Notes Payable

12 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

Notes Payable

11. Notes Payable

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

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

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

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

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

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

Principal outstanding	$	7,083,333
Unamortized debt discount and issuance costs		(1,341,156	)
Derivative liability associated with convertible notes		366,298
Changes in fair market value of derivative liability		338,886
Net carrying value	$	6,447,361

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

Fiscal year ended June 30, 2025	$	7,083,333
Fiscal year ended June 30, 2026		-
Total note payments		7,083,333
Less: unamortized debt discount and issuance costs		(1,341,156	)
Derivative liability, at fair value, less amortization		705,184
Total notes payable	$	6,447,361
Notes payable, current	$	6,447,361
Notes payable, non-current	$	-