the convertible note derivative which was classified as Level 3 before its derecognition and transfer to additional paid-in capital during the current period. The reconciliation of changes in the fair value of liabilities classified as Level 3 can be found in Notes 7 and 8.

**10. Share Based Compensation**

Share based compensation expense is included in general and administrative expense and consisted of the following for the periods presented.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended December 31,** | **Three months ended December 31,** | **Six months ended December 31,** | **Six months ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | (in thousands) | (in thousands) | (in thousands) | (in thousands) |
| Share based compensation expense — service based |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Employee share option plan | $1261 | $1310 | $2222 | $2838 |
| &nbsp;&nbsp;&nbsp;2022 Equity Compensation Plan — Options | 351 |  | 526 |  |
| &nbsp;&nbsp;&nbsp;2022 Equity Compensation Plan — PSU's | 34 |  | 59 |  |
| &nbsp;&nbsp;&nbsp;2022 Equity Compensation Plan — RSU and DSU's | 587 |  | 726 |  |
| Total service based compensation | 2233 | 1310 | 3533 | 2838 |
| Options issued to suppliers |  |  |  | 249 |
| Consulting stock awards |  | 1869 |  | 3408 |
| Total share based compensation | $2233 | $3179 | $3533 | $6495 |

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Stock Options

All options outstanding prior to the three-month period ended September 30, 2022 were granted under our predecessor parent company's employee share option plan. New option grants are made under the 2022 Equity Compensation Plan and vest ratably over three years. The tables below reflect all options granted under both plans. The significant assumptions used to estimate the fair value of stock option awards granted under the plans during the six months ended December 31, 2022 and 2021, using the Black-Scholes option valuation model are as follows.

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| | | |
|:---|:---|:---|
|  | **Six months ended December 31,** | **Six months ended December 31,** |
|  | **2022** | **2021** |
| Exercise price | $25.62 | $14.62 - $18.27 |
| Share price | $18.03 | $12.43 |
| Volatility | 79% | 85% |
| Expected term in years | 5 | 0.9 to 3.9 |
| Risk-free interest rate | 2.91% | 0.01% - 0.1% |
| Dividend rate | Nil | Nil |

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The following table summarizes stock option activity for each of the periods presented.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Six months ended December 31,** | **Six months ended December 31,** | **Six months ended December 31,** | **Six months ended December 31,** |
|  | **2022** | **2022** | **2021** | **2021** |
|  | **Number of Options** | **Weighted Average Exercise Price** | **Number of Options** | **Weighted Average Exercise Price** |
|  | (In thousands, except per share data) | (In thousands, except per share data) | (In thousands, except per share data) | (In thousands, except per share data) |
| Outstanding at beginning of the period | 4874 | $9.67 | 5554 | $5.19 |
| &nbsp;&nbsp;&nbsp;Granted | 400 | 25.62 | 1700 | 15.42 |
| &nbsp;&nbsp;&nbsp;Exercised | (575) | 3.78 | (1168) | 2.49 |
| &nbsp;&nbsp;&nbsp;Expired/forfeited | (460) | 15.33 | (477) | 5.48 |
| Outstanding at end of the period | 4239 | 11.37 | 5609 | 8.84 |
| Vested at the end of the period | 3312 | $9.01 | 3970 | $6.29 |
| Unvested at the end of the period | 927 | 19.76 | 1639 | 14.95 |

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The weighted average remaining life of vested options at December 31, 2022 and 2021 was 1.7 years and 2.24 years, respectively.

As of December 31, 2022, there was $5.6 million of unrecognized compensation cost related to 927 thousand unvested stock options. This cost is expected to be recognized over a weighted-average remaining period of approximately 1.7 years.

The following table summarizes the activity for unvested options for each of the periods presented.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Six months ended December 31,** | **Six months ended December 31,** | **Six months ended December 31,** | **Six months ended December 31,** |
|  | **2022** | **2022** | **2021** | **2021** |
|  | **Number of Options** | **Weighted Average Grant Date Fair Value per share** | **Number of Options** | **Weighted Average Grant Date Fair Value per share** |
|  | (In thousands, except per share data) | (In thousands, except per share data) | (In thousands, except per share data) | (In thousands, except per share data) |
| Unvested at beginning of the period | 1507 | $6.05 | 270 | $5.79 |
| &nbsp;&nbsp;&nbsp;Granted | 400 | 10.52 | 1700 | 6.26 |
| &nbsp;&nbsp;&nbsp;Vested | (880) | 5.71 | (220) | 6.62 |
| &nbsp;&nbsp;&nbsp;Expired/forfeited | (100) | 6.85 | (111) | 8.11 |
| Unvested at end of the period | 927 | 8.11 | 1639 | 6.01 |

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As of December 31, 2022, the intrinsic value of both the outstanding stock options and vested options was $5.1 million. The intrinsic value of stock options exercised during the six months ended December 31, 2022 and 2021 was $4.6 million and $14.2 million, respectively.

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Restricted Share Units, Director Share Units and Performance Share Units

The following table summarizes restricted share ("RSU"), director restricted share ("DSU") and performance share ("PSU") activity under the 2022 Equity Compensation Plan for each of the periods presented.

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Serviced-Based Shares** |  | **Weighted Average Grant Date Fair Value per Share** | **Weighted Average Grant Date Fair Value per Share** | **Performance- Based Shares** |  | **Weighted Average Grant Date Fair Value per Unit** | **Weighted Average Grant Date Fair Value per Unit** | **Total Shares** |
|  | (In thousands, except per share data) | (In thousands, except per share data) | (In thousands, except per share data) | (In thousands, except per share data) | (In thousands, except per share data) | (In thousands, except per share data) | (In thousands, except per share data) | (In thousands, except per share data) | (In thousands, except per share data) |
| Non-vested shares/units outstanding<br> at July 1, 2022 | 48.8 |  | $| 18.03 | 19.2 |  | $| 12.19 | 68.0 |
| &nbsp;&nbsp;&nbsp;Granted | 106.5 |  |  | 14.47 | 63.5 | (2) |  | 14.79 | 170.0 |
| &nbsp;&nbsp;&nbsp;Vested | (8.9) |  |  | 12.27 |  |  |  |  | (8.9) |
| &nbsp;&nbsp;&nbsp;Forfeited | (14.5) |  |  | 14.25 | (35.1) |  |  | 14.09 | (49.6) |
| Non-vested shares/units outstanding <br> at December 31, 2022 | 131.9 | (1) | $| 15.96 | 47.6 |  | $| 14.26 | 179.5 |
| (1) Includes approximately 32 thousand director share units | (1) Includes approximately 32 thousand director share units | (1) Includes approximately 32 thousand director share units | (1) Includes approximately 32 thousand director share units | (1) Includes approximately 32 thousand director share units | (1) Includes approximately 32 thousand director share units | (1) Includes approximately 32 thousand director share units | (1) Includes approximately 32 thousand director share units | (1) Includes approximately 32 thousand director share units | (1) Includes approximately 32 thousand director share units |
| (2) On September 1, 2022, we granted approximately 63.5 thousand performance share units, which based on the achievement of certain operational targets, could vest within a range of 0% to 100%. The operational targets are; 1) commissioning and operation of the small-scale facility; 2) obtaining formation flow, head grade and impurity profile data from the small-scale facility; and 3) generate product data to ensure process design for detailed engineering. The determination of the percentage of shares that ultimately vest will be made at the three-year anniversary of the grant date based upon achievement of the performance targets over the period. | (2) On September 1, 2022, we granted approximately 63.5 thousand performance share units, which based on the achievement of certain operational targets, could vest within a range of 0% to 100%. The operational targets are; 1) commissioning and operation of the small-scale facility; 2) obtaining formation flow, head grade and impurity profile data from the small-scale facility; and 3) generate product data to ensure process design for detailed engineering. The determination of the percentage of shares that ultimately vest will be made at the three-year anniversary of the grant date based upon achievement of the performance targets over the period. | (2) On September 1, 2022, we granted approximately 63.5 thousand performance share units, which based on the achievement of certain operational targets, could vest within a range of 0% to 100%. The operational targets are; 1) commissioning and operation of the small-scale facility; 2) obtaining formation flow, head grade and impurity profile data from the small-scale facility; and 3) generate product data to ensure process design for detailed engineering. The determination of the percentage of shares that ultimately vest will be made at the three-year anniversary of the grant date based upon achievement of the performance targets over the period. | (2) On September 1, 2022, we granted approximately 63.5 thousand performance share units, which based on the achievement of certain operational targets, could vest within a range of 0% to 100%. The operational targets are; 1) commissioning and operation of the small-scale facility; 2) obtaining formation flow, head grade and impurity profile data from the small-scale facility; and 3) generate product data to ensure process design for detailed engineering. The determination of the percentage of shares that ultimately vest will be made at the three-year anniversary of the grant date based upon achievement of the performance targets over the period. | (2) On September 1, 2022, we granted approximately 63.5 thousand performance share units, which based on the achievement of certain operational targets, could vest within a range of 0% to 100%. The operational targets are; 1) commissioning and operation of the small-scale facility; 2) obtaining formation flow, head grade and impurity profile data from the small-scale facility; and 3) generate product data to ensure process design for detailed engineering. The determination of the percentage of shares that ultimately vest will be made at the three-year anniversary of the grant date based upon achievement of the performance targets over the period. | (2) On September 1, 2022, we granted approximately 63.5 thousand performance share units, which based on the achievement of certain operational targets, could vest within a range of 0% to 100%. The operational targets are; 1) commissioning and operation of the small-scale facility; 2) obtaining formation flow, head grade and impurity profile data from the small-scale facility; and 3) generate product data to ensure process design for detailed engineering. The determination of the percentage of shares that ultimately vest will be made at the three-year anniversary of the grant date based upon achievement of the performance targets over the period. | (2) On September 1, 2022, we granted approximately 63.5 thousand performance share units, which based on the achievement of certain operational targets, could vest within a range of 0% to 100%. The operational targets are; 1) commissioning and operation of the small-scale facility; 2) obtaining formation flow, head grade and impurity profile data from the small-scale facility; and 3) generate product data to ensure process design for detailed engineering. The determination of the percentage of shares that ultimately vest will be made at the three-year anniversary of the grant date based upon achievement of the performance targets over the period. | (2) On September 1, 2022, we granted approximately 63.5 thousand performance share units, which based on the achievement of certain operational targets, could vest within a range of 0% to 100%. The operational targets are; 1) commissioning and operation of the small-scale facility; 2) obtaining formation flow, head grade and impurity profile data from the small-scale facility; and 3) generate product data to ensure process design for detailed engineering. The determination of the percentage of shares that ultimately vest will be made at the three-year anniversary of the grant date based upon achievement of the performance targets over the period. | (2) On September 1, 2022, we granted approximately 63.5 thousand performance share units, which based on the achievement of certain operational targets, could vest within a range of 0% to 100%. The operational targets are; 1) commissioning and operation of the small-scale facility; 2) obtaining formation flow, head grade and impurity profile data from the small-scale facility; and 3) generate product data to ensure process design for detailed engineering. The determination of the percentage of shares that ultimately vest will be made at the three-year anniversary of the grant date based upon achievement of the performance targets over the period. | (2) On September 1, 2022, we granted approximately 63.5 thousand performance share units, which based on the achievement of certain operational targets, could vest within a range of 0% to 100%. The operational targets are; 1) commissioning and operation of the small-scale facility; 2) obtaining formation flow, head grade and impurity profile data from the small-scale facility; and 3) generate product data to ensure process design for detailed engineering. The determination of the percentage of shares that ultimately vest will be made at the three-year anniversary of the grant date based upon achievement of the performance targets over the period. |

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**11. Earnings (Loss) Per Common Share** 

Basic earnings (loss) per share (EPS) is calculated by dividing net income (loss) less any applicable adjustments (the numerator) by the weighted-average number of shares of common stock (excluding unvested restricted stock units) outstanding during the period (the denominator). Diluted EPS incorporates the dilutive impact of outstanding stock options and unvested restricted stock units (using the treasury stock method). Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of unrecognized compensation expense related to unvested restricted stock units and the amount of excess tax benefits that would be recorded when the award becomes deductible are assumed to be used to repurchase shares.

Diluted earnings (loss) per share equals basic loss per share as the inclusion of normally dilutive options and restricted stock units would be antidilutive due to reported net losses for those periods. For the six months ended December 31, 2022 and 2021 respectively, stock options and unvested restricted stock units of 5,052 and 4,810 were excluded from the computation of diluted earnings (loss) per share.

**12. Commitments and Contingencies**

We had purchase order commitments of $20 million for the construction works in progress, equipment, software, drilling, and technical reports of which $6.2 million is reflected in accounts payable and accrued liabilities on our balance sheet at December 31, 2022.

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References herein to the "Company," "we," "our," and "us," refer to 5E Advanced Materials, Inc. and its subsidiaries.

**CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS** 

Certain statements included in this Quarterly Report on Form 10-Q for the three months ended December 31, 2022 (this "Form 10-Q") contain various forward-looking statements relating to the Company's future financial performance and results, financial condition, business strategy, plans, goals and objectives, including certain projections, business trends and other statements that are not historical facts. These statements constitute forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "budget," "target," "aim," "strategy," "estimate," "plan," "guidance," "outlook," "intend," "may," "should," "could," "will," "would," "will be," "will continue," "will likely result" and similar expressions, although not all forward-looking statements contain these identifying words. Forward-looking statements reflect the Company's beliefs and expectations based on current estimates and projections. While the Company believes these expectations, and the estimates and projections on which they are based, are reasonable and were made in good faith, these statements are subject to numerous risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other important factors, which include, but are not limited to, the risks described under the heading "Risk Factor Summary" and "Item 1A. – Risk Factors" in our annual report on Form 10-K, any of which could cause the Company's actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.

These forward-looking statements speak only as of the date of this Form 10-Q and, except as required by law, the Company undertakes no obligation to correct, update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required under federal securities laws. You are advised, however, to consult any additional disclosures we make in our reports to the U.S. Securities and Exchange Commission (the "SEC"). All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in our latest annual report on Form 10-K and this Form 10-Q.

**Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.** 

The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in conjunction with, and is qualified in its entirety by, the unaudited Condensed Consolidated Financial Statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report on Form 10K filed on September 28, 2022. This discussion and analysis contains forward looking statements that involve risks, uncertainties and assumptions and other important factors, which include, but are not limited to, the risks described in our annual report on Form 10-K filed with the SEC, any of which could cause the Company's actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth elsewhere in this Form 10-Q and under "Item 1A. Risk Factors" and elsewhere in our Form 10-K. In addition, see "Cautionary Note Regarding Forward-Looking Statements." References to the "Company," "we," "our," and "us," refer to 5E Advanced Materials, Inc. and its subsidiaries.

**Overview**

5E Advanced Materials, Inc. is focused on becoming a vertically integrated global leader and supplier of boron specialty and advanced materials whose mission is to enable decarbonization, increase food security, and ensure domestic supply of critical materials. We hold 100% of the rights – either through ownership or leasehold interest – in the 5E Boron Americas (Fort Cady) Complex (the "Project") located in southern California, through our wholly owned subsidiary 5E Boron Americas, LLC. Our Project is underpinned by a mineral resource that includes boron and lithium, with the boron being contained in a conventional boron mineral known as colemanite. In 2022, our facility was designated as Critical Infrastructure by the Department of Homeland Security's Cybersecurity and Infrastructure Security Agency. Our vision is to safely process boric acid and lithium carbonate through sustainable best practices to enable decarbonization, food security and domestic supply surety.

**2023 Outlook and Goals**

Small-Scale Facility

During the quarter ended December 31, 2022, we substantially advanced construction of our Small-Scale Facility and commenced pre-commissioning activities prior to quarter end. We continue to focus on and target commencing operations for initial production of boric acid in late first quarter or early second quarter of calendar year 2023. The timing of initial production of boric acid is contingent upon the successful completion of commissioning activities and the final clearance to commence mining from the Environmental

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Protection Agency under our Underground Injection Control permit, which are expected to be issued in the ordinary course of business. In January 2023, the United States Geological Survey issued a new report and there were only two companies that produced borates in calendar year 2022, and our production of boric acid would make us the third producer of boron in the United States. We continue to target initial production of lithium carbonate in the second calendar quarter of 2023.

Larger Scale Facility

As announced on December 20, 2022, we are considering opportunities to accelerate the timeline for initial commercial production based on the learnings from our Small-Scale Facility. The opportunities to accelerate the timeline for initial commercial production are underpinned on the belief that the sooner we can enter commercial production, the sooner we can achieve positive earnings and cash flow. There have been significant increases in prices for boron and lithium over recent quarters, largely driven by supply constraints which appear unlikely to dissipate in the near term. Our independent market research indicates medium-to-long term strength in boric acid demand and pricing, which further reinforces the need to explore all of our options to accelerate initial commercial production. The initial focus to accelerate includes developing model estimates for capital cost, operating expenses and revenue based on modular design options. We anticipate using the data and flow sheet optimization derived from the initial production from our Small-Scale Facility to optimize our larger scale production strategy. We aim to quickly transition into engineering and long lead time item acquisitions required to support our plans to achieve commercial production as soon as possible.

Revenue Opportunities from Small-Scale Facility

We are assessing partner-led initiatives to produce downstream derivatives (including, but not limited to, boron specialties and advanced materials) from our Small-Scale Facility. While this is a secondary focus for us, we have made progress with respect to certain initiatives with the opportunity to deliver revenue prior to our planned larger scale facility becoming operational.

Funding and Financial Markets

Commercial Initiatives

During the quarter, we entered into a non-binding letter-of-intent with Estes Energetics, a current supplier to the U.S. Department of Defense, to collaborate on producing boron advanced materials for solid rocket motors to support U.S. space and military industries. The letter-of-intent aligns with on-going U.S. government initiatives and programs to on-shore production of critical materials. We continue to have discussions with prospective and already engaged customers with respect to broader collaboration on boric acid and lithium carbonate sales including customer funded development options.

Government Initiatives

We continue to pursue various government funding opportunities and incentives. We are targeting funding opportunities in areas of interest for the U.S. government, including defense, clean energy, agriculture, and food security. Our focus to date has been the Department of Defense, via the Defense Production Act Title III and the Defense Logistics Agency, as well as the Department of Energy through, the Office of Fossil Energy and Carbon Management and Loans Program Office. While discussions are ongoing with multiple governmental entities, we expect to be able to have more meaningful discussions with the Loans Program Office upon completing an updated technical report. In October 2022, we received a partial exemption for use tax within the State of California for plant and equipment procured to process boric acid and lithium carbonate. The partial exemption is being retroactively applied to our Small-Scale Facility and we expect to apply the exemption to our larger facility.

Capital Market's Activities

During the quarter, our activities were primarily focused on the United States but included a two-week Australia non-deal roadshow where senior management presented extensively in four Australian states and territories. We have multiple non-deal roadshows scheduled for the upcoming quarter and continue to work with investment banks to increase awareness of the Company to investors in the United States. Given the nature of the project and its location, we have commenced a process to consider non-dilutive debt financing options for our larger scale facility.

**Highlights for the Three Months Ended December 31, 2022**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Pre-commissioning activities commenced prior to quarter-end with plan to commence operations in late Q1 or early Q2 of calendar year 2023;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Continued track record of zero lost time incidents with over 83,000 man hours recorded in the quarter;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Commenced workstream exploring options to accelerate the large-scale boron and lithium complex;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Signed letter of intent with Estes Energetics to collaborate in producing boron-based materials for solid rocket motors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Recruitment efforts for CEO well underway.

**Liquidity**

Our latest liquidity forecast indicates that available cash resources are expected to be exhausted by fourth quarter calendar year 2023. We are actively exploring various financing options, including government funding opportunities. However, if additional financing is not secured prior to the second half of calendar year 2023, we would need to implement a modified business plan. We have prepared and approved an alternative liquidity forecast that, if necessary and initiated beginning in May 2023, would alter the timing of controllable expenditures and would preserve available liquidity into the first quarter of calendar year 2024. See "Liquidity and Capital Resources" below for more information.

**Inflation**

The U.S. inflation rate has been steadily increasing since 2021 and throughout 2022. These inflationary pressures have resulted in and may result in additional increases to the cost of our goods, services, and personnel, which in turn cause our capital expenditures and labor costs to rise, including the estimated costs for our reclamation activities. Sustained levels of high inflation have caused the U.S. Federal Reserve and other central banks to increase interest rates, which could have the effects of raising the cost of capital and depressing economic growth, either of which or the combination thereof, could adversely affect our business.

**COVID-19 Response**

We have implemented policies at our offices in Houston, TX, Hesperia, CA, and Newberry Springs, CA designed to ensure the safety and well-being of all employees and the people associated with them. In that regard, to reduce risk, our employees have been encouraged to get fully vaccinated against COVID-19, have been asked to work remotely at times, avoid non-essential business travel when applicable, adhere to good hygiene practices, and engage in social distancing. Continuation of COVID-19 in 2023 and beyond could impact employee health, workforce productivity, insurance premiums, ability to travel, the availability of industry experts, personnel and equipment, restrictions or delays to field work, construction, procurement, studies, lab results, and other factors that will depend on future developments that may be beyond our control.

The forward-looking information contained in this section is subject to the risk factors and assumptions contained in the "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factor" sections.

------

**Results of Operations** 

The following table summarizes our results of operations for the periods presented:

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31, 2022** | **Three Months Ended December 31, 2022** | **Three Months Ended December 31, 2022** | **Three Months Ended December 31, 2022**<br>**Change** | **Change** | **Six Months Ended December 31, 2022** | **Six Months Ended December 31, 2022**<br>**Change** | **Change** |
|  | **2022** | **2022** | **2021** | **2021** | **%** | **2022** | **2021** | **%** |
|  | **($ in thousands)** | **($ in thousands)** | **($ in thousands)** | **($ in thousands)** | **($ in thousands)** | **($ in thousands)** | **($ in thousands)** | **($ in thousands)** |
| COSTS AND EXPENSES |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Project expenses | $| 3404 | $| 2990 | 14% | $6999 | $7775) | -10% |
| &nbsp;&nbsp;General and administrative |  | 7701 |  | 7830) | -2% | 12587 | 13671) | -8% |
| &nbsp;&nbsp;Research and development |  | 39 |  |  | N/A | 78 |  | N/A |
| &nbsp;&nbsp;Depreciation and amortization<br> expense |  | 42 |  | 20 | 110% | 79 | 40 | 98% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total costs and expenses |  | 11186 |  | 10840 | 3% | 19743 | 21486) | -8% |
| LOSS FROM OPERATIONS |  | (11186) |  | (10840) | 3% | (19743) | (21486) | -8% |
| NON-OPERATING INCOME (EXPENSE) |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Other income |  | 22 |  |  | N/A | 36 | 10 | 260% |
| &nbsp;&nbsp;Interest income |  | 465 |  | 1 | \* | 526 | 2 | \* |
| &nbsp;&nbsp;Derivative gain (loss) |  | (2166) |  | —) | N/A | 11743 |  | N/A |
| &nbsp;&nbsp;Interest expense |  | (1985) |  | —) | N/A | (2806) | (2) | \* |
| &nbsp;&nbsp;Other expense |  | (13) |  | (200) | -94% | (13) | 969) | -101% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total non-operating income<br> (expense) |  | (3677) |  | (199) | NM | 9486 | 979 | \* |
| NET INCOME (LOSS) | $| (14863) | $| (11039) | 35% | $(10257) | $(20507) | -50% |
| \* Represents a percentage change greater<br>&nbsp;&nbsp;&nbsp;&nbsp; than +/- 300% | \* Represents a percentage change greater<br>&nbsp;&nbsp;&nbsp;&nbsp; than +/- 300% | \* Represents a percentage change greater<br>&nbsp;&nbsp;&nbsp;&nbsp; than +/- 300% | \* Represents a percentage change greater<br>&nbsp;&nbsp;&nbsp;&nbsp; than +/- 300% | \* Represents a percentage change greater<br>&nbsp;&nbsp;&nbsp;&nbsp; than +/- 300% |  |  |  |  |

---

**Comparison of the three and six months ended December 31, 2022 and 2021** 

Project expenses

Project expenses include drilling, plug and abandonment, site-preparation, engineering, consumables, testing and sampling, hydrology, permits, surveys, and other expenses associated with further progressing our project. For the six months ended December 31 2022, project expenses decreased 10% versus the comparable period in 2021. The decrease was primarily due to a reduction in drilling activity specific to water monitoring wells ($6.3 million) incurred in the comparable 2021 period partially offset by costs related to our plug and abandonment program ($5 million), increases in construction related insurance ($0.4 million) and other site related costs ($0.2 million) incurred during the current period. For the quarter ended December 31, 2022, project expenses increased 14% as plugging and abandonment costs during the current quarter exceeded the reduction in costs related to the prior year's quarter water monitoring well activity (approximately $272 thousand) combined with construction related insurance costs of approximately $194 thousand that were incurred in the current year quarter.

General and administrative expenses

The decrease in general and administrative expenses during the three and six months ended December 31, 2022 was primarily driven by one-time costs incurred during the prior three and six months periods related to the preparation of our Form-10, our reorganization, and consulting fees paid to Blue Horizon Advisors LLC for services provided. The absence of these costs during the current three and six month periods were partially offset by an increase in salaries and benefits, stock based compensation, and travel costs resulting from an increase in headcount from 11 at June 30, 2021 to 30 at December 31, 2022. All employee costs across our business are currently accounted for within general and administrative expenses. Insurance costs increased during the three and six months ended December 31, 2022 as a result of our monthly amortization of insurance premiums for our public company Director and Officer insurance.

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Non-operating (income) expense

The derivative gain (loss) during the three and six months ended December 31, 2022 related to changes in fair value of the embedded conversion feature of our convertible notes that was required to be bifurcated and accounted for separately as a stand-alone derivative instrument during the quarter ended September 30, 2022. The unrealized loss during the three months ended December 31, 2022 was primarily due to our stock price increasing from $10.16 at September 30, 2022 to $11.63 at November 26, 2022 (termination). The unrealized gain during the six months ended December 31, 2022, was primarily due to the decrease in our stock price to $11.63 at the termination date from $15.83 on August 26, 2022 (inception date). The provision resulting in the separate derivative accounting for the conversion feature expired on November 26, 2022. The expiration resulted in the transfer of the fair value of the convertible note derivative at expiration to additional paid-in capital and no future related gains or losses are expected.

The increase in interest income during the three and six months ended December 31, 2022 was attributable to short-term investments (original maturities of three months or less) in highly liquid treasury bills and a certificate of deposit starting at the end of the quarter ending September 30, 2022. The weighted average interest rate earned on these investments was approximately 3.42% for the three and six months ended December 31, 2022.

Interest expense increased primarily due to the issuance of the convertible note on August 26, 2022 and includes $1.5 million and $2 million of debt issuance cost amortization during the three and six months ended December 31, 2022, respectively. During the six month period ended December 31, 2022, we capitalized approximately $144 thousand to construction in progress. Interest expense for the six months ended December 31, 2021 related to a note that was paid off during the year ended June 30, 2022.

Other expense consists primarily of foreign exchange gains and losses. The decrease during the three and six months ended December 31, 2022 compared to the comparative period was due to the transfer and conversion to U.S. dollars of all foreign denominated cash balances during the quarter ended June 30, 2022 to our bank account in the U.S.

**Income Tax** 

We did not have any income tax expense or benefit for the three and six months ended December 31, 2022 and 2021, as we have recorded a full valuation allowance against our net deferred tax asset.

**Liquidity and Capital Resources** 

As of December 31, 2022, we had cash and cash equivalents of $56.8 million and working capital of $45.3 million compared to $31.1 million and $25.2 million as of June 30, 2022, respectively. Our predominant source of cash has been generated through equity financing from issuances of our common stock and hybrid equity and debt securities. Since inception, we have not generated revenues, and as such, have relied on equity financing and hybrid equity and debt instruments to fund our operating and investing activities.

In August 2022, we executed a $60 million private placement of senior secured convertible notes to complete construction and commissioning of our Small-Scale Facility, fund operation of our Small-Scale Facility, commence detail engineering and procure long lead items for our large-scale complex and general corporate purposes.

With our current capital resources, we believe that we have sufficient funds to construct and commission our Small-Scale Facility and operate the facility to complete flow sheet optimization activities and produce product for customer qualification. Over the next 12 months we also have plans to do the following below that will require additional capital:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Pursue and optimize infrastructure capital expenditures for our larger-scale facility which could include expansion of non-potable water resources, upgrading shore power, connection to a natural gas network, and constructing new access roads into and out of the location for our larger-scale facility;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Progress detailed engineering and procure long lead item equipment, specifically our crystallization units;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Optimize well-field design in an effort to reduce future mining capital and operational expenditure through various drilling techniques such as directional, horizontal and radial drilling;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Further define our advanced materials strategy with consideration to engineering and repurposing our Small-Scale Facility to produce boron advanced materials once sufficient data has been obtained for flow sheet optimization and the production of product for customer qualification; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Continue hiring team members necessary to support our operation efforts of becoming a global producer of boric acid, lithium carbonate and gypsum.

------

It is our opinion, based on our current capital resources, that with a modified business plan, we will have sufficient assets to discharge our liabilities as they become due, construct and operate our Small-Scale Facility, and to meet our administrative and overhead requirements for at least the next 12 months from the date these quarterly financial statements are issued. Future financings to fund additional engineering and capital expenditures to scale our business are anticipated through efforts to raise additional equity, issue new corporate debt or project specific debt, pursuit of government funding opportunities and incentives, and/or other means. Our continued operations beyond 12 months are dependent on our ability to obtain additional financing prior to the second half of calendar year 2023 or alter the timing of controllable expenditures by May 2023 to the extent needed to maintain adequate liquidity and preserve ongoing environmental obligations. However, there can be no assurance that we will be successful in our efforts to raise additional capital on terms favorable to us, or at all, or our ability to adequately reduce expenses, if necessary, to maintain sufficient liquidity or capital resources.

As of today, we are currently operating under our normal business plan which indicates that available cash resources are expected to be exhausted in the fourth quarter of calendar year 2023. Absent additional financing as outlined above, we would no longer be able to meet our ongoing obligations or progress operations under that plan. We have prepared and approved a modified business plan that, if necessary and initiated beginning in May 2023, would alter the timing of controllable expenditures and would preserve available liquidity into the first quarter of calendar year 2024. This modified business plan alleviates substantial doubt about our ability to continue as a going concern. Our Convertible Note contains a financial covenant requiring us to maintain a cash balance of at least $10 million (see note 7 to our unaudited condensed consolidated financial statements in item 1 of this report for additional information). Our available liquidity will fall below $10 million by the end of February 2024 based on our modified business plan. If we are not able to procure other financing cash flows and our cash balance falls below $10 million, an event of default under the Convertible Note indenture would occur if not cured within 30 days. An event of default would cause our Convertible Note balance outstanding to become immediately due and payable, of which we would not have the resources to repay without additional financing.

**Critical Accounting Policies**

Derivative Financial Instruments

Our derivative instruments are accounted for on a mark-to-market basis. During the current quarter, our only derivative instrument, the convertible note derivative, was derecognized through a transfer to additional paid in capital. The derivative fair value was determined using a with-and-without methodology utilizing a binomial lattice model. The model considers various inputs including time value, volatility, credit risk and the current share price of our common stock. As a result, the value of the embedded conversion feature could be significantly different than the fair value transferred to additional paid in capital of $13.2 million, See Notes 7 and 8 to our unaudited condensed consolidated financial statements in item 1 of this report for additional information.

**Contractual Commitments and Contingencies** 

Purchase Obligations

The Company had purchase order commitments $20 million for the construction works in progress, equipment, software and technical reports, of which $6.2 million is reflected in accounts payable and accrued liabilities on our unaudited condensed consolidated balance sheet at December 31, 2022. The majority of the commitments will be settled by June 30, 2023.

Mineral Lease Payments

We have a mineral lease agreement with Elementis for the purposes of obtaining exploration and mining privilege. The mineral lease agreement requires us to make an annual minimum royalty payment of $75 thousand, escalated annually based on inflation, until the expiration date of the lease (March 31, 2023). Payments made during the six months ended December 31, 2022 and 2021, were $0 and $86 thousand, respectively.

Salt Wells Earn-in Agreement

On August 2, 2022, Great Basin Resources, Inc. agreed to amend our Salt Wells Earn-in Agreement. To fully realize the mineral interest rights under the agreement, we must incur exploration expenses of $900 thousand by December 31, 2023, $800 thousand by December 31, 2024, and approximately $756 thousand by December 31, 2025.

------

**Item 3. Quantitative and Qualitative Disclosures About Market Risk.** 

Not required.

**Item 4. Controls and Procedures.** 

During our fiscal year end June 30, 2022, management identified a material weakness in our internal control over financial reporting related to a lack of segregation of duties in the administrative rights of our accounting system. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. During the six month period ended December 31, 2022, we have taken steps towards remediating the design deficiency that led to the material weakness by hiring additional accounting personnel, removing the offending access to the old accounting system, and effective October 1, 2022, transitioned to a new more robust accounting system. During the quarter ended December 31, 2022, we finalized the design and implementation of the controls to address the material weakness, however, its required that controls operate effectively for a sufficient period of time and undergo testing before management concludes that the controls are operating effectively.

&nbsp;&nbsp;&nbsp;&nbsp;Our management, under supervision and with the participation of Mr. Anthony Hall (performing the functions of our Principal Executive Officer) and our Chief Financial Officer (our Principal Financial Officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of December 31, 2022. Based on the evaluation of our disclosure controls and procedures as well as the potential impact of the material weakness described above, Mr. Hall and our Chief Financial Officer have concluded that our disclosure controls and procedures were ineffective as of December 31, 2022. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

**Changes in Internal Control over Financial Reporting** 

Except as described above, there were no changes in internal control over financial reporting identified in the evaluation for the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**PART II - OTHER INFORMATION** 

**Item 1. Legal Proceedings.** 

As of December 31, 2022, we were not a party to any material legal proceedings.

**Item 1A. Risk Factors.** 

In addition to the risk factors set out below and other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part 1, Item 1A. "Risk Factors" in our annual report on Form 10-K, which could materially affect our business, financial condition, and future results. The risks described in our Form 10-K are not the only risks that we face. Additional risk and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our financial condition, operating results and cash flows.

**<u>Government efforts to combat inflation, along with other interest rate pressures arising from an inflationary economic environment, could lead to higher financing costs.</u>**

Inflation has risen on a global basis, the United States has been experiencing historically high levels of inflation, and government entities have taken various actions to combat inflation, such as raising interest rate benchmarks. Government entities may continue their efforts, or implement additional efforts, to combat inflation, which could include among other things continuing to raise interest rate benchmarks or maintaining interest rate benchmarks at elevated levels. Such government efforts, along with other interest rate pressures arising from an inflationary economic environment, could lead to higher financing costs and have material adverse effect on our business, financial condition and results of operations.

------

**<u>Our business could be affected by macroeconomic risks.</u>**

The Company's operations and performance depend significantly on global and regional economic conditions. Macroeconomic conditions, including inflation, slower growth or recession, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations can materially adversely affect demand for the Company's products and services. In addition, confidence and spending can be materially adversely affected in response to financial market volatility, negative financial news, declines in income or asset values, energy shortages and cost increases, labor and healthcare costs and other economic factors. An adverse impact on demand for the Company's products, uncertainty about, or a decline in, global or regional economic conditions can have a significant impact on the Company's suppliers and other partners. Potential effects include financial instability; inability to obtain credit to finance operations and purchases of the Company's products; and insolvency. We cannot predict the timing or scale of these various macroeconomic conditions, but they could have a material adverse affect on our business, results of operations and financial condition.

**<u>The transition to a new Chief Executive Officer ("CEO") will be critical to our success and our business may be adversely impacted if we do not successfully manage the transition process in a timely manner.</u>**

Our success depends, in part, on the effectiveness of our interim Principal Executive Officer, and a permanent CEO once such CEO is appointed. The CEO will be critical to executing on and achieving our vision, strategic direction, culture, products, and technology. Our capacity to identify and appoint a suitable permanent CEO in a timely manner will be essential to relieve any related speculation and uncertainty regarding our ability to execute the Company's future business strategy. Likewise, the permanent CEO search and subsequent transition may be disruptive to the Company and our relationships with vendors and employees. If we are unable to execute an orderly transition and successfully integrate the new CEO into our leadership team, our operations and financial conditions may be adversely affected.

Additionally, the departure of our CEO has resulted in a loss of institutional knowledge. This loss of knowledge and experience can be mitigated through successful hiring and transition, but there can be no assurance that we will be successful in such efforts. The ability of the new CEO to quickly adapt to and understand our business, operations, and strategic plans will be critical to the Board and our management's ability to make informed decisions about our strategic direction and operations.

**<u>We have experienced significant turnover in our senior management team and across our organization, and our failure to attract and retain qualified personnel, skilled workers and key officers could have an adverse effect on us.</u>**

Our business may be adversely affected by recent turnover in our senior management team and board of directors which may create instability within the Company, which could disrupt and impede our day-to-day operations, internal controls and our ability to fully implement our business plan and growth strategy. In addition, management transition inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution, and our results of operations and financial condition could be negatively impacted as a result. Competition for key management personnel is intense. If we fail to successfully attract and appoint permanent replacements with the appropriate expertise, we could experience increased employee turnover and harm to our business, results of operations, cash flow and financial condition. The search for permanent replacements could also result in significant recruiting and relocation costs, as well as increased salary and benefit costs. Like most businesses, our employees are important to our success and we are dependent in part on our ability to retain the services of our key management, operational, compliance, finance and administrative personnel. In order to compete and implement our growth strategy, we must attract, retain, and motivate employees, and turnover of senior management may make it difficult to retain qualified and skilled employees.

**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Date** | **Title of Security** | **Number** |  | **Consideration Received** | **Exemption from Registration Claimed** | **Security Holder** |
| 10/18/2022 | Common Stock | 100000 | (1) | $365000 | Section 4(a)(2) | Aaron Dean Bertolatti  |
| 10/20/2022 | Common Stock | 100000 | (1) | 365000 | Section 4(a)(2) | irX Enterprises Pty Ltd  |
| 10/21/2022 | Common Stock | 200000 | (1) | 730000 | Section 4(a)(2) | JAWAF Enterprises Pty Ltd  |
| 10/24/2022 | Common Stock | 100000 | (1) | 365000 | Section 4(a)(2) | Scor Go Luath Limited |
|  |  | 500000 |  | $1825000 |  |  |

---

<sup>(1)</sup> shares issued upon option exercises

The transactions listed above are exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

------

**Item 3. Defaults Upon Senior Securities.** 

None.

**Item 4. Mine Safety Disclosures.** 

Not applicable because we do not currently operate any mines subject to the U.S. Federal Mine Safety and Health Act of 1977.

**Item 5. Other Information.** 

None.

------

**Item 6. Exhibits.** 

**Exhibit Index** 

---

| | |
|:---|:---|
| **Exhibit<br>Number**<br>| &nbsp;&nbsp;&nbsp;**Description**<br>|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1 | &nbsp;&nbsp;[<u>Mishic O'Brien Offer Letter, dated October 24, 2022 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on October 25, 2022).</u>](https://www.sec.gov/Archives/edgar/data/1888654/000119312522267968/d308087dex101.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2 | &nbsp;&nbsp;[<u>Jennings Offer Letter, dated October 24, 2022 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on October 25, 2022).</u>](https://www.sec.gov/Archives/edgar/data/1888654/000119312522267968/d308087dex102.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3 | &nbsp;&nbsp;[<u>Van't Hoff Offer Letter, dated October 24, 2022 (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on October 25, 2022).</u>](https://www.sec.gov/Archives/edgar/data/1888654/000119312522267968/d308087dex103.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31.1\* | &nbsp;&nbsp;[<u>Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</u>](feam-ex31_1.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31.2\* | &nbsp;&nbsp;[<u>Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</u>](feam-ex31_2.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32.1\* | &nbsp;&nbsp;[<u>Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</u>](feam-ex32_1.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32.2\* | &nbsp;&nbsp;[<u>Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</u>](feam-ex32_2.htm) |
| &nbsp;&nbsp;101.INS\* | &nbsp;&nbsp;XBRL Instance Document - embedded within the Inline XBRL document |
| &nbsp;&nbsp;101.SCH\* | &nbsp;&nbsp;XBRL Taxonomy Extension Schema Document |
| &nbsp;&nbsp;101.CAL\* | &nbsp;&nbsp;XBRL Taxonomy Extension Calculation Linkbase Document |
| &nbsp;&nbsp;101.DEF\* | &nbsp;&nbsp;XBRL Taxonomy Extension Definition Linkbase Document |
| &nbsp;&nbsp;101.LAB\* | &nbsp;&nbsp;XBRL Taxonomy Extension Label Linkbase Document |
| &nbsp;&nbsp;101.PRE\* | &nbsp;&nbsp;XBRL Taxonomy Extension Presentation Linkbase Document |
| &nbsp;&nbsp;104\* | &nbsp;&nbsp;Cover page Interactive Data file (formatted as Inline XBRL and contained in Exhibit 101). |

---

------

\* Filed herewith.

------

**SIGNATURES** 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | 5E Advanced Materials, Inc. | 5E Advanced Materials, Inc. |
|  | (Registrant) | (Registrant) |
| Date: February 9, 2023 | By: | /s/ Paul Weibel |
|  |  | Paul Weibel |
|  |  | Chief Financial Officer (Principal Financial Officer) |

---

------

## Exhibit 31.1

Exhibit 31.1

CERTIFICATION

I, Anthony Hall, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this quarterly report on Form 10-Q of 5E Advanced Materials, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) [Paragraph intentionally omitted];

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: February 9, 2023 |  |
|  | /s/ Anthony Hall<br>|
|  | Anthony Hall |
|  | (Performing the functions of Principal Executive Officer) |

---

------

## Exhibit 31.2

Exhibit 31.2

CERTIFICATION

I, Paul Weibel, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this quarterly report on Form 10-Q of 5E Advanced Materials, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) [Paragraph intentionally omitted];

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: February 9, 2023 |  |
|  | /s/ Paul Weibel<br>|
|  | Paul Weibel |
|  | Chief Finance Officer<br>(Principal Financial Officer)  |

---

------

## Exhibit 32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002,

18 U.S.C. SECTION 1350

In connection with the quarterly report of 5E Advanced Materials, Inc. (the "Company") on Form 10-Q for the quarter ended December 31, 2022, as filed with the U.S. Securities and Exchange Commission on the date hereof (the "Report"), I, Anthony Hall, performing the functions of Principal Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| Date: February 9, 2023 |  |
|  | /s/ Anthony Hall<br>|
|  | Anthony Hall |
|  | (Performing the functions of Principal Executive Officer) |

---

------

## Exhibit 32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002,

18 U.S.C. SECTION 1350

In connection with the quarterly report of 5E Advanced Materials, Inc. (the "Company") on Form 10-Q for the quarter ended December 31, 2022, as filed with the U.S. Securities and Exchange Commission on the date hereof (the "Report"), I, Paul Weibel, Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | | |
|:---|:---|:---|
| Date: | February 9, 2023 |  |
|  |  | /s/ Paul Weibel<br>|
|  |  | Paul Weibel |
|  |  | Chief Financial Officer<br>(Principal Financial Officer) |

---

------